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Post Office Limited — Strictly Confidential
POST OFFICE LTD BOARD MEETING (Company Number 2154540)
Meeting to be held at 9.30 am on 16" July 2013
at 148 Old Street, London, EC1V 9HQ in the Board Room
The Board will be preceded by a breakfast for Non-Executive Direct: it 8.15am at Bistrot
Bruno Loubet, 86-88 Clerkenwell Road, London, EC1M 5RJ
0930 1 Board Effectiveness Review Alice Perkins
1000 2 __ IT Supply Chain Procurement activity Sue Barton/ Lesley Sewell
e Programme update and Strategy
e Data Centre tower award positioning
e Service Integrator tower award positioning
e Transitional support services
1100 BREAK
1110 3 Progress report on Government Funding and Strategic Sue Barton/ Chris Day
Plan
1140 4 Horizon Update Susan Crichton/Mark
Davies
1210 5 _ FS Strategy including: Nick Kennett/ Chris Day
e investment required and effect on state aid/funding
e insurance proposition
1255 LUNCH
1315 6 Financial Performance Update Chris Day
1335 7 Chief Executive's Report Paula Vennells
(including Network IR update)
1350 8 Pensions Valuations Chris Day/ Virginia Holmes
1405 9 Group Structure Susan Crichton
1415 10 Minutes of Previous Meeting and matters arising Alice Perkins
Minutes for noting: Remuneration Committee
Status report update
1420 11 Items for Noting
e Significant Litigation Report Alwen Lyons
« Health and Safety Report
« Sealings
1425 12 Any other business Alice Perkins
1430 BREAK
1445 Mutualisation Sub Committee Sue Barton
e Public Purpose Statement
1600 CLOSE
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Post Office Ltd — Strictly Confidential
POST OFFICE LTD BOARD
Board Effectiveness Review
The Chairman's Board evaluation report is attached as appendix 1. The areas proposed for
discussion at the Board and for action are covered in section 13.
Alice Perkins
July 2013
Board Effectiveness Review 10/07/2013 Page 1 of 1
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Annex 1
Board Effectiveness Review
1. Process
The Chairman interviewed all the Board Directors and the Company Secretary on a one-to-
one basis using the Discussion Guidelines, attached at Annex 2, between 20 June and 3
July. A list of interviewees is at Annex 3. The Chief Executive had consulted her ExCo
colleagues and included their views in her feedback.
This report summarises all the points made. There were many common themes and where
the same points were made more than once, they have not been repeated. All the
suggestions made for improving how the Board works are included and brought together in
section 13.
The process included peer feedback for all members of the Board which the Chairman will
communicate separately on an individual basis. Concurrently, the SID has conducted a peer
review of the Chairman’s performance which is being fed back separately to her.
The Board will discuss this report at its July meeting and it will then be sent to the
Shareholder Executive.
2. Context
Alice Perkins took over the Chairmanship of the Post Office Board from Donald Brydon in
October 2011. At that time the CEO, CFO, SID and Company Secretary were all in their
present roles. The other NEDs joined the Board over the period from [March] to September
2012. So at the time of carrying out this evaluation, the Board has been in existence for less
than a year. It is early days in its life.
The creation of a new PO Board has gone remarkably well in a very difficult context and
challenging environment. The Board is maturing. It has come a long way since autumn 2011
and is operating very well (8 out of 10). We can be pleased with where it has got to and the
Shareholder should be pretty pleased. The issue now is how to make it even better.
This is a well-functioning Board. The Directors have a wide range of skills and experience
from different backgrounds. We have the key bases covered. We are working together
effectively; it's fun and really challenging.
This is a disparate set of Directors who have come together and are pointing in the same
direction most of the time; there is a sense of team work. We do listen to each other and can
agree to disagree or agree on what we are prepared to live with. It can feel uneven as
between the respective contributions of the Executives and the NEDs.
The Board has got better as it has matured. People have become feistier; they are
challenging but very respectful of each other and of the business. Board members come well
prepared; they are good at listening. They don’t always agree and sometimes issues get re-
opened when people thought they had been settled. The debate can be circular and hard to
close down but it is helpful if people speak up if they disagree.
The Board is quite different from a year ago. It is stimulating, vibrant, pro-active and
searching for solutions in its determination to fix the business. It is extremely positive and
helping the Executives to improve. It adds value.
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The Board provides a good balance between support and challenge -— it is giving clear
direction and has a clear mandate and has stopped diving into the detail. It feels like a team
which is great. ExCo feels very positive about it - should they and the Board meet a couple
of times a year?
The Board has been the most amazing improvement for the PO. The recruitment of the
NEDs has gone really well — they have very different skills and have the ability to
contemplate working in a different environment from what they are used to. The company
has adjusted well to the new Board. Thank goodness we went in that direction.
4. Organisation of the Board
Overall, this is very good. The Company Secretary, supported by Jorja Preston, provides
excellent support to the Board including looking after the hygiene factors, really well. The
electronic papers are great and one Director commented positively on the Reading Room
while another wondered whether it is as useful as it could be?
The meetings are held at the right frequency, for the right length of time and they run to time.
The quality of the papers has improved but there is further to go — some should be crisper
and they should always arrive in time for Board members to digest them properly before
meetings unless there is an emergency to report.
A common theme was that the Board could use its time even better. There is still a tendency
for Executives to repeat what is in the papers. The Board could get better at taking papers
as read if there are no issues to discuss. For instance, while retaining a paper on financial
performance and key indicators at each Board meeting, should the Board discuss this at
alternate meetings and without any introduction from the CFO unless it is to add something
new? This would release time which could be spent on the substance of the business such
as mails and financial services.
Several people commented on the nature of the debate. The Board does not need to be led
by the Executives to a conclusion - this is not a good use of the Directors’ expertise. It is
getting better at having a robust debate. One person commented that it is a very respectful
Board and another Director suggested that it should become more hard-edged and willing to
call a spade.
The Board is not a talking shop. It takes decisions all the time but the Chairman could be
even clearer about when decisions have been made and they could be recorded in a
decision log at the end of the minutes. This should flush out outstanding differences and the
Board would be able to decide explicitly how to handle these rather than finding that the
issues were being unexpectedly re-opened by one member of the Board to the surprise of
the others.
