POL00090553
PoLO008N553,
In Strictest Confidence
POB(98)4th
P098/33 to 49 Copy No
T OFFICE BOARD
Minutes of the meeting h
eld on 14
at 148 Old Street, London mites
Present
Dr Neville Bain Chairman
Mr Peter Allen
Mr Richard Close Managing Di i
g Director Finance
Mr Jerry Cope ing Di
Mr ory, on os Managing Director Strategy & Personnel
Sir Christopher Harding
Mr John Roberts Chief Executive
Mr Richard Adams Secretary
Mrs Nicky Jayson Notes
Mr Richard Dykes, Managing Director Royal Mail
Mr Stuart Sweetman, Managing Director Post Office Count imi
Mr Kevin Williams, Managing Director Parcelforce Worldwide. timited
Mr Jim Cotton- Betteridge, Strategic Marketing Director, Royal Mail for POB98/24
Mr John Dunlop, Director & General Manager, Royal Mail International for POB98/25
and POB98/26
Mr Dave Miller, Director Horizon Programme, Post Office Counters Limit
boosie? imited, for
MINUTES OF PO98/33
PREVIOUS MEETING
The Board approved the minutes of its meeting of
10 March 1998.
DR NEVILLE BAIN PO98/34
The Secretary reported that Dr Neville Bain had been
appointed Chairman of The Post Office with effect
from 16 March 1998.
NICKY JAYSON PO98/35
The Board also welcomed Nicky Jayson who had
been appointed Head of Secretariat on a temporary
basis.
MATTERS ARISING PO98/36
POB(98)22 7
The Board noted the matters arising from the
meeting of 10 March 1998.
24
In Strictest Confidence l Wy
CHAIRMAN’S
BUSINESS
ACTION
Chairman (a)
Secretary (b)
Executive Members (c)
and MDs
CHIEF EXECUTIVE’S
REPORT
JOHN ROBERTS
(POB(98)23) (i)
ACTION
MDs and Richard Close
(i)
ACTION
John Roberts and (a)
Jerry Cope
In Strictest Confidence
PO98/37
The Chairman outlined his it
ne I Personal agenda for action
within three and twelve months and described the
business culture which he wished to promote:
a focus on added value for all managers
much more emphasis on action than on form leading
to faster decision taking and greater personal
accountability
Support for training and development initiatives,
recognition that people at all levels were important
a new era of pragmatic realism with Unions through
top level understanding and dealing with trouble spots
The Chairman proposed to hold occasional meetings
with the non-executive Members and the Chief
Executive where issues could be discussed in greater
detail and depth than was possible at Board
meetings.
In future, Board papers and minutes would be more
concise and action orientated. Board papers would
have a facing page in a standard format setting
out the essentials.
Copies of the Chairman's agenda to be circulated
to members of Business Executive Committees
and Board Members’ Direct Reports on a personal
basis.
PO98/38
Financial Performance. The full year financial
forecasts were still on track to beat the Royal Mail
target, achieve the POCL target and hopefully to
achieve the Parcelforce target. But targets were not
being met in the manner forecasted.
To review the reasons for misforecasting.
Government Review. The Government had announced
that The Post Office would remain in the public sector,
but the structural options under review included a 49%
share sale.
The Board to review at the May meeting its position on
the options now under review.
25
In Strictest Confidence
POLODDG0553,
Chairman and (b)
John Roberts
(iii)
I
(iv)
ACTION
Richard Dykes
(v)
(vi)
(vii)
(viii)
FINANCIAL OVERVIEW
RICHARD CLOSE
()
In Strictest Confidence
To consider interim freedoms to press for.
Liverpool. The Union Nationally had accepted that
Warrington was a better option than Speke for the new
mail centre and had accepted in negotiation the
Proposal to retain some work at Liverpool if performance
guarantees were obtained. The strike ballot had been
withdrawn and management had made it clear that the
Proposal would be withdrawn if there were any further
strike action. Meeting dates had been offered, but not
yet taken up, by local MPs.
