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Norway Post - Quarterly report 1st quarter 2010

Norway Post - Quarterly report 1st quarter 2010. 28 May 2010. Financial highlights. Operating revenues were reduced by MNOK 269 (3,9 %) compared with Q1 2009, mainly due to falling volumes in the Mail and Logistics segments and the recession

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Norway Post - Quarterly report 1st quarter 2010

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  1. Norway Post - Quarterly report 1st quarter 2010 28 May 2010

  2. Financial highlights • Operating revenues were reduced by MNOK 269 (3,9 %) compared with Q1 2009, mainly due to falling volumes in the Mail and Logistics segments and the recession • Earnings before non-recurring items amounted to MNOK 284, an improvement of MNOK 194 compared with Q1 2009. The improvement was mainly due to the effects of cost-reducing measures and government procurements • Government procurements were granted and recognised in the accounts in Q2 2009 • The 12-month return on invested capital before non-recurring items and write-downs (ROIC) was 12.8% compared with 7.5% in 2009 • The efficiency-enhancement programme ”Spinnaker” was initiated in 2008. Additional measures are being implemented to adjust costs to a declining activity level in the market 2

  3. Important events • Due to a difficult winter weather-wise and challenges with the start-up of the new South-East terminal, delivery quality for overnight A-mail was 81,4 % in Q1 2010. Despite this, Norway Post fulfilled five out of six licence requirements in Q1 • In the first quarter of 2010, the city of Oslo approved a development plan for the terminal area at Alnabru. This gives the Group an opportunity to plan a future-oriented, effective and environmentally-friendly centre for its logistical operations at Norway Post and Bring • ErgoGroup and Edda Media have entered into a long-term collaboration through ErgoGroup AS’ acquisition of Edda Media’s IT operations that currently provide IT services to 92 editorial publications. The collaboration involves a five-year agreement for operation, support and management, worth MNOK 200 over this period. • The Logistics segment has beenaffected by the transport strike as of 15 May. The strike escalated on 25 May and the entire Norwegian transport sector is affected The South-East terminal opened in January 2010 3

  4. New divisional structure • In order to better prepare the Group to realise coordination gains across the group and Nordic growth, a new division-level organisation was decided in April 2010. This new organisation will come into effect in June • The operational areas in the Mail Division and the Distribution Network Division will be merged to form an integrated Mail Division, which will have responsibility for both customers and production • The Logistics segment will for operational purposes be divided into two divisions, a Parcels and Goods Division and a Logistics Solutions Division, so that corporate management can come even closer to the logistics market • ErgoGroup is not affected by the changes 4

  5. Operating revenues per quarter Average annual revenue growth of 3.8% (Q1 2006 – Q4 2010) 2010 2009 2008 2006 2007 Operating revenues per quarter in MNOK 5

  6. Operating revenues from foreign subsidiaries • Operating revenues in MNOK From Q1 2002 until Q1 2010, Norway Post’s foreign operations had an average increase in operating revenues of 31.9% +19% +50% +140% +20% -6% +7% +23% Operating revenues from foreign subsidiaries decreased by MNOK 113 (6.1%) from Q1 2009, and accounted for 26.7% of the Group’s revenues (28.7% in the same period last year) 6

  7. EBIT before non-recurring items and write-downs per quarter 2010 2006 2008 2009 2007 EBIT before non-recurring items and write-downs per quarter in MNOK 7

  8. Profit and Loss

  9. Key figures • Investments in Q1 2010 amounted to MNOK 240, a decrease of MNOK 161 compared to Q1 2009 • Net debt/EBITDA-factor was 1.2** (Q1 2009: 2.1) • As of 31 March 2010, Norway Post’s long-term liquidity reserve, consisting of market investments and unused drawing rights, amounted to MNOK 4 860 compared with MNOK 4 645 at the same date last year * Moving 12 month average ** Net interest-bearing liabilitiesMNOK 2 534 and 12 month moving EBITDAMNOK2 153 9