Should the Board make more use of the NEDs in creative ways so that they are generating
ideas rather than reviewing ideas which have come up from the Executives? (e.g. the
session on Outsourcing at the recent Awayday.)
The recent Awayday had been good (though the session on Mails had been a wasted
opportunity). How many of these should there be in a year (in the last year there have been
two — Shoreditch and Kingston)?
Should the Board meet outside Head Office more often e.g. at a large Crown or a call
centre?
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Should the Board meet the ExCo on a regular (but infrequent) basis? And what about the
SLT?
Should the Board have a dinner with partners?
One Director asked that dates for future Board meetings in 2014 and even 2015 should be
fixed now.
It was also suggested that the Board should have a regular opportunity to review the forward
programme of agendas as it has in the past.
There is sometimes an absence of follow-through (e.g. the delay in circulating the updated
Rothschild’s work). While this has got better, there is further to go.
5. Committee Organisation
The right Committees are in place. The Board has only just set these up so their roles should
be clear and they are.
The Committees have been feeling their way on the frequency and timing of their meetings.
There is a need to find a schedule which works and is more settled. This is especially true of
the ARC and the RemCom.
The RemCom is the Committee with the most difficult business in practice and it has not
always felt as though it is in control of it. This should improve with experience of the
interaction with the Shareholder, better forward planning and better professional support
from the business.
The ARC initially felt too much like the main Board but that is better now that membership
has been reduced to three NEDs. It is discharging its responsibilities properly and has
handled the two year-ends extremely well. One Director commented that it might be trying to
do too much and might need to be more flexible in its use of time. There is important and
urgent work for it to do on risk, which is in hand for the autumn. Several Directors
commented that that it was the next major priority after settling the strategy.
The Mutualisation Committee has been less effective than the Board although it has the
same membership. It should review its future programme in the light of the strategy.
6. Strategy
The Board has spent a great deal of time on the Strategy since it has been fully formed and
this has been helpful in terms of its understanding of the business and its development as a
team.
The Directors all think the Strategy has been well developed and are happy with the
substance of what they have agreed. At the time of writing, this is subject to negotiations
with the Shareholder.
However, the process got off to a shaky start at Shoreditch. Lessons were learned from that
and by the end the NEDs all felt satisfied that they had been able to make the contribution
they wanted to make. There was universal recognition that Sue Barton's role in this had
been invaluable.
One Director commented that there was further to go in articulating the vision of what the
Post Office would be in 2020.
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7. Board Composition
There is universal agreement that the Board has a great mixture of skills and experience.
Almost all the key aspects of the business are covered and several people commented that
whatever came up as an issue, there would be at least one member of the Board who had
the relevant experience to make a valuable contribution to its resolution. The areas where
additional expertise would be valuable were large-scale operations including change
management, industrial relations and IT.
Some people also commented on the mix of Directors in terms of their styles and
temperaments. There is a good balance between the entrepreneurial and the risk conscious
and between those whose glasses are half full and those whose are half empty. It would be
important in future to ensure that any changes in the Board did not result in the balance
being skewed too far one way or the other.
The Board is well balanced in terms of gender. In future it would be good if there were also a
greater diversity of ethnicity.
8. Board Involvement
The Directors’ knowledge of the business was generally thought to be sufficient for their
roles, though individual Directors raised areas which they it would be helpful for them to
understand better e.g. the economics of the network including SPMs’ pay.
There had been a tendency in the early days for NEDs to appear to “meddle” in the business
and dive down too much into the detail but this had diminished over time. This needs
watching as it is always tempting for NEDs to fall into that trap on any Board.
All the NEDs commented on how willing the Executives were to engage with them outside
Board meetings and were impressed by the extent to which most of them, and especially the
CEO, were open to challenge. In return, the Executives commented that the NEDs were very
generous with their time outside the Boardroom.
The relationship between the Chairman and the CEO appeared good, supportive but also
challenging with no obvious tensions.
One NED wondered whether they should become more involved by e.g. opening new PO
branches and/or developing relationships with key stakeholders (see next section). The CEO
wondered whether they could contribute to interviewing key candidates for ExCo positions.
9. Board Relationships with Key Stakeholders
There is general recognition that there is more to do here. The Board needs to understand
its shareholder's position better, especially that of the Minister concerned. The session with
Mark Russell had been extremely useful (“formative”/” an eye-opener’) in that context. It was
excellent that he had agreed to come again in the autumn and there should be more
sessions to help the Board understand this area.
It is also recognised that more time should be spent forging relationships with other key
stakeholders inside and outside the business. The Forum at the recent Awayday had been a
good use of time.
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10. Risk, Compliance, Financial Monitoring.
The Directors believe that they are carrying out their fiduciary duties appropriately overall.
Several people commented on the need to do more work on risk management as noted
above. More than one NED commented that the financial and performance report could be
improved further. Is there sufficiently robust reporting of the delivery of key projects,
including cost-cutting — is there a danger of the Board being lulled into a false sense of
security over these?
There is also a need to satisfy the Board that the right compliance measures are in place in
financial services as the company expands its business in this area. This is something for
the ARC in the first instance; there is a need to spend more time on this.
11, Looking Forward
Directors are concerned about the quality of the pipeline for the top posts, especially for the
CEO’s position. This is something which has already been identified and work is underway
under the direction of the NomCo to address it. Progress is being made in relation to the
ExCo positions and job specifications for new recruits to the ExCo are targeted at candidates
with the potential to be future CEOs. This is a real weakness which NomCo and the Board
need to keep actively under review.
The induction of the NEDs had been done well and everyone was satisfied with this. The
Board needed to decide now what additional development was needed, for example, visits to
branches (should each NED commit to visit a certain number every year?) or
workshops/Board sessions on particular issues?
It will be important to manage the tenure of the NEDs so that there is no bunching of
retirements.
12. Overall Board Effectiveness
The Directors thought that the Board got the balance right between fulfilling its fiduciary
duties and making a positive, substantive contribution to the business. Looking back over the
last year, one Director commented that the Board’s agenda had felt as though it had lurched
in an unplanned way but that once the Strategy was settled, it should be possible to get
more stability into the business and focus on key elements of its delivery.
