Jersey Post: Annual Report and Accounts 2015

Jersey Post Annual Report and Accounts 2015

www.jerseypost.com

R.67/2016

Contents

Directors, O icers and Advisors  3 Board of Directors  4 Chairman s Statement  6 Strategic Report  8 Statement of Corporate Governance  16 Directors Report  20 Independent Auditors Report  22 Consolidated Income Statement  23 Consolidated Statement of Comprehensive Income  23 Consolidated Statement of Financial Position  24 Consolidated Statement of Changes in Equity  25 Consolidated Statement of Cash Flows  26 Notes to the Financial Statements  27 Five Year Summary  44

Directors, Officers and Advisors

DIRECTORS OF JERSEY POST INTERNATIONAL LIMITED

Jurat Mike Liston OBE FREng BSc CEng FIEE Non-Executive Chairman

Tim Brown FIoD FCILT CPFA Chief Executive O icer

Liz Vince BA (Hons) CPFA MICA Dip IoD Finance Director (resigned 31 March 2016)

Clive Barton MBE FCA FIMgt TEP FInstD

Non-Executive Director and Senior Independent Director (resigned 24 April 2015)

Chris Evans Non-Executive

Donal Duff BAAF FCA AMCT Non-Executive

Gary Carroll Dip IoD

Commercial Director (resigned 31 May 2015)

Alan Merry

Senior Independent Non-Executive (appointed 1 September 2015)

Susan Barton

Non-Executive (appointed 1 April 2016)

COMPANY SECRETARY

Liz Vince BA (Hons) CPFA MICA Dip IoD (resigned 31 March 2016) Tim Brown FIoD FCILT CPFA (appointed 1st March 2016) INDEPENDENT AUDITOR

Price waterhouseCoopers CI LLP

37 Esplanade, St. Helier, Jersey, JE1 4XA

PENSION SCHEME ACTUARY

Aon Hewitt Limited

Actuaries and Consultants, 40 Queen Square, Bristol, BS1 4QP

BANKERS

HSBC Bank plc

PO Box 14 , St. Helier , Jersey, JE4 8NJ

REGISTERED OFFICE

Postal Headquarters

La Rue Grellier, La Rue des Pres Trading Estate, St. Saviour, Jersey, JE2 7QS

Board of Directors 1

Jurat Mike Liston OBE FREng BSc CEng FIEE / Chairman

Non-Executive Chairman, Mike Liston has wide experience of the public and private sectors. Previously Chief Executive of Jersey Electricity PLC,  he now holds a wide range of Non-Executive board positions internationally including Chairmanships with public and private operating companies, private equity and venture capital houses, in the energy and iduciary services sectors. He is a lay Judge in the Royal Court of Jersey.

Mike was founding Chairman of the Jersey Appointments Commission, which was established by government to ensure probity in public appointments. He served for many years on the governing council and audit committee of Europe s largest professional engineering body, the Institution of Engineering and Technology. He is a Fellow of the Royal Academy of Engineering.

Tim Brown FIoD FCILT CPFA / Chief Executive Officer

Tim Brown has over 20 years experience in the post, parcel and distribution industry. He has worked in senior positions in Royal Mail and DHL Express, was CEO of Postcomm (the UK s postal regulator), providing advice to government and was vice-chair of the European Regulators Group for Post. Tim joined the board irstly as a Non-Executive Director on 1 September 2011 and he was the Senior Independent Director and Deputy Chairman until he took over as Chief Executive O icer from Kevin Keen on 1 July 2014.

Donal Duff BAAF FCA AMCT / Non-Executive Director

Non-Executive, Donal Duff quali ied as a Chartered Accountant with Coopers & Lybrand in Ireland in 1991 and subsequently transferred to its Jersey o ice in 1993 to work on a wide range of audit and corporate inance assignments. In 1996, he joined Le Riche Group Limited, a listed company, as Group Financial Controller, where he performed a variety of roles until such time as it was acquired by C.I. Traders Limited, an AIM-listed company, in 2002. Donal was Director of Finance and Company Secretary of this company (the largest private sector employer in the Channel Islands) until its acquisition by a private equity consortium in 2007. He continued to work with the new owners until 2008. Donal is Chief Finance O icer of Stanley Gibbons Group plc, an AIM-listed Jersey registered company.

1 Directors at the time the Board approved the inancial statements.

Chris Evans / Non-Executive Director

Non-Executive, Chris Evans has worked in the information technology services sector for 30 years and has been involved in the formation and running of a number of IT businesses. Until July 2014 Chris was the Chief Executive of Foreshore, an Internet services business, promoting Jersey-based digital business to a global customer base. Chris has served as a Non-Executive Director on a number of boards and has been a member of States of Jersey committees speci ically tasked with examining diversi ication opportunities for the Island.

Alan Merry / Non-Executive Director

Non-Executive, Alan Merry has extensive international senior executive and board-level experience gained across a range of business sectors including inancial services, retail, renewable energy and professional services. As a Director of CPA Global, the world s leading provider of intellectual property and legal support services, he played a key role in the international growth and development of the business.

Now running his own consultancy, Alan works with businesses and executive teams supporting transformational change and focuses on the development of strategy, change management, strategic HR and improving board and organisational effectiveness. Most recently, Alan has worked closely with the board and executive team on the incorporation of the Ports of Jersey.

Susan Barton / Non-Executive Director

Sue is a quali ied management accountant and accredited mediator with over 20 years experience of the postal and professional services industry having held leadership positions with PA Consulting, Accenture and the UK Post O ice.

As a consultant, she worked with many of the leading international postal organisations providing support and advice across a broad spectrum of areas such as strategy development, quality of service, operational performance, and organisation design. She also conducted independent reviews of strategic business plans and supported the renegotiation/ restructuring of commercial contracts. Most recently Sue was the Strategy Director at the UK Post O ice where her portfolio included IT, mutualisation and strategic management.

Sue is a regular presenter at international postal conferences and events speaking on subjects such as liberalisation, innovation and future world scenarios. She is also an active member of the judging panels for World Mail Awards.

Chairman s Statement

This year s trading results confirm the robustness of Jersey Post s rapid recovery from the UK government s sudden withdrawal of Low Value Consignment Relief (LVCR) in 2012 and the consequent loss of £30m annual revenues. Operating profits rose modestly in the year by 5.5% on turnover which at £38m, was just over half that we had at the peak of the LVCR era.

The company s continued delivery of pro its undiminished by the LVCR shock reinforces the board s con idence in the company s future. The radical cost-cutting of the survival phase of our strategy has given way to the less disruptive pursuit of operational e iciencies, and with independent surveys consistently con irming the recovery of high standards of customer service and employee morale which were damaged during the survival effort, the sustainability phase is underway, focusing on growth.

The Board s strategy for sustainability recognises that although the company  has  recovered  from  the  collapse  of  Jersey s  ful ilment industry, it faces a more pernicious threat to its longer-term survival. This arises from the decline in their core letters service, which postal

operators everywhere are suffering, as the rise of the internet and use of smart mobile devices changes the way the world communicates. The volume decline in Jersey Post s letters business of some 60% in the past decade is similar to that seen across the globe. Unmitigated, this trend would put at risk our achievement of the shareholder objectives set for us by the States of Jersey, not least the Universal Service  Obligation  (USO)  through  which  the  States,  like  other governments, require national postal authorities to provide baseline levels of affordable postal services to every citizen regardless of cost.