Willesden. A two day unofficial strike over a discipline
case at the Princess Royal Distribution Centre (PRDC)
had spread to other offices in London. Negotiations with
the Union nationally on a new conduct code had now
been completed and a ballot was currently taking place.
The new code should be very helpful in these
circumstances but the situation at Willesden was now
judged to be intolerable and positive action was
necessary.
To catalogue all the problems at PRDC since its
opening, and to determine appropriate action with John
Roberts.
Quadrant. The joint venture transaction had been
completed successfully. No guarantee had been
offered against compulsory redundancies but surplus
administration staff would be absorbed back into the
business.
Coventry. The legal opposition to the Parcelforce
Coventry Hubs had been overcome and planning
permission granted.
RelayOne. A new electronic mail service had been
introduced in partnership with Microsoft and had
received a good press.
OCL pay. The 1998 pay round would not be easy,
Serene with the NFSP, in view of falling transaction
volumes.
The Board agreed an increase of x%.
PO98/39
Cumulative profit to February now stood at:
Royal Mail = £544m
POCL £58m
26
In Strictest Confidence
POL00090553
PoLO00sN553,
POL00090553
PoLoo080553,
In Strictest Confidence
- Parcelforce (£12m)
- SSL £2.6m
(ii) The group results for 1997/98 would show a
substantial Tecord profit and capital expenditure would
also be the highest ever. The EFL underlying
Performance was £353m. A £1 5m prepayment would
allow £25m surplus to rollover.
(iii) The Royal Mail full year forecast was £547m, £7m
more than that forecast in January, due to the
decision taken against making a £25m payment to
employees, the delayed REIMS agreement and lower
income. A £15m provision would be made for EVR
(subject to final audit confirmation).
(iv) The Parcelforce full year target of a £15m loss
now appeared attainable; consequently the 1998-99
budget would need to be reviewed by the Board.
(v) Counters’ full year forecast had been held at £33m,
The £17m provision for Horizon had now been settled
with the auditors.
(vi) SSL’s £4.5m forecast against a budget of £9m was
disappointing due mainly to a shortfall in planned
telebusiness income.
(vil) I The Quadrant joint venture transaction had generated
£23m with a £21m profit. It would be accounted for in
the first month of the 1998-99 financial year.
(viii) IThe Government's March budget would increase
National Insurance Employer's contribution by £2m;
the review of Group VAT rules which had been
signalled could, in a worst case, result in up to £60m
higher VAT costs.
i to
ACTION It was agreed that Richard Close would release ,
Ache Close the DTI forecast profit figures of £540m for Royal Mail,
(£20m) for Parcelforce and £30m for POCL, at the
same time signalling that there were some upsides to
these forecasts.
ROYAL MAIL MARKET PO98/40
DEVELOPMENT
RICHARD DYKES AND GE
I RID! ;
(PoBoaiz0) BETTE (i) The level of volume growth since 1980 fad een ‘o
unprecedented and was forecast to conti ut no
accelerate. The 5 year growth forecast was , Of
which 90% would be from core services, 3% from
27
In Strictest Confidence
ACTION
Richard Dykes
ACTION
Richard Dykes
PROJECT GLORIA
JERRY COPE
(POB(98)25)
(ii)
(iii)
(iv)
(v)
(vi)
(ii)
(iii)
In Strictest Confidence
developing existin mark
mere 1g ets and 7% from new
To re-base the long term i
seale, Ie} growth graph using a log
Competition could develop in a number of forms:
low cost Operators offering low prices and high
reliability, but delivery restricted to perhaps once a week
ones delivery only, Offering high quality and low
a PIT making a large investment in the UK and
incurring significant initial losses
one Player acquiring and consolidating a number of
mailing houses
electronic substitution
Core business would become increasingly vulnerable.