The right balance has been struck between support and challenge. But the Board has now
“formed”. It has been “quite kind” to the business. It can now be more challenging and
expect more; it needs to be more demanding e.g. about cost-cutting, and tougher with
failure.
Generally the Directors were satisfied with the quality of the external advice received e.g.
the auditors, and Rothschild’s, but one Director commented that the business did not always
seem to be clear about what it was using advisers for, or doing that well.
13. Areas for Discussion and Action
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Discussion
What is the right balance amount of rigour and challenge? Does the Board agree that it
should be more forthright than it is now? How would that affect the balance between the
NEDs and the Executives?
Does the Board agree that time should be saved in meetings by moving more briskly through
agenda items and discussing financial performance and key indicators only every other
meeting (assuming things are on track?) If so, what would it like to spend more time on? Is
giving more time to our key stakeholders, including understanding the Shareholder better, a
key priority?
How could the NEDs be used more creatively?
What does the Board want to do outside Board meetings e.g. branch visits (an annual target
for NEDs?), workshops, meetings with key stakeholders, or with ExCo/SLT?
Are two Awaydays a year right?
Would the Board like a dinner with partners?
Should the Board meet outside Head Office more frequently e.g. at large Crowns or call
centres?
Is the Reading Room as useful as it could be?
Action
The Chairman to sum up discussions even more clearly. Board members to speak up if they
disagree or register clearly that they are willing to support the majority view despite
remaining reservations.
Executives to assume as a matter of course, that their papers have been read and not to
repeat material already covered unless asked to do so. The Chairman to move more swiftly
through each item unless there are questions or issued raised by the Board.
Company Secretary to fix Board dates for 2014 and if possible, 2015; to record decisions
taken in a “log” at the end of the minutes of each meeting; to continue to work with the
Executives to raise the standard of papers and ensure they are sent out in good time; to
ensure all follow-up action is taken timeously and circulate a forward programme of Board
agendas every 6 months.
All Committees to keep the cycle of their meetings under review and follow-up on the key
issues identified in this report e.g. succession planning for NomCo and risk for ARC.
Alice Perkins
July 2013
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Annex 2
Post OFFICE BOARD EVALUATION SUMMER 2013
DiscussiON GUIDELINE
1.
Overall impression of the Board
Shared understanding of the Board’s role
Dynamics of the Board
Culture and climate in the Boardroom
Sense of teamwork
Use of time
Quality of discussion and listening
Decision-making
Organisation of the Board
Agenda
Meeting frequency and length
Formal processes and duties
Informal processes
Information and support materials
Servicing of the Board
Committee organisation
Clear remits
Agendas
Meeting frequency and length
Membership, attendees and advisers
Information and support materials
Strategy
Development
Understanding
Agreement
Communication
Review
Peer reviews
Feedback on contribution of individual Board members
Executive Directors
Senior Independent Director/Committee Chairmen
Other Non-Executives
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Discussion GUIDELINE
6. Board composition
Balance of skills and experience, including diversity
Future requirements
7. Board involvement
Directors’ knowledge
Relationship Chairman and CEO
Relationships with management
Contact outside boardroom
8. Board relationship with key stakeholders
Shareholder relations
Employee/Franchisee relations
Other key stakeholder relations
9. Risk, compliance, financial monitoring
Identification
Monitoring
Openness
Balance with performance
Responsibility
10. Looking forward
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Succession planning for board members; non-executive and executive
Directors’ development needs
Future remuneration for non-executives
Induction and training
11. Overall Board effectiveness
Fulfilment of fiduciary duties
Contribution to business
Checks, balances and support
Short and long term health of business
Support/independent advice
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Annex 3
Neil McCausland
Tim Franklin
Virginia Holmes
Alasdair Marnoch
Susannah Storey
Paula Vennells
Chris Day
Alwen Lyons
List of Interviewees
Senior Independent Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Chief Executive Officer
Chief Financial Officer
Company Secretary
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Agenda
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Setting the scene
Technology landscape overview
Progress update
Future Board engagement
Summary
Branch counter (Horizon)
IT Separation
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Context: The decisions made over the past year in progressing our ‘
strategy have positioned us well to deliver against our refreshed 2013-
20 Business strategy
Over the past year we have involved the Board in our strategic Technology journey, the business drivers we are
responding to and our delivery plans.
Previous decisions have supported our approach to:
¢ IT supply chain: procurement of our supply chain driving value for money, flexibility and a smaller IT function
through our new IT supply chain model including:
- Consulting, Products and Solutions frameworks’.
- Services Integrator and Towers model for the provision of our future operational technology.
* Improve our IT Operating model: meeting business demand including:
- Improved integration and collaboration with business units
- Reorganisation of IT& Change
- Reduction in the size of our retained organisation
- Increasing the maturity and skill levels of our people.
* Risk and Resilience: Protecting branch counter service through to 2015 through investment in Horizon (our
branch counter service) to address end of life equipment in our data center in Belfast.
* Separation: endorsement of our plans.
1: Our frameworks have been procured and are delivering value today.
(2)
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Updating our strategy: We have updated our technology strategy to
take account of the changes demanded by our refreshed business
Strategy.
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Our Technology strategy published in support of our 2011-15 Business strategy has been refreshed to
accommodate:
* The newly refreshed 2013-20 Business strategy incorporating:
- Customer service focus.
- Speed to market.
- Continuing to focus on cost control.
- Support of our financial services and commercial propositions.
* improved understanding of the demands of achieving independence from Royal Mail Group.
* experiences and feedback received from the procurements we have been progressing.
* understanding of the commercial stance of Fujitsu services and other incumbents.
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Board proposals: At the July 2013 Board meeting we are bringing ‘
forward proposals for continued Branch counter support and
providing advanced notification of decisions to be made in September.
July 2013 Board September 2013 Board
We are asking for Board to: We will be asking the Board in September to
approve the award of the following contracts to our
* Transitional support services with Fujitsu selected bidders:
Approve the two year transitional support
agreement with Fujtisu Services. * Data Centre
- For provision of our strategic capability.
This will enable us to:
- Protect branch counter services beyond 31° * Services Integrator
March 2015. - Includes the provision of Service Desk
- De-risk the Network transformation and - Remaining bidders include CapGemini, CGI
Crown transformation delivery. and ATOS.