The  USO  funding  burden  has  become  a  key  driver  for  the diversi ication  of  postal  operators  beyond  their  traditional  home markets.  The  same  diversi ication  imperative  faces  Jersey  Post, given that without the ful ilment industry the island s postal market is too small to provide contestable business from which we can continue to fund the losses inherent in the USO. However, the lip side of new technology replacing letter mail is the explosive growth in parcels and packets generated globally by the internet shopping and e-commerce revolution. The organisational capabilities which we developed for the ful ilment industry in Jersey equip us well to be part of this revolution.

We made encouraging progress during the year to exploit our recent admission to the Universal Postal Union as a national postal authority in its own right. This prized status has been an essential enabler in securing partnerships with almost 200 global carriers on attractive commercial terms, enabling us pro itably to provide carriage from anywhere, to anywhere, of goods which we never touch and without the need for us to establish permanent footprints overseas. Whereas our international business will involve us more in brokerage than physical activity, there are strategic bene its to owning some of the facilities involved in the logistics chain. In those few situations we intend to acquire rather than build those facilities, and fund them internally without recourse to borrowing.

Our  new  International  strategy  leverages  many  of  our  existing competencies, but also demands new infrastructure, new business processes and new attitudes to innovation and risk in response to the needs of online and traditional businesses and their customers for speedy, reliable, traceable and convenient delivery of goods across Continents regardless of the complexities of Customs procedures, air freight security, dangerous goods regulations and the challenges of  integrating  the  countless  Information  Technology  platforms and payments processes typically involved in every cross-border consignment. Importantly these initiatives, whilst prompted by our international ambitions, are also providing meaningful bene its to our customers at home.

The demands of online shopping consumers are stimulating new strategies to improve both on-time and irst-time delivery success. We have introduced new delivery options that are more convenient for  customers,  and  invested  in  new  infrastructure  to  allow  for successful  delivery  when  customers  are  not  at  home  such  as standalone personal or community parcel lockers, and are looking at collection points at local post o ices or nearby retail locations such as convenience stores. Such initiatives are key to ensuring customer satisfaction and con idence in delivery services, as well as improving e iciency  by  eliminating  costs  associated  with  the  last  mile  of  the operation.

During the year we accelerated our investment in our IT infrastructure and business processes both to improve cost e iciencies and in readiness to revolutionise the power of our customers to determine how,  when  and  where  they  want  our  services.  New  packet automation  systems  introduced  during  the  year  are  providing faster, cheaper handling of parcels in the same way that our new automated letter sortation systems have with letter post since their upgrade  last  year.  Our  introduction  of  hand-held  and  in-vehicle technologies will provide more than the increasingly popular track and trace facilities, anticipating that online shopping services such as payment on delivery and security assurance for high value goods will soon become commonplace. Whilst our innovation plans do not yet feature parcel deliveries by drones piloted elsewhere, we do anticipate the impact on daily life of the internet of things when for example, refrigerators which automatically compile and order the shopping online, become commonplace.

Jersey Post is conscious of the unique position it has where its people interact face-to-face with its customers daily, at home and increasingly at work. Our parcels and packets service puts us at the heart of the relationship between retailers, their customers, inancial institutions and mobile phone companies, as we provide the ultimate interface between the digital service and the physical customer. We re harnessing this relationship for both commercial and social responsibility motives. Offering inancial services such as loans and insurance whilst seeking States support for our widely acclaimed call and check service to the Islands healthcare and social services agencies caring for those in our community made vulnerable by in irmity or isolation.

Change at Jersey Post is now embraced for its potential, not feared for its consequences. I enter my tenth and inal year as Chairman with con idence that it will thrive in the transformation of the postal industry now underway.

Jurat Mike Liston OBE Chairman

29 April 2016

Strategic Report

Introduction

2015 has been the year of consolidating our performance and making considerable investment in Jersey

Post s services and infrastructure.

40000000 LETTER VOLUME TRENDS 30000000

20000000

10000000

0 2007 2008 2009 2010 2011 2012 2013 2014 2015 PARCEL VOLUME TRENDS

400000

300000

200000

100000

0

2007 2008 2009 2010 2011 2012 2013 2014 2015

We have continued to see decline in our core business and now over 45% of our revenue comes from parcels, yet it only accounts for 10% of our volume. Looking back over the last 10 years it is evident that there has been a huge shift in our business.

Whilst the growth in parcels has been signi icant, for the revenue earned from parcels to replace that from letters then the price of an up to 30kg parcel to the UK would need to be nearly 3 times what we charge now.

This growth in parcels and the growing use of tracked services means items cannot be delivered through the letterbox and, as a result, we have postmen and women s round becoming longer but with less tra ic. We are also seeing an increasing number of addresses with new apartments, houses and o ices being built. In essence, with our core business we are delivering less and less to more and more places. Obviously this is not sustainable and we continue to look to do things smarter and more e iciently.

On top of this we have continued see the decline in our ful ilment business with both Feelunique and Daysoft moving distribution to the UK.

We are also aware of the changing expectations of our customers who are looking for more convenient options to both send and receive  parcels.  In  some  cases  we  are  unable  to  meet  these expectations as our clients in the UK and around the world specify the service we must provide. Again this is why we continually look for better and innovative solutions for customers.

It is no secret that on-line shopping continues to boom with people ordering from across the world. During Christmas we saw a 20% increase in parcels year on year, whilst mail declined by 1%. Providing accessible,  value-for-money  services  for  parcel  recipients  is  key. Indeed, value for money is a key requirement expressed by the nearly 5,000 customers who responded to our survey.

FOR US THE CHALLENGES ARE:

TO PROVIDE CUSTOMERS WITH A GREAT SERVICE AT A REASONABLE PRICE

TO FLEX OUR SERVICES TO THE CHANGING DEMANDS AND REQUIREMENTS OF CUSTOMERS

TO IMPROVE OUR EFFICIENCY TO COPE WITH THE CHANGING MIX OF TRAFFIC

TO INVEST IN NEW PROFIT STREAMS TO COUNTER THE DECLINE IN OUR CORE BUSINESS

Jersey Post delivered increased revenue for the second successive year and a small increase on overall operating pro it year on year. This was despite the loss of key logistics customers who relocated their ful ilment operation to the UK, and continued decline in overall mail volumes. The performance has been underpinned by revenue growth from our new international business that now operates with partners in the USA and UK and we also have an agent operating out of China. Additionally, we continue to focus on e iciency within the business. To this end we have relocated our logistics operation from the harbour to our headquarters and during the year we have reduced overall staff numbers.

Last year Jersey Post also embarked upon an ambitious investment programme to deliver lasting changes that affect how our business operates. The business invested over £3m during 2015 to ensure Jersey Post remains at the top of its game and pro itable for many years to come.

Our public facing and retail areas including counters at Postal HQ and Broad Street have been transformed and further complimented through the launch of a range of complimentary inancial services.

The new unloading bay and packet automation is complete and handles up to 4,500 items an hour sorting by destination and size.

During the year we introduced a new time and attendance system using biometric data to log operational staff on and off site. The project is being rolled out across the rest of the group during 2016.

We launched a new track and trace system and began deploying new hand held terminals to all delivery staff.

Four 24/7 locker banks are fully operational around the

island with a ifth on the way. On the back of this we introduced parcel delivery plus and alternative business delivery options. A new website for customer registration and payments was also launched.

For our vehicle leet we implemented Routeplanner to optimise our delivery routes and installed telematics into all vehicles helping our drivers drive more safely and e iciently.