More work was required on the potential effects of
competition. Royal Mail would need to consider an
acquisition strategy for vertical integration and to
consider new ways of operating new services like city
centre deliveries. Work was being carried out on
developing this concept.
Competition issues would be discussed in connection
with the Corporate Plan at the June Board meeting and
wider organisation issues at the July Awayday.
Royal Mail planned to spend an additional £130m on
advertising over the next five years.
Given the size of the commercial customer base, there
was a case for increasing the number of 140 Account
Managers in Royal Mail significantly.
To co-ordinate production of a short brief for further
discussion with the Chairman indicating the priorities
within the programme and the cost and benefits of
moving more rapidly to account marketing.
PO98/41
This acquisition would fully support Royal Mail's
strategic intent and represented much the best
opportunity to develop the North American market
A phased payment would help to retain the existing
management team which would be critical to success.
The company should be run quite separately from the
main UK business.
28
In Strictest Confidence
POLO0090553
PoLo0Ds0s53
PROJECT VALERIE
JERRY COPE ;
(POB(98)26) 0
ACTION
Jerry Cope
BA/POCL AUTOMATION
(HORIZON)
STUART SWEETMAN (()
(POB(98)27)
(ii)
(iii)
PoLov0s0553
In Strictest Confidence
To press the DTI very hard to agree the deal,
The Board agreed a maximum PV of $35m for the
acquisition and that the Chairman, John Roberts,
Richard Dykes and Richard Close would agree the
letail.
PO98/42
The proposal Provided Royal Mail with the opportunity
to access a low cost delivery system for mail into the
Netherlands (outside KPN's monopoly) for both
international and domestic mail.
To seek DTI approval and continue negotiations with
Valerie and Valerie's parent to completion.
The Board agreed that authority would be devolved to
Mr Roberts and Mr Close to authorise the deal.
PO98/43
Whilst the NPV of the Project for POCL at this point had
changed little, the financial Position of the other partners
had worsened Substantially to the point where
ICL/Pathway wished to renegotiate terms and DSS/BA
were thought to favour termination.
A review Board with independent external advice was
now a possibility to provide input to a political decision
on the project's future.
The project remained central to POCL’s strategy and
Stuart Sweetman had already briefed DTI thoroughly on
the implications for the rural network if it were aborted.
It was agreed that the Board's position was to support
the continuation of the Programme.
COMPETITIVE PO98/44
OVERHEAD PROGRAMME:
PROPERTY AND FACILITIES
MANAGEMENT The Board approved expenditure of £8m on
RICHARD CLOSE implementation fees and a special DFE provision of
(POB(98)28) £8.3m for EVR and relocation costs, with future
expenditure to be authorised through the normal
project authority process.
AUDIT COMMITTEE PO98/45
REPORT ;
PETER ALLEN . (i) Audit fees had been reduced considerably.
(POB(98)29)
(ii) Treasury controls were good.
29
In Strictest Confidence
(iii)
(iv)
ACTION
John Roberts
BOARD MEMBERS’
INTERESTS
SECRETARY
(POB(98)30)
MaPEC FINANCE
EXCELLENCE -
REVENUE
MANAGEMENT STRAND
RICHARD CLOSE
(POB(98)31x)
ANY OTHER BUSINESS
DATE OF NEXT
MEETING
In Strictest Confidence
A numb il js A
review er of Royal Mail issues were being kept under
The Planned centralisation of internal audit would better
Utilise resources,
To further review internal controls in POCL's cash
centres which were still not Operating satisfactorily.
PO98/46
The Board agreed that relationships would not be
Started or deepened with companies of which the
Chairman was a Board member without the express
consent of Ministers.
PO98/47
Noted
PO98/48
(Secretary's note: the minute of this discussion has
been circulated to Members on a personal basis)
PO98/49
12 May at 148 Old Street.
30
In Strictest Confidence
POL00090553
POLO0080553,