TREASURY AND RESOURCES
THE JERSEY POST INTERNATIONAL LIMITED
ANNUAL GENERAL MEETING 28TH JUNE 2007
1. Purpose of Report
To instruct the Nominee Shareholders to vote on the resolutions put forward for consideration at Jersey Post International (JPIL) Annual General Meeting on 28th June 2007.
2. Background
The States of Jersey is the holder of all the ordinary shares of JPIL which represents 100% of the company’s equity share capital. The Annual General Meeting will be held on Thursday 28th June 2007 at 16:00 at the Postal Headquarters, Rue des Pres Trading Estate.
3. Resolutions
3.1 To receive and adopt the Audited Financial Statements for the Period ended 31 December 2006 . (Appendix B)
The financial statements are prepared in accordance with generally accepted accounting practice in the United Kingdom (“UK GAAP”). The financial statements are prepared under the historical cost convention.
Prior to the incorporation of Jersey Post International Limited Financial Statements were prepared under UK GAAP for Jersey Post as if it were a stand alone entity. The last set of these separate financial statements was for the six month period ending 30 June 2006. For comparison purposes the amounts shown in those financial statements are provided as comparators to the current period.
The Group purchased the trade, assets and liabilities of the Postal Trading Department of the States of Jersey Economic Development Department with a book value of £9.7m in return for 5 million fully paid £1 ordinary shares on 1 July 2006. The enabling legislation for the incorporation of Jersey Post, allowed the difference of £4.7m to be credited to a distributable reserve. The retained profit for the six month period ending 31 December 2006 was £0.9m (6 months ending 30/06/06 = £1.2m). However, the underlying operating profitability was £1.5m for the second half of 2006 (6 months to 30/06/06 = £0.7m) an increase of 114% on the first half of 2006 primarily due to the seasonal nature of Jersey Post business.
Cash balances were significantly reduced in July 2006 by a payment of £12m to fully fund Jersey Post Group’s proportion of the pre 1987 Public Employees Contributory Retirement Pension Scheme deficit. A further £2m was used to fully fund the Jersey Post Office Pension Fund. The payments were partly funded by a £4m loan from the States of Jersey repayable over 5 years. In January 2007 cash balances were further significantly affected when a net payment of £14m was paid to Royal Mail for delivery of mail, both within the UK and worldwide, covering the 18 month period to 30 June 2006, once the amount Royal Mail owed Jersey Post for the delivery of mail in Jersey was netted off.
Turnover grew by 18% in the second half of 2006 to £27.3m, compared to the first 6 months of 2006. The increase is attributed to the normal business cycle which is dominated by a significant increase in postings at Christmas, most noticeably from our bulk packet export (fulfilment) customers. The 2006 business cycle was affected by the hot summer and the World Cup, which had a noticeable downward impact on the bulk packet export businesses resulting in lower than forecast volumes posted at that time. Similarly, overall operating expenditure increased by 15%, reflecting the increased business in the second half of 2006. Other contributory factors for the increased expenditure were the 1 May pay award of 3.15%, an increase in the average price paid to Royal Mail for the delivery of mail off Island, and a fuel surcharge associated with conveying mail off Island.
Income tax chargeable for the period has been offset against deferred tax assets which arose primarily from accelerated pension payments and historical operating losses.
In the Directors’ view, there remains considerable uncertainty over regulation of the postal market within Jersey and consequently, no dividends are proposed for the period allowing the Group to build up its reserves. Condition 2.12 of Jersey Post’s Class II Postal Services licence requires the JCRA to determine whether or not the Directors shall declare or recommend a dividend, this permission has not been sought by the Directors.
The Group generated net cash outflows from operating activities of £1.6m during the period compared to inflows of £9.6m for the first half of 2006.
In the second half of 2006 Jersey Post spent £0.4m on capital expenditure, this compares to £0.6m in the first 6 months of the year. Capital expenditure was invested in mail process automation and information systems.