This  huge  investment  in  Jersey  Post  is  part  of  our  strategy  to modernise our business, to make us relevant for our customers and therefore help provide Jersey Post with a sustainable future, which is good for jobs. We will be a leaner, itter more relevant business going into 2016. The coming year is therefore one of exploiting this investment, ine tuning what we do and how we do it, but it is also one of developing new and better services and to develop new business and to explore alternative revenue streams. Our core business continues to decline and our challenge now is to strive for growth and build on the tremendous progress made in 2015.

This time last year we were concerned with decisions by the UK regulator Ofcom and changes in Royal Mail s approach to the island. Following changes in the UK, OFCOM will be reviewing its approach to postal regulation and issuing a consultation document during the coming year. The impact on us is still unknown. In terms of Royal Mail, its change in approach has seen some increases in rates for delivery

in the UK in 2015 with much larger increases in 2016. Improvements in e iciency and working with new partners in the UK means we will be able to minimise the impact on customers but there will still remain an above RPI price increase.

up to 4,500 items 4,500  an hour handled by the

items new unloading bay

Outlook for 2016

The outlook for 2016 is challenging as traditional letter volumes are forecast to continue the decline by between 3 5%, and the long term future of our logistics business in the island remains uncertain as ful ilment providers migrate their operations from the island. This is likely to be hastened if EU countries remove their Low Value Consignment Relief2 as has been trailed by EU authorities in 2015. It is unlikely that any business of signi icant size will move their ful ilment to Jersey, although we work with a number of growing world class ful ilment partners that are still based in Jersey. We continue to focus on offering relevant and affordable services to customers in the island and look to ways to improve e iciency to maintain pro it levels.

The  business  continues  to  invest  in  new  revenue  streams  and 2016 showed early promise, particularly in respect of international business. We expect to see substantial growth in this area although, whilst margins are strong, decision lead times are long and the market is competitive. Jersey Post is focussing on a few key strategic partners in this area. Another area where we continue to invest is in southbound from the UK, looking at consolidation of tra ic to improve e iciencies, but also to offer new services to Jersey based customers and those UK businesses wishing to ship to the Channel Islands. Trials in 2015 proved the concept is viable and 2016 should see implementation with a number of customers.

To support these developments Jersey Post will look to invest in new capability to strengthen our position in these markets.

2 A De Minimis level below which authorities deem the cost of collecting duty to be greater than the duty collected.

Customer feedback

We continually monitor customer feedback to look at ways to improve service. We look at the service we provide in three ways:

WHAT OUR CUSTOMERS TELL US:

In March we sent out our ifth all-island customer survey. The table below shows the results and how these have improved over the last two years.

PERCENTAGE OF 2015 SURVEY RESPONDENTS THAT ANSWERED VERY GOOD OR GOOD

93% 92% 92% 90%

83% 85% 82% 84% 80% 81% 86% 81%

71% 71% 70%

How do you rate your

postman?

How do you rate the overall

delivery service?

How do you rate the

network?

2016 2015 2014 2013 2012

We are pleased with the large response again to our customer survey. Whilst it was good to see our best ever levels of satisfaction, we continue to look at where we can further improve. When looking at those who rated our services Poor or Very Poor the results were 2% for Post O ice network, 1% for our postmen and women and 4% for our delivery service overall.

THE KEY AREAS CUSTOMERS IDENTIFIED AS A PRIORITY WERE:

EARLY MORNING DELIVERY

KEEPING COSTS LOW

CONSISTENCY OF DELIVERY TIME

WHAT OUR MEASUREMENT TELLS US:

We measure the Quality of Service we provide i.e. the time it takes to get items of mail to and from certain destinations.

2015 QUALITY OF SERVICE JERSEY, GUERNSEY, UK AND ISLE OF MAN

97.6% 96% 99.9% 99% 98.2% 97% 99.1% 97% 99.4% 97% 99.9% 97%

88.3%

78.6% 82% 82% 83.7% 82%

65.6%

Actual J+1 Target J+1 Actual J+3

0%  Target J+3

Posted JE /  Posted UK & IOM /  Posted JE /  Posted GY /  Posted JE / Delivered JE Delivered JE Delivered UK or IOM Delivered JE Delivered GY

Whilst we are pleased that on Island quality and that to Guernsey exceeds the set targets, we remain frustrated by the failures with the aircraft and its loading in the UK that have resulted in us missing our targets to the UK. After explaining that the control of the light and its connections to Royal Mail s network are outside of our control, and that Royal Mail has no target for quality of service to the Channel Islands, CICRA agreed to remove this as a target although we continue to report it. We have recently been able to agree with Royal Mail that the two businesses will review quality end to end and implement a plan to improve it.

WHAT ISSUES OUR CUSTOMERS HAVE HAD DURING THE YEAR

We continue to review every complaint and comment and strive to improve performance. As the percentage of our business that is tracked increases the number of enquiries is likely to grow. During 2016 we will be looking to provide customers with better access to this information via the web and mobile phone apps, as well as by telephone.

We measure the number of complaints per 50,000 items of mail. In 2015 the igure was 1.2 compared to 1.73 in 2014 and 4.49 in 2013. The top areas of complaints were:

Delivery procedures

Secure Drop failure

Redirection failure

Therefore our focus in 2016 will be to concentrate on these areas to further improve our performance.

Number of complaints dropped to just 1.2

per 50,000 items of mail

The community

Jersey Post takes its place in the community very seriously and participates in a number of ways. Each year the staff chooses a charity to support.

In 2015 we continued with Macmillan and the staff held various events to raise money. For 2016 our staff selected The Jersey Alzheimer s Association. Our aim is to raise £20,000 for this worthy cause during 2016.

In 2014 we announced our sponsorship for Team Jersey for the 2015 and 2017 Island Games. As part of that support we put the team logo on one of our vans and all staff wore red t-shirts for the week of the games. It was good to see Team Jersey do so well and we look forward to working with the team in Gotland in 2017.

In  other  areas,  we  continue  to  offer  a  limited  number  of  free Direct2Home door drops to charities who have applied. In 2015

we helped St John Ambulance, the British Red Cross, Jersey Brain Tumour,  Family  Nursing  and  Jersey  Cheshire  Homes.  We  also supported the Luxury Jersey postcards initiative to support tourism and provide help to Jersey Overseas Aid teams with postage of items to project countries.

Charities registered in Jersey are able to bene it from a 5% discount on certain stamp prices (www.jerseypost.com/charitypostage).

Our employees

Our post men and women are Jersey Post s biggest asset and our customers recognise it.

It is important to Jersey Post that we invest in our staff. As stated before, during 2014 we put all our staff through World Host customer service training. We continue to provide this training to new staff.  We also offer all staff access to a Keen to Develop Fund set up by Kevin Keen and topped up annually. The fund is aimed at staff wishing to learn new skills and has included training in human resources, accountancy and book-keeping, meditation, sign language, offshore administration and irst-line management.

Following on from our Pay Advance scheme in 2014, in 2015 we launched an employee health scheme which has been taken up by over 100 of our staff.

Jersey Post continues to face a very challenging market place with its traditional business continuing to decline, and needs to continue to provide an affordable and relevant service to the people and businesses  of  Jersey  without  subsidy,  whilst  looking  to  develop  new business streams in Jersey, UK and across the world to support the business.

Statement of Corporate Governance

Introduction

Jersey Post International Limited is committed to maintaining the highest standards of corporate governance and follows the best practice principles of the UK Corporate Governance Code issued by the Financial Reporting Council ( the Code ) where it is appropriate and practical to do so.

The Board

At the time of signing the inancial statements the Board comprised

of four Non-Executive Directors including one Senior Independent Non-Executive  Director,  one  Executive  Director  and  Mike  Liston as Chairman.