- Give us time to determine and develop a new
fit for purpose Point of Service solution.
(4)
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Technology
landscape
overview
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IT supply chain: Post Office’s legacy commercial contracts have been
established over many years with inconsistent terms & conditions.
90% of Post Office IT contracts and services terminate within the 2012-2015 strategic term.
Our legacy contracts and services have been established over many years and do not provide the optimal
vehicle for us to compete commercially.
We are moving to a new contractual model providing flexibility, speed to market and value for money whilst
meeting the demands of public sector bodies.
Post Office
IT & Change
Post Office
new IT
supply chain
(9)
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IT supply chain: Post Office is continuing to progress the
establishment of its future IT supply chain, enabling us to deliver the
technology required for our future 2013-2020 Business strategy.
Post Office IT will be:
* —asmaller organisation,
+ business focussed and driven,
+ — fit for purpose and more responsive.
Frameworks will help us:
+ leverage innovation,
* access an increased range of skills and
specialisms from the market,
+ avoid supplier lock-in,
* procure solutions efficiently,
+ improve speed to market.
The Services Integrator will:
* augment Post Office skills,
+ provide flexible resources to meet demand,
* assume responsibility for the delivery of
business solutions.
The Towers model will:
* provide access to lower cost operational
technology,
* provide industry standard components and
solutions,
* — rationalise our technology estate,
+ — provide more integrated solutions.
Infrastructure
End User Computing
Tower
Network
Point of Sale/Service
Application
Other Applications &
Frameworks Towers
O Completed
i I Award 2013-14 financial year.
Next contracts for consideration.
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IT Operating Model: To enable us to meet the business objectives of
our 2013-2020 strategic plan, Post Office needs to enhance the ability
and flexibility of our people.
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* The capability of our people is our most valuable
resource and enables us to compete in an
aggressive marketplace.
* To meet the Business strategy our Technology
strategy identified the need to uplift the capability
and maturity of the IT organisation to become more
responsive to business demand.
* The Post Office IT operating model is being
transformed to provide:
- Improved speed to market.
- Cost efficiency.
- Amore capable, forward thinking and
innovative workforce.
* We have worked with Deloitte, ISG’, Gartner? and
others to develop the optimal model for Post Office.
+ We will use the capabilities' of the Services
Integrator to provide us with additional skills and
workforce flexibility.
ISG: Leading advisory services company specialising in business optimisation.
2Gartner: IT research and advisory company.
Existing IT Operating model
will be unable to meet the
needs of the Business
Strategy.
We undertook a wide
ranging review identifying
the most appropriate model
to meet the needs of our
business.
Over the strategic period we
will reduce the costs of our
retained organisation whilst
becoming more responsive
to business demand.
We will need to upskill our
retained organisation and
leverage the skills of the
= Services Integrator to meet
demand.
The Services Integrator will
provide resource flexibility
and help us to mature our
capabilities.
13-14 14-15 15-16 16-17 17-18 18-19 19-20
Indicative
Staff costs
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Technology Strategy: Our strategy transforms our technology, delivering
reduced costs, improved service and better customer experience to our
customers.
(1) Our Technology Strategy builds on the robust and cost effective IT supply chain for the solutions needed to deliver our 2013-20 Business
strategy.
Our common technology platform, based on open systems products, provides a low cost and flexible ability to integrate our existing
systems with the applications and services needed in the future to deliver our strategy.
C3] By providing great applications on robust technology, backed up with strong service and support from our suppliers we will deliver credible
products and services, with the customer experience that will support business growth.
Technology Element
6»
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Standard
Applications
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Commodity
Equipment
r 1
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Good IT Contracts
Standard Business
Processes
Business Outcome
Credible retailer.
Unrivalled access to service.
Customer experience and service
excellence.
Flexible ways of working.
Speed to market.
Cost effective technology.
Business efficiencies.
Excellent colleague experience.
Business agility.
Cost effective technology.
Innovation.
Multichannel business.
Deliver Cost effective technology.
Speed to market.
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wi ®
Innovation: Our future business capabilities will be underpinned by
innovative delivery of a multi-channel retailing experience.
* Over the past year we have worked with innovative SME’s (working
in the Government space) to specify the technology required to
integrate existing and future systems.
* Our proposed platform (CDP: Common Digital Platform) is
grounded in non-proprietary hardware and software avoiding
excessive lock-in and licence costs.
* Our Common Digital Platform utilises commodity services including
for example, cloud computing and open source software platforms
to support speed to market and value for money.
* Our platform is being designed to scale with business demand,
allowing us to flex services as necessary.
e Weare currently in the process of proving this platform prior to
establishing it more widely in all future developments, including
delivery of services to the branch counter.
* Our initial proof of concept (Environment Agency “Rod Fishing
Licence”) has been developed in weeks rather than months.
* Our approach is enabling us to avoid supplier lock-in, significant
licence costs and increase our business responsiveness.
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Innovation: The technology which underpins our Multi-Channel and
Digital Branch Strategy is cost effective, flexible and fit for purpose.
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Our 2013-20 Business strategy is supported by key
technology elements including:
* Modern and agile ways of working to help deliver
new products and services to market more quickly
helping us compete in the market.
Post Office digital & multi-channel strategy
6 components of digital strategy
6 critical enablers
Website strategy —
4 . " wy , 7 Organisation
* New branch counters & devices will help: = COP ORG EATS &
1]
- engage our customers. ce Mobile strategy “ye Digital marketing
- Increase the productivity of our colleagues. —
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- Provide market opportunities currently difficult ey) range strategy vNve single view
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- ss . he Delivery strategy 4 management
* Customer service systems will help us engage in ig
meaningful conversation with our customers. PHELP a
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* Our technology will be able to deliver across strategy
existing and new channels seamlessly, interacting oh
. ve In branch digital
with our customers when and where it is most ry strategy @) Branch engagement
convenient for them.
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POS (Point of Service) 2020: delivering the Post Office channel
experience.
POS 2020 will define the point of service (including branch counter)
experience and capabilities going forward.
We are undertaking work to:
.
Provide a modern Point of Service (POS) capability across all our
channels.