3.2 To Re-elect Mike Liston OBE as a Director of the Company
Non-executive Chairman, Mike Liston (55 years) has wide experience of the public and private sectors. He is currently Group Chief Executive of the LSE-listed utility, Jersey Electricity Company Ltd. and Chairman of AIM-listed, Renewable Energy Generation Ltd. which has businesses in Europe and North America. Mike is Chairman of the internet data centre operator, Foreshore.Net and is a member of the Audit Committee of Europe’s largest engineering professional body The Institution of Engineering and Technology. He was the first Chairman of the Post Office Users’ Committee established in 1997.
It is proposed to re-elect Mike Liston OBE as a Director of the Company
3.3 To Re-elect John Pinel as a Director of the Company
Managing Director John Pinel (55 years) joined the organisation in 1995 following a 25 year career in the British Army. John is a graduate of the Army Staff College (psc 1983) and subsequently was an instructor at the Army Staff College and commanded a regular engineer regiment in Germany. In recent years much of his focus has been on change management, business diversification, the incorporation process and dealing with external issues such as Low Value Consignment Relief and the Royal Mail Commercial Agreement. In 2001 he passed the Diploma in Company Direction run by the Institute of Directors.
It is proposed to re-elect John Pinel as a Director of the Company
3.4 To Re-elect Clive Spears as a Director of the Company
Non-executive Vice-chairman, Clive Spears (53 years) is an Associate of the Chartered Institute of Bankers and a Member of the Securities Institute. He currently runs his own local corporate services consultancy business, being on the board of a number of regulated offshore funds covering both the private equity and property fund markets. He retired from the Royal Bank of Scotland in 2003 after 32 years service of which 25 years were spent in Jersey, latterly as Deputy Director responsible for corporate business. He also is the current President of the Jersey Chamber of Commerce.
It is proposed to re-elect Clive Spears as a Director of the Company
3.5 To Re-elect Paul Jackson as a Director of the Company
Non-executive, Paul Jackson (64 years) is a well-known expert in the mail, express, airfreight and logistics industry, with extensive knowledge and experience of all aspects of the industry as a whole, and the postal world in particular. He is the non-executive Chairman of Triangle Management Services Limited, which provides strategic consultancy, market research, mergers and acquisitions services, conferences and executive recruitment mainly in the mail, express and logistics sectors. Under Paul’s direction the company has developed a pre-eminent position in the mail, express, logistics and global freight sectors.
It is proposed to re-elect Paul Jackson as a Director of the Company
3.6 To Re-elect Ian Ridgway as a Director of the Company
Group Finance Director Ian Ridgway (38 years) qualified as a chartered accountant with Coopers & Lybrand Deloitte. Immediately prior to joining Jersey Post, he was a partner in a Birmingham based Accountancy practice and a founding Director of its consultancy company. Ian joined Jersey Post in 1999. At Jersey Post Ian is responsible for Financial Control, Corporate Governance, Legal & Compliance, Regulation and Business Systems. He was awarded a Masters Degree in Business Administration in 2003 and became a Fellow of the Institute of Chartered Accountants in England and Wales in 2005.
It is proposed to re-elect Ian Ridgeway as a Director of the Company
3.7 To confirm the Directors’ remuneration
Details of current Directors’ fee are shown in Appendix A.
It is proposed to confirm the Directors’ remuneration as set out in Appendix A.
3.8 To reappoint the retiring Auditors
Following the transfer of their business to Deloitte & Touche LLP with effect from 1 October 2006, Deloitte & Touche resigned as auditors on 24 November 2006 and the directors appointed their successor, Deloitte & Touche LLP, as auditors.
It is proposed to re-appoint Deloitte & Touche LLP as auditors.
4. Recommendation
The Nominee Shareholders be instructed to vote, by proxy, in favour of the eight resolutions outlined above.
States Treasury Corporate Finance
22nd June 2007
Appendix A – Directors’ Remuneration
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