In  accordance  with  the  Company s  Articles  of  Association, one-third of the number of Non-Executive Directors is required to retire by rotation annually. Chris Evans and Donal Duff are currently the longest serving directors and will retire by rotation at the AGM on 27 May 2016. Both Chris and Donal will be seeking reappointment

and a resolution will be made at the AGM to re-appoint them both to the Board.

The Executive Director, Tim Brown who is the company s CEO, is not subject to retirement by rotation but he is subject to a period of notice of termination of employment, as are other members of the Company s senior management.

The Board is responsible to the Company s shareholder, the States of  Jersey  Investments  Limited,  for  the  proper  management  of the  Company.  It  meets  regularly,  normally  ive  to  six  times  per year, to agree and monitor strategy, review trading performance, the management of key risks and business plans, which include revenue  and  capital  budgets  for  the  next  three  years.  Board papers are circulated prior to each meeting in order to facilitate informed discussion.

The  Chairman  and  Chief  Executive  meet  with  the  shareholder representative, the Treasury & Resources Minister, at least twice  each year.

The following table sets out the number of meetings (including Committee meetings) held during the year under review and the number of meetings attended by each director:

NUMBER OF MEETINGS ATTENDED

Remuneration  Nomination Board Audit Committee

Committee Committee Number of meetings

5 4 2 1 held during 2015

Mike Liston 4 (Chairman) 4 2 1 Tim Brown 5

Clive Barton 1/1 2/2

Donal Duff 5 4 (Chairman) 2 1 Chris Evans 5 2 (Chairman) 1 Alan Merry 2/2 2/2

Liz Vince 5

Gary Carroll 1/1

Performance Evaluation

The effectiveness of the Board is vital to the success of the Company. A self-assessment of the board and its Committees was undertaken at the board meeting held on 2 March 2016.

Audit Committee

The Audit Committee is charged by the Board with responsibility for reviewing the annual report and inancial statements and the strategic processes for risk, control and governance throughout the company. The Committee also advises the Board on the appointment of the external auditor and on the auditor s remuneration and monitors auditor independence. The company does not currently have an internal audit function, but at each meeting of the Audit Committee the need for internal audit is considered and individual reviews are commissioned from time to time.

The Audit Committee is chaired by Donal Duff. Members during the year were Mike Liston, Clive Barton (until his resignation on 24 April 2015) and, from 1 September 2015, Alan Merry. The meetings are  attended  by  invitation  by  the  external  auditor,  the  Finance Director, the Financial Controller and, from time to time, other senior executives.

At its meeting on 21 April 2016 the Committee received and reviewed the  company s  2015  annual  report  and  inancial  statements.  At this meeting the Committee also received a report from the external  auditors  summarising  the  results  of  their  audit  of  the

 inancial statements.

The Committee reviewed, in particular the material accounting and audit judgements which had been made in the inancial statements.

These were:

The disclosure of and accounting for the Public Employees Contributory Retirement Scheme (PECRS) sub-fund prior to its amalgamation into the main PECRS fund from 1 October 2015.

Taxation disclosures including accounting for deferred taxation;

Provisions in relation to building dilapidations and an onerous lease;

Stamps in circulation;

UPU accrual; and

The Going Concern principle.

The Audit Committee considered whether the 2015 annual report was fair, balanced and understandable and whether it provided the necessary information for the shareholder to assess the company s performance, business model and strategy. The Committee was satis ied that, taken as a whole, the Annual Report is fair, balanced and understandable.

The Audit Committee recommended the annual report and inancial statements  to  the  Board  for  approval  at  the  Board  meeting  on 29 April 2016.

Nomination Committee

The  Nomination  Committee  is  responsible  for  overseeing  the selection and appointment process of Directors to the Board and making recommendations to the Board thereon. When considering future Board appointments the Nomination Committee pays due regard to issues of diversity, including gender.

Statement of Corporate Governance

Remuneration Committee

The Remuneration Committee has responsibility for setting remuneration for the Executive Directors of the Company which is su icient to attract, retain and motivate people of the quality required. No Director plays any role in the determination of his/her own remuneration. The Memorandum of Understanding with the Treasury and Resources Minister requires any changes to the level of remuneration paid to Non-Executive Directors to be agreed, in advance, by the Minister. The Committee also monitors the levels of remuneration for members of the Executive Management Team of the company.

The remuneration of the Directors of the Group for the inancial year ended 31 December 2015 is set out below, together with comparatives for 2014:

Salary/Fees Bonuses Bene it in Kind3 2015 Total 2014 Total

£ 000 £ 000 £ 000 £ 000 £ 000

Executive Directors

Tim Brown  1944 46 18 258 125* (appointed 01.07.14)

Liz Vince  112 26 12 150 148 (resigned 31.03.16)

Gary Carroll  535 2 55* 160 (resigned 31.05.15)

Kevin Keen  212 Total 359 72 32 463 645

Non-Executive Directors

Mike Liston 40 40 40 Tim Brown  0 0 12*

(resigned 30.06.14)

Donal Duff 20 20 20 Chris Evans 15 15 15 Clive Barton  0 0 7*

(resigned 24.04.15)

Alan Merry  5 5* 0 (appointed 01.09.15)

Total 94 80 94

* Part year

The Company offers an annual bonus scheme to all staff. There are three schemes:

Staff who are covered under Collective Bargaining;

Members of the Executive Team (excluding the three Executive Directors in the above table); and

All other staff.

The total amount paid out in bonuses relating to 2015 for the above three schemes as £668,000(2014: £693,000).

During 2015 the company provided £24,000 (2014: £25,000) to the Sports and Social Club who organise events for staff and the company also funded the CWU s local branch secretary post at a total cost of £19,000 (2014 : £42,000).

3The bene it in kind received by the Executive Directors comprises the contribution payable into pension schemes and health insurance. 4Includes £27,500 accommodation allowance.

5Gary Carroll left on 31st May 2015.

Internal Control

The Board is responsible for ensuring that there are effective systems of internal control in place to reduce the risk of misstatement or loss and to ensure that business objectives are met.

These systems are designed to manage, rather than to eliminate, the  risk  of  failure  to  achieve  business  objectives,  and  can  only provide reasonable and not absolute assurance against material misstatement or loss.

The key procedures which the Board has established to provide effective control are:

BOARD REPORTS

Key strategic decisions are taken at Board meetings following due debate, and with the bene it of Board papers circulated in advance. The risks associated with decisions are a primary consideration in the information presented and discussed by the Board. The Board discusses  and  approves  the  Group s  strategic  direction,  plans, objectives, annual budgets and inancial forecasts and the associated risks to achieving these.

MANAGEMENT STRUCTURE

Responsibility  for  operating  the  systems  of  internal  control  is delegated  to  management  and  directed  and  overseen  by  the Executive Team chaired by the Chief Executive. This Team meets weekly. There are speci ic matters reserved for decision by the Board and these have been formally documented.

RISK MANAGEMENT

Management is responsible for identifying the key risks to achieving their  business  objectives  and  ensuring  that  there  are  adequate controls in place to manage these in line with the risk appetite set by the Board and contained in the company s Risk Management Policy. Senior managers are invited to attend the Audit Committee s meetings to provide presentations on the key risks within their area of the business and how these are managed. Key strategic risks are identi ied as part of the annual budget process and reported to the board and the shareholder.

BUDGETARY CONTROL

Detailed phased budgets are prepared at pro it centre level and the Board  receives  monthly  management  accounts  showing  actual performance  against  these  budgets,  with  explanations  of  any material variances.