Open up Horizon through integration, using open and internationally
recognised standards.
Allow services built once can be utilised across all our channels including
branch.
Enable us to provide basic counter services through standard integration
points and common services.
Use industry standard processes.
Ensure we only customise processes essential as market differentiators.
Provide a consistent and excellent customer experience across channels.
Capabilities of our new solution might include:
single customer account,
Omni-channel shopping baskets,
I
Pricing engine,
Product bundling and promotions.
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Future Board engagement: As we move forward over the next year we
will be seeking further Board approvals in support of the delivery of
our Technology strategy.
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« We have a phased approach to the
delivery of our Technology strategy to
safely manage the change portfolio.
* Over the period to 2015 we will be
bringing a number of initiatives to the
Board to complete our IT supply chain.
*« Some of these contracts carry a value
in excess of £50m, financial
governance requires additional
Shareholder Executive approval.
Indicative Approvals Sought
, Main Financial
Horizon Transitional support services
Services Integrator & Service Desk award
Data Centre award
Risk and Resilience
Technology Strategy Update
Network procurement
Other Application & Infrastructure
POS Application procurement
v
\ BS BS Ba SN
v
v
\B \ Ee
v
v
\ BS
July
Sept
Sept
Sept
Apr
tbc
tbc
tbc
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Summary &
Over 2013-14 financial years we:
* have a significant programme of work,
* are continuing to update our strategy in line with our
2013-2020 Business strategy,
* are continuing to take the best independent industry
advice and guidance available,
* will continue to implement our new operating model,
* will continue to progress our IT supply chain
procurements,
* will be executing our Separation strategy to complete
by September 2014.
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Conclusions & Ask
w We are asking for Board to:
« Approve the two year Transitional Support Services agreement with Fujtisu
Services.
2) We will be asking the Board in September to approve the award of the following
contracts to our selected bidders:
* Data Centre award.
* SI/SD award.
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Branch
counter (Horizon)
ww
Pa
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Branch Counter: Fujtisu is currently Post Office’s largest technology
partner providing critical services including our branch counter service
(Horizon).
Contractual Context
Branch Counter Systems (Horizon)
° Horizon is a bespoke solution operating out of resilient data centres in
Northern Ireland.
Our plan is to migrate Horizon to our new IT supply chain over the
strategic term.
Horizon was originally created in 1995 in partnership between the then
DSS’, Post Office and ICL?.
The system is in all our c.11,800 Post Office’s nationwide, operating
some c.30,000 counter positions.
The service has not been tendered under public procurement law since
that time.
Delivering our 2020 vision:
It is prudent in selecting a way forward to recognise the significant
investment Post Office have already made in Horizon over its lifetime.
Early in 2013 we identified a number of routes forward.
All options are dependant upon public procurement law and
negotiations with Fujitsu
We are undertaking further work this financial year to establish the
requirements for and market test our options for continued channel
services post 315t March 2015..
Our precise path forward will not become clear until this work comes to
fruition.
1 DSS: Department of Social Security.
? ICL: International Computers Ltd, subsequently bought by Fujitsu.
The contract under which services are provided is
known as HNG-x
HNG-x contract ends 31st March 2015.
The branch counter service known as Horizon is
the most significant service provided under the
HNG-x contract.
Arange of services are provided through the
HNG-x contract including:
- Horizon, our Branch Counter system
- Core Finance (SAP)
- Management Information (Credence)
Contract value to Fujitsu circa £65m pa plus BAU
change.
There is no automatic extension capability written
into the contract.
We are required by Public Procurement Law to
offer the services to the market.
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Managing Legacy (Horizon): In considering how we continue to provide
Post Office branch counter services we have established the following
principles and path forward.
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Principles
In considering how we continue to provide branch counter services we must take
account of a number of key requirements including:
. De-risking the network and crown transformation programmes.
. The Horizon transitional support services are designed to guarantee business
stability while the Post Office implements a modern, fit for purpose Point of Service
solution.
. The services provided under this agreement will amongst others include:
- Branch communications data network
- Data centre hosting in Fujitsu’s Belfast data centre.
- Horizon application support.
Moving forward
The major tenets comprising our future plans require us to:
. Conclude commercial negotiations with Fujitsu to agree on a 2 year Transitional
support service.
. Begin procurement for our future POS solution.
. Commence procurement for our Network Tower. This tower will assume
responsibility for the provision of the branch communications network at March
2017.
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IT
Separation
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Separation Context: Historically Post Office have benefitted from common E>
IT services provided across the Royal Mail Group.
CHANNELS
Circa 30% by value of Post Office IT is provided and managed through Royal Mail Group contracts.
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~ Context: Post Office and Royal Mail Group will separate our IT systems
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and services by September 2014 as agreed with Royal Mail Group
under the Master Services Agreement.
We have well developed plans for delivery of separation.
In line with the Master Services Agreement:
— _ business services will be separated by the end of March 2014.
— IT services will be complete by end of September 2014.
The Independence and Separation Programme, comprised of a joint Post Office
and Royal Mail Group team, is working well.
We will use the new IT supply chain where possible to deliver value for money
technology required for the 21 projects.
We should recognise that Post Office, as a smaller independent organisation,
may not be able to achieve the same economies of scale afforded to Royal Mail
Group.
Technology which will be re-provisioned includes:
- Finance systems including Treasury.
— HR
- Desktop hardware, software and other productivity tools.
- Supply chain and Fleet management.
- Customer facing web site and services (www.postoffice.co.uk).
- Internal websites (intranet).
The current major suppliers contracted by Royal Mail Group for these services
include: CSC, CapGemini, BT, and Steria;
Historical Context
In 2012 Post Office and Royal Mail Group
agreed the Master Services Agreement
(MSA).
The Master Services Agreement governs
the continued provision of services between
the two organisations to achieve separation.
There were 131 business services provided
by Royal Mail Group on behalf of Post
Office.
85 have now ceased, leaving 46 remaining;
Post Office uses a wide range of IT
applications from within the Royal Mail
Group estate.
Circa 20 application services have been
completed to date.
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Current Status: Work is progressing to schedule and we are currently on
target to deliver to the agreed timeframes.
* The programme is on track to complete by the end of September
2014.