  10. Employees

  11. Quality development(moving 12 month average) • Delivery quality for over night A-mail was 81.4 % in Q1 2010 compared with 87.4 % in Q1 2009. This reduction was due to a difficult winter weather wise and start-up challenges at the new South-East terminal • The start-up problems were solved in the second half of April, however closed airports due to maintenance and volcanic ash will have a negative impact on delivery quality in Q2 Licencerequirement 2009 2006 2008 2003 2007 2000 2001 2004 2005 1999 2002 Delivery quality, moving 12 month average 11

  12. Segment structure for Norway Post Group group logistics IT mail 12

  13. External operating revenues per segment Share of external revenues in% Change 2009 – 2010 in MNOK and % -2.3% -7.4% -4.4% Logistics IT Mail 13

  14. Segment mail logistics IT • Letter mail • Banking services • Dialog services mail 14

  15. Volume development mail logistics IT Mail products *Addressed and unaddressed direct advertising mail Unaddressed advertising mail accounted for 46.8% of the parent company mail volumes in Q1 2010, compared with 44.8% in 2009 15 15

  16. mail logistics IT Key figures • Total A and B mail volume was 8,6 % lower than the corresponding period in 2009, primarily due to increased electronic substitution • Cost-cutting measures in the Spinnaker programme, including the new post office structure, more effective administrative functions, reduced IT cost and the implementation of the Group’s productivity system have affected results positively • Bring Citymail Sweden maintained the same level of volume as in 2009 • Bring Citymail Denmark ceased postal delivery from 1 January 2010 • As of March 2010, 109 out of 124 post offices have been converted into Post-in-shops. The conversion has been well received by the customers. Norway Post has also decided to modernize its remaining post offices over a three year period in order to meet changing customer’s needs 16

  17. Segment mail logistics IT • Cargo • Thermo • Express • Parcels • Warehousing logistics 17

  18. mail logistics IT Key figures • Operating revenues in 2010 were 4,2% lower than the same quarter in 2009, mainly as a result of the effects of the economic downturn on volumes and pressure on prices in the market • Revenues for the Logistic segment’s operations outside of Norway amounted to MNOK 1 149, which comprised 37,6% of total revenues • The segment’s earnings were positively affected by increased parcel volume and cost-reduction measures within most business areas. However, groupage and part load services and temperature-controlled transport had increased transport costs in Q1 2010 as a consequence of train delays • In Q1, the city of Oslo approved a development plan for the terminal area at Alnabru. This gives the Group an opportunity to plan a future-oriented, effective and environmentally-friendly centre for its logistical operations at Norway Post and Bring 18

  19. Segment mail logistics IT IT • Operations • Infrastructure • Solutions • Consulting services 19

  20. Key figures mail logistics IT • Operating revenues in Q1 2010 were 7,0 % lower than for the same period in 2009. This decline is due to the sale of operations, contractual price reductions and the recession • Revenues outside of Norway comprised 26% of the total revenues for the period, compared with 27% for the same period in 2009. Sales to Norway Post AS comprised 13% of the overall revenues, which is similar to the same period in 2009 • ErgoGroup has entered into contracts with a total value of MNOK 845 in Q1 2010, an increase of MNOK 56 compared with Q1 2009 • An improvement and restructuring programme was launched in the second half of 2009, in both the Norwegian and Swedish parts of the business. Profits in the operations and infrastructure services area remained unsatisfactory in Q1 2010 and further restructuring is necessary. In the solutions and application services sectors, margins were still good in Q1 2010

  21. Future focus areas • The Group’s earnings development is expected to continue to be negatively affected by low demand, price pressure and increased competition • The Spinnaker profitability programme continues to give good resultsand furthermeasures will be taken in order to adapt resources to a lower activity level in the market • The new divisional structure will be implemented in June 2010 • The new South-East Norway terminal took over letter production from the Oslo letter centre in Q1 2010 and will take over production from the terminals at Drammen and Hamar during the course of 2011 • There continues to be a focus on long-term and systematic work in the areas of HSE, environment and climate 21 21

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