HUMAN RESOURCES

The company endeavours to ensure that its employees are able to carry out their duties in a competent and professional manner through its commitment to staff training and development, including performance appraisal.

Tim Brown Company Secretary 29 April 2016

Directors Report

The Board of Directors of Jersey Post International Limited ( JPIL or the Company ) present their report on the affairs of JPIL and its subsidiaries ( the Group ), together with the audited consolidated inancial statements for the year ended 31 December 2015.

(2014: £177,000). Also a special dividend of £2,000,000 was paid

Principal Activity during the year.

The principal activity of the Group is that of providing postal services  to the Island of Jersey.

Employee Involvement

Going Concern

The  Directors  have  produced  forecasts  for  the  next  12  months following the date of signing of these inancial statements which have satis ied them that the Group will continue to be a going concern and be able to meet its liabilities as they fall due.

The Directors are mindful of Article 8(2)(e) of the Postal Services (Jersey) Law 2004 which states in so far as it is consistent with paragraph (1), the Economic Development Minister and the Jersey Competition Regulatory Authority [JCRA] shall each have a duty in performing its functions under the Law, to have regard to the need to ensure that persons engaged in commercial activities connected with postal services in Jersey, have su icient inancial and other resources

to conduct those activities . Accordingly the Directors have adopted the going concern basis in preparing the inancial statements.

Results

Details of the results for the year are set out in the Group consolidated income statement on page 24. A review of the Group s business during the year and an indication of the likely future development of the business are provided in the Chairman s Statement and the Strategic Report on pages 6 15.

Shareholdings

The 5 million £1 ordinary shares of JPIL are 100% owned by the States of Jersey who is the ultimate controlling party of the Company.

Dividends

An  ordinary  dividend  of  £278,000  will  be  recommended  by the  Directors  for  2015  at  the  AGM  to  be  held  on  27  May  2016

During the year, the policy of providing employees with information about the Group was continued using a variety of media through which employees were encouraged to present their suggestions and views on the Group s performance.

Disabled Employees

The Group gives full consideration to applications for employment from disabled persons where the requirements of the job can be adequately  ful illed  by  a  handicapped  or  disabled  person.  Where existing employees become disabled, it is the Group s policy, wherever practicable, to provide continuing employment under normal terms and  conditions  and  to  provide  training,  career  development  and promotion to disabled employees wherever appropriate.

Board Remuneration

Details of Directors remuneration are set out in the Remuneration Committee Report on page 17.

Statement of Directors Responsibilities

The Directors are responsible for preparing the inancial statements in accordance with applicable law and United Kingdom Accounting Standards.

The Companies (Jersey) Law 1991 requires the Directors to prepare inancial statements for each inancial year. Under that law the Directors have elected to prepare the inancial statements in accordance with United Kingdom Accounting Standards, including Financial Reporting Standard FRS102, The Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland ( FRS102 ) Generally Accepted  Accounting  Practice  (United  Kingdom  Accounting Standards and applicable law). The inancial statements are required by law to give a true and fair view of the state of affairs of the Group as

at the end of the year and of the pro it or loss of the Group for the year. In preparing these inancial statements, the Directors are required to:

Select suitable accounting policies and then apply them consistently; Make judgements and estimates that are reasonable and prudent;

State whether applicable UK Accounting Standards have been followed; and

Prepare the inancial statements on the going concern basis unless it is inappropriate to presume that the Group will continue in business.

The  Directors  con irm  that  they  have  complied  with  the  above requirements in preparing the inancial statements.

The Directors are responsible for keeping proper accounting records that  disclose  with  reasonable  accuracy  at  any  time  the  inancial position of the Group and enable them to ensure that the inancial statements comply with the Companies (Jersey) Law 1991. They are also responsible for safeguarding the assets of the Group and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.

The Directors are responsible for the maintenance and integrity of the corporate and inancial information included on the Group s website. Legislation in Jersey governing the preparation and dissemination of the inancial statements may differ from legislation in other jurisdictions.

So far as the Directors are aware, there is no relevant audit information of which the Group s auditors are unaware, and each Director has taken all the steps that he or she ought to have taken as a Director in order to make himself or herself aware of any relevant audit information and to establish that the Group s auditors are aware of that information.

Viability Statement

The  Code  requires  that  the  Directors  of  Jersey  Post  International Limited should explain how they have assessed the prospects of the company, over what period they have done so and why they consider that period to be appropriate, and in so doing express a view about the long term viability of the company.

Jersey Post conducts a rigorous strategy and budget setting process. Whilst each Board meeting reviews the wider market, strategic risks and opportunities, it dedicates at least one day a year to review where the business is, what challenges it is facing, what new opportunities and  risks  present  themselves  and  identifying  potential  key  areas of concern. From this it reviews its existing strategy, amends where necessary and con irms the direction of the business for the next three to ive years. From this a Business Plan is developed looking three years

out with detailed planning for the irst year. This plan includes a review of strategic risks and opportunities. The Plan also provides indicative forecasts for years four and ive. The Board presents the outcomes of this process to its shareholder and provides half yearly updates. Given the dynamics of the market Jersey Post operates in, the Board considers that the timescale is appropriate for the business.

The Strategic Report outlines the main areas of risk, the key one being the decline in its core letters market over the last 10 years and the forecast that this will continue in the foreseeable future. Therefore the Board have approved a strategy that provides for the development of new pro itable revenue streams at the same time investing in its core to ensure it continues to deliver a quality service at a pro it. Without these new revenue streams, Jersey Post would be in a period of managed decline that could ultimately lead to an unsustainable Universal Service Obligation in Jersey.

The Board considers that the strategy it has approved, coupled with the track record of the business in dealing with the historic 60% loss of letter volume and the loss of ful ilment business, gives it a reasonable expectation that the company will be able to continue in operation and meet its liabilities, including its Universal Service Obligation over the three year period ending 31 December 2018.

Annual General Meeting

The AGM will be held at the States Treasury, Cyril le Marquand House, St Helier on 27 May 2016.

Directors

The Directors of the Company are listed on page 3.

Independent Auditors

Price waterhouseCoopers  CI  LLP  were  appointed  and  acted  as independent  auditors  for  the  year  ended  31  December  2015.  A  resolution  to  appoint   Price waterhouseCoopers  CI  LLP  as independent auditors for the year ending 31 December 2016 will be proposed at the AGM on 27 May 2016.

This statement was approved by the Board of Directors of Jersey Post International Limited on 29 April 2016 and was signed on their  behalf by:

Tim Brown Company Secretary 29 April 2016

Independent Auditor s Report

to the members of Jersey Post International Limited

Report on the financial statements

We  have  audited  the  accompanying  inancial  statements  of Jersey Post International Limited ( the Group ) which comprise the Consolidated Statement of Financial Position as of 31 December 2015 and the Consolidated Income Statement, Consolidated Statement of Comprehensive Income, the Consolidated Statement of Changes in Equity and the Consolidated Statement of Cash Flows for the year then ended and a summary of signi icant accounting policies and other explanatory information.

Directors responsibility for the financial statements

The  Directors  are  responsible  for  the  preparation  of  inancial statements that give a true and fair view in accordance with United Kingdom  Accounting  Standards,  including  Financial  Reporting Standard 102, The Financial Reporting Standards applicable in the United Kingdom and the Republic of Ireland ( FRS 102 ) and with the requirements of Jersey law. The Directors are also responsible for such internal control as they determine is necessary to enable the preparation of inancial statements that are free from material misstatement, whether due to fraud or error.