« IT and Business services are being considered together to ensure we
achieve the desired business outcomes.
* Our Technology strategy is guiding our activity to ensure we realise
the best outcomes for Post Office.
« Weare collaborating closely with Royal Mail Group to ensure mutual
success and the team is operating well.
*« We are communicating closely with our supplier base to ensure they
have good visibility of our timeframes and objectives.
¢ Both organisations are applying a pragmatic commercial lens to each
of the proposed separation activities.
* The Master Services Agreement target dates are being used as the
basis for planning and delivery execution, however exceptions will be
considered where a business case exists.
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POST OFFICE LTD BOARD
IT&C Transformation Programme
Service Integrator and Data Centre Procurement Update
1. Purpose
The purpose of this paper is to:
1.1 Update the Board on the current status of the procurements for a Service
Integrator and a strategic Data Centre.
1.2 Inform the Board that a request for approval to award both contracts is expected
to be presented to the Executive Committee and Post Office Board in September
2013. The Service Integrator award will also need approval from the Shareholder
Executive
2. Background
2.1 As previously agreed by the Executive Committee and the Board, Post Office is
re-procuring its IT supply chain to meet the demands of our business strategy,
Royal Mail Group Separation activities and support our end of life IT contracts.
2.2 As we progress our IT supply chain we will be asking for approval to award
contracts to our selected bidders. Due to the size of award, Post Office financial
governance requires some of these approvals to be sought from the Board and
Shareholder Executive.
2.3 The Service Integrator and Data Centre procurements will be the first contract
awards. We will be presenting these to the Executive Committee and the Post
Office Board in September for approval.
24 We are currently refreshing the business case for IT supply chain procurement
and this will be presented to POLIC in July.
Service Integrator and Service Desk (SISD).
3. Overview
3.41 Given the volume of change required to support our IT and business
transformation journey the Post Office needs a trusted partner.
3.2 The Service Integrator, which will encompass our IT Service Desk, will fulfil this
role and is pivotal to the success of our new IT supply chain.
3.3 The SISD will be the single point of contact for Post Office colleagues on all
aspects of Information Technology (IT).
3.4 They will be accountable for the end-to-end management and delivery of current
and future IT services.
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3.5 The key aims of this procurement are to optimise the IT supply chain to:
e Reduce operating costs.
« Improve Post Office speed to market for business and product change.
« Offer an improved user experience.
e Drive innovation in process, service and cost management.
e Improve our identification and management of technology risks.
e Improve our ability to benchmark our services against the market to ensure
continued value for money over the life of the Tower contracts.
3.6 Our new IT Operating Model balances the responsibilities between the Post
Office and the SISD, with Post Office retaining the commercial relationships
while the SISD takes accountability for delivery.
3.7 Following contract award a number of current Post Office staff will move to work
for the Service Integrator (under TUPE).
3.8 The key challenge that we face is establishing the new contractual relationships
within a short period of time. The sequencing and alignment of contract awards
is crucial to our success.
4. Current Status
44 We are following a Competitive Dialogue procurement process’.
4.2 We have completed an extensive period of dialogue with 3 suppliers (CGI, Cap
Gemini and ATOS) to clearly define the Post Office’s current, transition and
future operating models.
4.3 A formal Invitation to Submit Final Tender (ISFT), which defines Post Office’s
requirements to the bidders, has been approved by the programme board and
issued. Issuing an ISFT enables the three suppliers to submit a bid detailing their
final contractual and commercial terms.
44 Submitted bids will be evaluated on cost and the quality to which they meet the
defined requirements, resulting in the selection of a preferred supplier in August.
45 Approval will be sought from the Executive Committee and Post Office Board in
September for contract award.
* Competitive Dialogue is a Public Procurement Law (PPL) procedure used where there is a need to develop
solutions and requirements with assistance from the market.
? The ISFT does not commit us to contract, but does form the basis of the contract. PPL procedure prevents any
negotiation or changes to contractual or commercial terms following issue of an ISFT.
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5. Commercial Terms
5.1 The contract is being offered on an initial term? of 4 years with an option to
extend for up to 2 years at Post Office’s discretion.
5.2 This contract is shorter than the initial term for other Tower contracts. This is to
facilitate early re-procurement of the Service Integrator as they will then assist
Post Office in selection for future Tower providers.
5.3 Based on dialogue, the cost estimates are in the range of £10m to £12m per
annum, £40 to £48m over the initial term. Cost estimates will be refined during
the evaluation of ISFT responses.
5.4 These costs are in line with industry benchmarks for the services we are looking
to procure.
Data Centre.
6. Overview
61 Data Centres provide the facility to host and operate the IT systems required to
support the Post Office.
6.2 Post Office currently has multiple Data Centres including some services provided
by Royal Mail. Many of these Data Centres are reaching end of life.
6.3 Procuring a strategic Data Centre will allow us to consolidate our current data
centres which will lead to a reduced cost base. In addition we will have access
to technologies, such as Cloud’, which will enable us to adjust our costs in line
with varying business demand.
6.4 Our strategy is to consolidate our Data Centres into one operational facility
supported by a resilient backup.
7. Current Status
71 We are currently in the final stages of dialogue with Fujitsu.
7.2 Dialogue will complete during August and subject to its successful conclusion we
will recommend the contract award to the Board in September.
8. Commercial Terms
8.1 The contract is being offered on an initial term? of 5 years with an option to
extend for up to 2 years at Post Office’s discretion.
8.2 Based on dialogue the cost estimates are in the range of £3m to £4m per
annum, £15 to £20m over the initial term’. Cost estimates will be refined during
the evaluation of the ISFT response.
5 The term was defined in the initial OJEU (Official Journal of the European Union) notice and cannot be changed
without restarting the procurement process.
* Cloud: enables Post Office to reduce its overheads by using shared third party IT facilities.
5 The term was defined in the initial OJEU (Official Journal of the European Union) notice and cannot be changed
without restarting the procurement process.
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8.3 These costs are in line with industry benchmarks for the services we are looking
to procure.
9. Summary
9.1 The Board is asked to note the status of the Service Integrator and Data Centre
procurements.
Lesley Sewell
July 2013
° This excludes the capacity that supports the Horizon Point of Sale solution as this is not a committed spend.
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POST OFFICE LTD BOARD
Transitional Support Services with Fujitsu
1. Purpose
The purpose of this paper is to:
1.1. Seek approval from the Board for a 2-year agreement" with Fujitsu for Transitional
Support Services (TSS), so ensuring continued provision of Horizon? counter services.
1.2 Gain approval to submit this paper to the Shareholder Executive in July 2013 for
approval to sign the TSS agreement before the 30" September 2013.
2. Our journey so far
2.1 Fujitsu has developed and run Horizon for the Post Office since 1995. Itis a highly
complex, bespoke system which given its structure is inflexible and costly to change.
2.2 During the last 12 months, we have initiated the following programmes of work to
enhance Horizon and better support our business strategy. These include:
e Horizon Anywhere: allows Horizon to run on any Microsoft Windows device.
e Branch Counter Refresh: identifies how we replace out dated counter hardware to
enable new services such as internet and email.
¢ Horizon Business Services: reduces the cost and time for Post Office to connect
business partners and clients to Horizon.
2.3 In parallel we have conducted market activity to understand how other Postal
organisations have transitioned away from their legacy Point of Service (POS) solutions.
2.4 Having completed this activity we now better understand the challenge and time
requirements to deliver a future POS solution for an organisation of our size and
complexity.
3. Recommendations
3.1. Extend the existing Fujitsu contract for Horizon via a 2-year TSS agreement to:
¢ Secure the continued provision of core Horizon services to 31*t March 2017 so
allowing time to procure a future POS solution which will either evolve or replace
Horizon.
¢ Acquire a Horizon Intellectual Property (IP)° license from Fujitsu so that any new
suppliers have the choice to incorporate elements of this solution within their
proposal.
e Allow time to deconstruct and transition Horizon services into the new IT supply chain
(Towers model).
1 The Transitional Support Services agreement is a contract change note, or CCN, which varies the existing Horizon contract.
? Horizon Online electronic counter services are provided by Fujitsu Services under the HNGx managed services contract which
provides end-to-end services to all Post Office branches. The Agreement was originally signed 28" July 1999 and has been
extended. It expires on 31 March 2015
3 Intellectual Property or Intellectual Property Rights (IPR).
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4. Considerations
4.1 Horizon costs c £68M inclusive of VAT each year, comprising OpEx of c £58M and
development business as usual CapEx of c £10M. This expenditure represents
approximately 70% of third party IT OpEx spend.
4.2 Given the business criticality of Horizon, a risk constrained approach to any
transformation impacting counter services is essential.
4.3 The HNGx contract with Fujitsu includes a provision for Post Office to request an
extension beyond 31° March 2015. Unless otherwise agreed, formal notification must
be provided to Fujitsu by 30"" September 2013.
5. Transitional Support Services (TSS) Benefits
5.1 Post Office branch counter operations are protected during the 2-year TSS period,
reducing our risk profile during Crown and Network transformation and separation from
Royal Mail Group.
5.2 Post Office price points have been maintained and in some cases improved whilst the
scope’ with Fujitsu has been reduced.
5.3 Horizon services will be transitioned to the Towers model during the TSS period and
additional partial termination rights° have been negotiated with Fujitsu to support this
approach.
5.4 Inclusion of additional transition and collaboration principles will allow Post Office to
leverage the benefits of its Service Integrator to manage this activity.
5.5 Post Office will have sufficient time to implement our future POS solution, engaging with
the market to ensure an effective competitive process.
6. Risks
6.1 Should transition to our future POS solution extend beyond 31° March 2017, Fujitsu
have indicated that additional investment in the Horizon data centre will be required. As
a result of this we have already begun the process of determining our future POS
solution and preparing to go to market.
6.2 Horizon is a complex solution comprising multiple services that are currently provided by
Fujitsu. Any transition of these services adds additional risk. A 2-year TSS has
therefore been selected as affording the best balance between risk and cost.
6.3. There is a risk that we may be unable to agree an IP License with Fujitsu on reasonable
terms. Post Office is continuing to meet with Fujitsu and the Board will be updated as
discussions develop.
7. Financials
7.1 OpEx for the proposed TSS agreement is up to £41.5M inclusive of VAT per annum.
This does not represent incremental expenditure beyond the on-going cost of
maintaining our Branch counter service.
Some Horizon services will transition to Towers during FY2014~15 including Service Desk and Engineering Services.
Post Office can partially terminate for convenience many individual Horizon services. Alternatively, the whole Agreement
can be terminated prior to full term. Any early termination is subject to early termination charges.
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7.2 At the point of signature, Post Office’s liability to early termination charges is increased
by c £8.3M. This incremental liability reduces during the term of the TSS agreement.
7.3 As we conclude the Tower procurements, we will progressively plan transition of TSS
services to the Towers model to optimise our OpEx position.
8. Approval Request
8.1 The Board is requested to approve a 2-year Transitional Support Services Agreement
with Fujitsu valued at up to £83M.
8.2 The Board is asked to note that approval for authority to contract the TSS agreement
with Fujitsu will also need to be sought from the Shareholder Executive in July. This will
allow us to conclude negotiations and execute the TSS with Fujitsu before the 30°
September 2013.
Lesley Sewell
July 2013
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POST OFFICE LTD
Financial Services Strategy Update
Background
11
1.2
1.3
1.4
At the March 2013 meeting the Board supported the Financial Services (FS)
strategy (the Plan) and asked management to provide an update on progress,
in particular that the assumptions on the new insurance model remained valid.
The Plan identified the opportunity for the Post Office to become the leading
challenger FS brand, with five million customers and gross income of £530
million by 2020. The Plan also confirmed that to deliver the growth, the Post
Office needs to enhance its business fundamentally, in particular to:
e Build the brand, so that customers are aware of the Post Office FS offer;
e Ensure our products are simple, transparent and offer value for money;
« Improve the sales model and people capability;
e Enhance the sales and service experience for customers, including
leveraging branch and on-line capabilities’.
The Plan also highlighted the opportunity to change the role that Post Office
plays in insurance, taking more value from the transaction. The initial focus for
this strategy was on the travel insurance business as the current
arrangements expire shortly; subsequent phases encompassed acquiring the
Bank of Ireland (UK) plc’s (Bol) interest in insurance and taking over the
broking activities currently performed by Junction/BSL.