Auditors responsibility

Our  responsibility  is  to  express  an  opinion  on  these  inancial statements  based  on  our  audit.  We  conducted  our  audit  in accordance  with  International  Standards  on  Auditing.  Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the inancial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the inancial statements. The procedures selected depend on the auditors judgement, including the assessment of the risks of material misstatement of the inancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the inancial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on

the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Directors, as well as evaluating the overall presentation of the inancial statements.

We believe that the audit evidence we have obtained is su icient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the inancial statements give a true and fair view of the inancial position of the Group as of 31 December 2015, and of its inancial performance and its cash lows for the year then ended in accordance with United Kingdom Accounting Standards, including FRS 102 and have been properly prepared in accordance with the requirements of the Companies (Jersey) Law 1991.

Report on other legal and regulatory requirements

We read the other information contained in the Annual Report and consider the implications for our report if we become aware of any apparent misstatements or material inconsistencies with the inancial statements. The other information comprises the Directors, O icers and Advisors, Board of Directors, Chairman s Statement, Strategic Report, Statement of Corporate Governance, Directors Report and Five Year Summary.

In  our  opinion  the  information  given  in  the  Directors  report  is consistent with the inancial statements.

This report, including the opinion, has been prepared for and only for the Company s members as a body in accordance with Article 113A of the Companies (Jersey) Law 1991 and for no other purpose. We do not, in giving this opinion, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing.

Mark James

For and on behalf of Price waterhouseCoopers CI LLP Chartered Accountants

Jersey, Channel Islands

29 April 2016

Consolidated Income Statement Year Ended 31 December 2015

The basis of preparation of these inancial statements is set out on page 27, and notes on page 27 43 form an integral part of these inancial statements.

The above results are derived from continuing activities.

Consolidated Statement of Comprehensive Income Year Ended 31 December 2015

The basis of preparation of these inancial statements is set out on page 27, and the notes on page 27 43 form an integral part of these inancial statements.

Consolidated Statement of Financial Position Year Ended 31 December 2015

The basis of preparation of these inancial statements is set out on page 27, and the notes on pages 27 43 form an integral part of these inancial statements.

The inancial statements on pages 29 to 49 were authorised and approved for issue by the Board of Directors on 29th April 2016 and were signed on its behalf.

Tim Brown

Chief Executive O icer

Consolidated Statement of Changes in Equity Year Ended 31 December 2015

Year Ended 31 December 2014

The basis of preparation of these inancial statements is set out on page 27, and notes on page 27 43 form an integral part of these inancial statements.

Consolidated Statement of Cash Flows Year Ended 31 December 2015

The  basis  of  preparation  of  these  inancial  statements  is  set  out  on  page  27,  and  the  notes  on  pages  27 43  form  part  of  these inancial statements.

Notes to the Financial Statements

1. ACCOUNTING POLICIES

1. GENERAL INFORMATION

Jersey Post International Limited provides a postal service both on the Island of Jersey and through an international network worldwide.

The Company is incorporated and domiciled in Jersey. The address of its registered o ice is Postal Headquarters, La Rue Grellier, La Rue des Pres Trading Estate, St Saviour, Jersey JE2 7QS.

2. STATEMENT OF COMPLIANCE

The consolidated inancial statements of Jersey Post International Limited have been prepared in compliance with United Kingdom Accounting Standards, including Financial Reporting Standard 102, The Financial Reporting Standard applicable in the United Kingdom and the Republic of Ireland (FRS 102) and the Companies (Jersey) Law 1991.

3. BASIS OF PREPARATION

The consolidated inancial statements have been prepared on a going concern basis, under the historic cost convention, as modi ied by the recognition of certain inancial assets and liabilities measured at fair value, in accordance with FRS 102. Information on the impact of irst-time adoption of FRS 102 is given in note 25.

The  preparation  of  inancial  statements  in  compliance  with  FRS 102 requires the use of certain critical accounting estimates.  It also requires management to exercise judgement in applying the Group s accounting policies as per note 1.22.

The principal accounting policies are summarised below. They have all been applied consistently throughout the year and preceding year.

4. BASIS OF CONSOLIDATION

The consolidated inancial statements present the results of Jersey Post International Limited and its subsidiaries ( the Group ) as if they formed  a  single  entity.  Intercompany  transactions  and  balances between group companies are therefore eliminated in full.

5. GOING CONCERN

The  Directors  have  produced  forecasts  for  the  next  12  months following the date of signing of these inancial statements which have satis ied them that the Group will continue to be a going concern and be able to meet its liabilities as and when they fall due.

The Directors are also mindful of Article 8(2)(e) of the Postal Services (Jersey) Law 2004 which states in so far as it is consistent with paragraph (1), the Economic Development Minister and the Jersey Competition Regulatory Authority [JCRA] shall each have a duty in performing its functions under the Law, to have regard to the  

need  to  ensure  that  persons  engaged  in  commercial  activities connected with postal services in Jersey, have su icient inancial and other resources to conduct those activities . Accordingly the Directors have adopted the going concern basis in preparing the inancial statements.

6. TANGIBLE ASSETS

On a continuing use basis within the business, tangible assets are stated  at  cost  less  accumulated  depreciation  and  accumulated impairment losses. Cost includes the original purchase price and expenditure that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management.

The group adds to the carrying amount of an item of tangible assets the cost of replacing part of such an item when that cost is incurred if the replacement part is expected to provide incremental future bene its to the group. The carrying amount of the replaced part is derecognised. Repairs and maintenance are charged to pro it or loss during the period in which they are incurred.

In accordance with the Postal Services (Transfer) (Jersey) Regulations 2006 which regulated the transfer of the assets, liabilities and rights of Jersey Post to Jersey Post International Limited at 30 June 2006, the freehold land and buildings were re-valued on an existing use basis prior to their purchase by the Group.

The cost of all other tangible ixed assets is their purchase cost, together  with  any  incidental  costs  on  acquisition.  Tangible  ixed assets with a cost of less than £1,000 are not capitalised.

Depreciation is calculated so as to write off the cost of tangible ixed assets on a straight-line basis over the expected useful economic lives of the assets concerned. Tangible ixed assets are not depreciated until they are available for use.

The lives assigned to major categories of tangible ixed assets are:

Land

Not depreciated

Freehold buildings 15 - 30 years

Computer hardware and software 1 - 5 years

Plant, vehicles and equipment 3 - 10 years

Improvements to leasehold property Remaining length of the lease

The assets residual values, useful lives and depreciation methods are reviewed, and adjusted at the end of each accounting period if appropriate, if there is an indication of a signi icant change since the last reporting date. The carrying value of tangible ixed assets is reviewed for impairment when events or changes in circumstances indicate  that  the  carrying  value  may  not  be  recoverable.  An impairment loss is recognised for the amount by which the asset s carrying amount exceeds its recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use.

Gains and losses on disposals are determined by comparing the proceeds with the carrying amount and are recognised within other operating income in the income statement.

7. INTANGIBLE ASSETS

Intangible assets are stated at cost less accumulated amortisation and accumulated impairment losses.

Intangible  assets  acquired  separately  from  the  business  are capitalised at cost. Assets are amortised on a straight line basis over their estimated useful life.

Amortisation is charged to Administrative expenses.

The carrying value of intangible assets is reviewed for impairment when events or circumstances indicate that the carrying value may not be recoverable. An impairment loss is recognised for the amount by  which  the  asset s  carrying  amount  exceeds  its  recoverable amount. The recoverable amount is the higher of an asset s fair value less costs to sell and value in use.

Where  web  sites  are  expected  to  generate  future  revenues  in excess of the costs of developing those web sites, expenditure on the functionality of the web site is capitalised and treated as an intangible  ixed  asset.  Expenditure  incurred  on  maintaining  web sites and expenditure incurred on developing web sites used only for advertising and promotional purposes are written off as incurred.

8. CASH AND CASH EQUIVALENTS

Cash  and  cash  equivalents  includes  cash,  deposits  and  other short-term highly liquid investments that are readily convertible to a known amount of cash and are subject to an insigni icant risk of changes in value.

9. FINANCIAL INSTRUMENTS

The Group has chosen to adopt Sections 11 and 12 of FRS 102 in respect of inancial instruments.

Financial assets

Basic inancial assets, including trade and other receivables, cash and bank balances are initially recognised at the transaction price. Such assets are subsequently carried at amortised cost using the effective interest method and assessed for impairment at each reporting date.

Other inancial assets, including investments in equity instruments where  not  subsidiaries,  associates  or  joint  ventures,  are  initially measured at fair value, which is normally the transaction price. Such assets are subsequently carried at fair value and the changes in fair value are recognised in income statement.

Financial assets are derecognised when (a) the contractual rights to the cash lows from the asset expire or are settled, or (b) substantially all the risks and rewards of the ownership of the asset are transferred to another party or (c) control of the asset has been transferred to another party who has the practical ability to unilaterally sell the asset to an unrelated third party without imposing additional restriction.

Financial liabilities

Basic  inancial  liabilities,  including  trade  and  other  payables, are initially recognised at transaction price.

Trade payables are obligations to pay for goods or services that have been acquired in the ordinary course of business from suppliers. Accounts payable are classi ied as currently liabilities if payment is due within one year or less. Trade payables are recognised initially at transaction price and subsequently measured at amortised cost using the effective interest method.

Derivatives, including forward foreign exchange contracts, are not basic inancial instruments. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently re-measured at their fair value. Changes in the fair value of derivatives are recognised in pro it or loss in inance costs or income as appropriate.

Financial liabilities are derecognised when the liability is extinguished, that  is  when  the  contractual  obligation  is  discharged,  cancelled  or expires.

Hedge Accounting

The Group has entered into forward foreign currency contracts to manage  its  exposure  to  foreign  exchange  currency  luctuations. The cash low hedged derivatives are measured at fair value at each reporting date. To the extent the hedge is effective, movements in fair value are recognised in other comprehensive income and any ineffective portions of those movements are recognised in the pro it or loss for the period.

Offsetting

Financial  assets  and  liabilities  are  offset  and  the  net  amounts presented in the inancial statement when there is an enforceable right to set off the recognised amounts and there is an intention to settle on a net basis or to realise the asset and settle to liability simultaneously.

10. STOCKS

Stocks  are  stated  at  the  lower  of  cost  and  net  realisable  value. Provisions are made where necessary for obsolete, slow-moving and defective stocks. Costs are measured on purchase price with the expense being recognised in the income statement when the stock item is sold.

11. PROVISION FOR LIABILITIES

Provisions are recognised when the Group has an obligation (legal or constructive) arising from a past event and the costs to settle the obligation are both probable and able to be reliably measured.

12. ONEROUS LEASES

Where the unavoidable costs of a lease exceed the economic bene it expected to be received from it, a provision is made for the present value of the obligations under the lease.

13. FOREIGN CURRENCIES

Items included in the inancial statements are measured using the currency of the primary economic environment in which the Group operates ( the functional currency ). The inancial statements are therefore presented in pound sterling which is the group s functional and presentation currency.

Transactions in foreign currencies are translated into pound sterling at the exchange rate ruling when the transaction was entered into. Monetary assets and liabilities expressed in foreign currencies are translated to sterling at the exchange rates ruling at the reporting date. Foreign currency gains and losses are taken to the income statement.

14. TURNOVER

Turnover is measured at fair value of the consideration received or receivable for goods and services supplied less post o ice boxes and business reply licences invoiced in advance and unexpended credit on franking meters. The sale of stamps is based on the cash received and no provision is made for services to be provided in respect of stamps in circulation as the Directors consider this to be immaterial. Included within Turnover and Cost of Sales are customs clearance charges incurred and recharged to customers of Jersey Post.

15. OTHER NON OPERATING INCOME

Other non-operating income represents the value of rental income received and receivable from the lease of a property recognised over the life of the rental agreement. Other non-operating income also includes net gain/loss on disposal of Fixed Assets.

16. ADMINISTRATIVE EXPENSES

Included within administrative expenses is, amongst other costs, the GST expense, support services staff costs and marketing and distribution costs.

Administrative expenses are recognised on an accruals basis.

17. TAXATION

Taxation expense for the period comprises current and deferred tax recognised in the reporting period. Tax is recognised in the income statement, except to the extent that it relates to items recognised in other comprehensive income or directly in equity.

Current tax is provided at amounts expected to be paid (or recovered) using the tax rates and laws that have been enacted or substantively enacted by the reporting date.

Deferred tax is recognised in respect of all timing differences that  have  originated  but  not  reversed  at  the  reporting  date  where transactions or events that result in an obligation to pay more tax in the future or a right to pay less tax in the future have occurred at the reporting date. Timing differences are differences between the Group s taxable pro its and its results as stated in the inancial statements  that  arise  from  the  inclusion  of  gains  and  losses  in tax assessments in periods different from those in which they are recognised in the inancial statements.

A net deferred tax asset is regarded as recoverable and therefore recognised  only  when,  on  the  basis  of  all  available  evidence,  it can be regarded as more likely than not that there will be suitable taxable  pro its  from  which  the  future  reversal  of  the  underlying timing differences can be deducted. Deferred tax is measured at the average tax rates that are expected to apply in the periods in which the timing differences are expected to reverse based on tax rates and laws that have been enacted or substantively enacted by the reporting date. Deferred tax is measured on a non-discounted basis.

18. PENSION COSTS

The Group operates both de ined bene it and de ined contribution schemes.

De ined Bene it

The Group is party to a de ined bene it plan for certain employees. A de ined bene it plan de ines the pension bene it that employee will receive on retirement, usually dependent upon several factors including age, length of service and remuneration.

Operating  pro it  is  charged  with  the  cost  of  providing  pension bene its earned during the year. The expected return on pension scheme  assets  less  the  interest  on  pension  scheme  liabilities  is shown as a inance cost within the income statement.

Actuarial gains and losses arising in the year from the difference between the actual and expected returns on pension scheme assets, experienced gains and losses on pension scheme liabilities and the effects of changes in demographics and inancial assumptions are included in the consolidated statement of comprehensive income

Pension scheme liabilities are measured using the projected unit credit method, discounted at the current rate of return on a high quality  corporate  bond  of  equivalent  term  and  currency  to  the liability. Recoverable pension scheme surpluses and pension scheme de icits are recognised in the statement of inancial position.

Please refer to Note 16 for further details.

De ined Contribution

Both  the  Group  and  employees  pay  contributions  into  an independently  administered  fund.  The  cost  of  providing  these bene its, recognised in the income statement, comprises the amount of contributions payable to the scheme in respect of the year.

19. OPERATING LEASES

Rentals receivable and payable under operating leases are charged in the income statement on a straight line basis over the lease term.

20. RESEARCH AND DEVELOPMENT

Expenditure on research and development is written off in the period in which it is incurred.

21. RELATED PARTIES

The  Group  discloses  transactions  with  related  parties  which  are not  wholly  owned  within  the  same  Group.  Where  appropriate, transactions  of  a  similar  nature  are  aggregated  unless,  separate disclosure is necessary to understand the effect of the transactions on the Group inancial statements.

22. CRITICAL JUDGEMENTS

The Group makes estimates and assumptions concerning the future. The resulting accounting estimates will, by de inition, differ from the actual results. The estimates and assumptions that have a signi icant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next inancial year are addressed below:

De ined Bene it Pension Scheme

The Group has an obligation to pay pension bene its to certain employees. The cost of these bene its and the present value of the obligation depend on a number of factors, including; life expectancy, salary  increases,  asset  valuations  and  discount  rates.  These actuarial assumptions are reviewed annually and are based on prior experience, market conditions and the advice of scheme actuaries. Although  no  liability  remains  at  the  reporting  date,  valuations were required at the transfer date. See note 16 for full disclosure of assumptions, pro it & loss charge and the balance sheet liability.

Impairment of assets

On at least an annual basis and when indicators of impairment are present, a review of impairment is conducted on property, plant and equipment, intangible assets as well as any debt owed to the Group. When considering whether impairment is required reference is made to the current value of the asset, useful life of the asset and age of the debt.

International Accruals

Within our creditor igure we maintain an accrual in relation to our international trade for amounts owed to other administrations within the Universal Postal Union. This accrual is calculated in accordance with the Letter Post Article 29 for Terminal Dues.

Deferred Tax

In accordance with FRS 102 this has been recognised as a taxation expense in our Income Statement in relation to ixed asset timing differences.

Provisions

The Group has maintained creditor balances at the year end in relation to an onerous lease held and dilapidation provisions as inancial liabilities under FRS 102.

Stamps in Circulation

The sale of stamps is based on the cash received and no provision is made for services to be provided in respect of stamps in circulation as the Directors consider this to be immaterial.

2. OPERATING PROFIT/(LOSS) FOR THE YEAR Operating pro it for the year is stated after charging the following:

3. STAFF COSTS

Staff costs (including Directors) consist of:

Employees

The average number of persons (including executive directors) employed by the Group during the year was:

Directors

The directors emoluments were as follows:

Post-employment bene its are accruing for two directors (2014:2) under a de ined bene it scheme. One Director was a member of the de ined contribution scheme.

Highest paid director

The highest paid director s emoluments were as follows:

Key management compensation

Key management includes the directors and members of senior management. The compensation paid or payable to key management for employee s services is shown below:

4. INTEREST AND DIVIDENDS RECEIVABLE

5. NET MOVEMENT ON INVESTMENTS

All current asset investments are shares held in listed companies which are traded on a regular basis. The total income statement effect recognised on these investments in the period was £99,000 (2014:£262,000) representing the fair value measurements shown above and dividends received of £213,000 (2014:£189,000). Fair value is established using quoted market prices.

6. OTHER FINANCE COSTS

7. TAXATION

Jersey Post International Limited is subject to Jersey income tax at the standard rate of 0% (2014:0%). Jersey Post Limited, a subsidiary of Jersey Post International Limited, is subject to Jersey income tax at the rate of 20% (2014:20%). All other companies in the Group are subject to Jersey income tax at the standard rate of 0% (2014:0%).

The estimated value of the net deferred tax asset not recognised in relation to the de ined pension scheme de icit held in previous years, measured at the standard rate of 20% is £nil (2014: £1,113,000).

8. TANGIBLE ASSETS

9. INTANGIBLE ASSETS

The useful life of the software is based on its expected utilisation by the Group.

10. STOCK

11. DEBTORS

12. CREDITORS: AMOUNTS FALLING DUE WITHIN ONE YEAR

Deferred income relates to prepaid post o ice boxes, business reply licences, and unexpended credit on franking meters.

Included within 2015 Other Creditors is £508,075 (2014:£669,481) of VAT due to HMRC as a result of customer postings above the HMRC   de-Minimis level. The customers pay the amounts due to Jersey Post who then pay these to HMRC. The amounts received from customers

but not paid over to HMRC at the reporting date are recorded within cash.

13. PROVISIONS FOR LIABILITIES

14. OPERATING LEASE COMMITMENTS

During period ended 31 December 2015, the total expense relating to operating leases was £450,000.

15. FINANCIAL INSTRUMENTS

The Group purchases forward foreign currency contracts to hedge currency exposure on liabilities to be settled in foreign currencies. The fair values of the derivatives held at the balance sheet date are determined by reference to their market values.

At the reporting date, the Group had a commitment to buy USD200k with a maturity date of 1st March 2016.

The forward foreign currency contracts are measured at fair value which is determined using valuation techniques that utilise observable inputs. The key inputs used in valuing the forward foreign currency contracts are the forward exchange rates for GBP:USD

16. PENSION COSTS DEFINED BENEFIT

The Group is party to one de ined bene it pension scheme at 31 December 2015, which is open to certain employees of Jersey Post Limited, the Public Employees Contributory Retirement Scheme ( PECRS )( the scheme ). Prior to incorporation Jersey Post had a second de ined pension scheme, the Jersey Post O ice Pension Fund ( JPOPF ). The responsibility for JPOPF remains with the States of Jersey as from 30 June 2006.

PECRS is a multi-employer de ined bene it scheme operated by the States of Jersey, funded in accordance with the recommendations of an actuary, which currently provides bene its based on inal pensionable pay.

The Group participates in the PECRS as an Admitted Body under a Terms of Admission Document which sets out how the contributions to and assets of the Group s notional sub-fund are determined.

The assets of the fund were held separately from those of the States of Jersey until 1 October 2015 when the requirement for a ring fenced sub-fund was removed and all assets and contributions treated as held within the Group s sub-fund were amalgamated with other funds of the scheme.

Until 30 September 2015 the PECRS was accounted for as a de ined bene it scheme under FRS 102. Actuarial gains and losses have been recognised in the period in which they occur, (but outside the income statement), through the Statement of Comprehensive Income (SOCI).

A valuation of the Scheme was carried out on 30 September 2015 by the PECR s independent actuary prior to the ring fenced sub-fund being amalgamated with other funds of the scheme. The outstanding de icit as at 30 September 2015 was measured using a roll-forward approach based on the latest actuarial valuation of the PECRS at 31 December 2013.

Following the amalgamation of the sub-fund there has not been su icient information to apply de ined bene it accounting as there is no basis for allocating any portion of the PECRS de icit to the Group and hence an actuarial valuation is no longer possible as at year end. In accordance with FRS 102 as of the 1 October 2015 the scheme has been accounted for as a de ined contribution scheme. The outstanding de icit as at 30 September 2015 was eliminated by way of a capital contribution accounted for directly to equity, as disclosed in the consolidated statement of changes in equity, with no impact on the consolidated income statement or consolidated statement of comprehensive income.

* Includes changes to the actuarial assumptions

 The de icit transferred is equal to the net liability and asset amounts shown above, £34,281,000 and £29,081,000 respectively.

17. PENSIONS DEFINED CONTRIBUTION

The  pension  cost  represents  contributions  payable  by  the  Group  to  the  de ined  contribution  scheme  and  amounted  to  £464,483 (2014: £391,385). No contributions (2014: £0) were payable to the scheme at 31 December 2015. These balances include the PECRS  contributions from 1 October 2015, which is now accounted for as a de ined contribution scheme since the transfer on 1st October 2015.

18. ORDINARY SHARE CAPITAL

There is a single class of ordinary shares.

19. DIVIDENDS PAID AND PAYABLE

During the year £2,177,000 (2014 £390,000) dividends were paid to the shareholder.