This paper provides an update on progress on the core components of the
strategy after three months and is tabled for noting.
Travel insurance
2.1
2.2
23
To provide customers with travel insurance, Post Office currently utilises a
single underwriter (Ageas) via a broker (Aon). This structure is cumbersome,
expensive and slow to market and is not capable of delivering the 2020 vision.
Establishing a new model for travel insurance requires:
* Confirming the proposed model to establish an MGA? (see 2.3 - 2.5);
e Extending the existing travel insurance arrangements (2.6);
e Identifying and procuring an appropriate insurance platform (2.7);
e Assessing the future operating model for the Aon call centre (2.8 - 2.9).
Since March, management has been stress-testing the proposed model and
engaged Miller Insurance Service LLP, its corporate insurance adviser, to
review the model and validate the assumptions’.
This change program is largely funded from the £4.0 million annual investment commitment that
Post Office made in Eagle. This does not include Post Office brand investment, or acquiring the
insurance businesses. Bol provides £15 million per annum in marketing spend.
The MGA would control the process of the insurance delivery, giving Post Office significant
operational and commercial flexibility.
Including comparing the MGA model to alternatives.
1
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25
26
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The Miller report* confirmed that utilising an MGA is both workable and
appropriate for Post Office, providing operational flexibility and increased
control on product and pricing. Miller also confirmed that it would create
income in line with projections and that the model overall was of low, and
manageable, risk. In particular Miller stated that:
“_..we believe that setting up an MGA is a viable option for POL as this would
give you full control. An MGA would also give you enhanced economic value
through additional profit commission, whilst allowing you the underwriting
ability, flexibility around the coverage and pricing mechanisms to drive
change”.
The business case for the overall travel insurance program is being finalised
and will be tabled to POLIC in July; preliminary assessment confirms that the
financial projections are consistent with those set out in the Plan.
Management is in negotiations with Aon and Ageas to continue cover to
October 2014, thereby allowing a managed transition to the new model’.
While management is confident that agreement will be achieved before the
end of July, Aon have also been instructed to seek alternative underwriting
arrangements should agreement not be reached with Ageas.
The delivery of the MGA requires utilising a scalable multi-product insurance
platform. Management is in the process of identifying and procuring the
appropriate platform. This process will be completed in October 2013.
The Aon call centre employs up to 120 staff® and is dedicated to Post Office
travel insurance. With the migration to a new provider triggering TUPE’,
management is assessing the appropriate operating model and procurement
process. This evaluation will be complete by October 2013.
Insurance Buy-out from Bol
3.1
3.2
3.3
3.4
The Eagle contract established clear parameters for the Post Office to buy out
the insurance business from Bol, being:
e One way call option from September 2014 to September 2016;
* Option price based on Bol’s discounted cash flow from the business.
At the March meeting, the Board agreed that management could seek to
advance this strategy with Bol ahead of the option period.
To assist accelerate the acquisition, management has engaged KPMG® to
develop a financial model and negotiating strategy. The KPMG report will
conclude in mid-July; initial feedback confirms that the indicative valuation
remains at c£20 million identified in the Plan.
Nick Kennett has had a preliminary conversation with the Bol Distribution
Director to ascertain Bol’s potential interest in pre-option discussions. He
Miller report 14" June 2013: “Commercial Travel Insurance - Options and deliverables for
creating a long term commercially viable and robust risk financing platform”.
While a quicker transition is achievable, migrating during the summer holiday season would add
considerable risk to the program.
The number varies through the year, with the peak occurring during the summer holiday period.
Transfer of Undertakings (Protection of Employment) Regulations 2006.
KPMG provided expert assistance during Eagle, including on the creation of the insurance
buyout option
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confirmed that Bol would entertain an offer, while seeking to ensure that “the
value of the insurance business is maximised over the long term for the
benefit of both partners”.
3.5 It is anticipated that management will be in a position to propose an
acquisition strategy in August.
Removing Junction from the Post Office Insurance Program
44 The Plan assumed that Post Office would no longer use Junction for general
insurance broking from 2015/16. Further analysis, in particular following
negotiations with Junction to confirm the extension of their services beyond
2014, it is now apparent that transition would occur in 2016/17.
4.2 This delay does not impact the 2020 outcomes, but does have timing
implications in 2015/16 and 2016/17 years.
Financial Services Sub-Brand
5.1 Final market research on various FS sub-brand options is underway, with
results due in mid-August. The rollout of a new sub-brand could occur from
September, although the rollout strategy and timings have yet to be finalised.
Financial Services Sales Model
6.1 To support the growth of mortgage sales, c50 mortgage specialists have been
trained and deployed in Crown branches, ahead of 100 planned by October.
The team will then be trained to perform under the new advised sales
regulation (Mortgage Market Review) that applies from April 2014.
6.2 The deployment of the new FS area and supervisory structure is well
underway with all three Regional Managers and 27 of the 36 Area Managers
recruited (with nine Area Mangers already in training). The full rollout of the FS
sales structure will be largely completed by October.
6.3 While it is very early days, the establishment of a dedicated and focused sales
structure alongside Crowns has shown improvements in both attitude and
outcome’.
6.4 The current FS sales incentive scheme does not encourage and reward
effective sales performance. Management, supported by Mercer LLC a
specialist HR consulting business, is developing a new incentive structure. It is
planned that this will be deployed from October, but will require sign off from
Bol and is subject to agreement with the CWU. The plans will also be shared
with the Financial Conduct Authority.
A few examples of the changed approach seen:
The Mortgage Specialist (MS) in Derby travelled to an agency for an appointment made by the
Financial Specialist (FSS) from Chesterfield on a Saturday; not only did she achieve the sale,
but used the conversation to sell two life insurance policies and booked a further appointment
for the FSS to discuss credit cards and travel insurance when the customer returns to complete
the documentation.
The MS in Manchester has achieved 15 mortgage applications since April (1.25 per week) by
engaging with local branches, attending their team meetings and sharing his mortgage
knowledge.
In the first six weeks of the Polo pilot, Diss Crown office averaged 2.3 applications per week.
After a direct coaching session through the new support structure sales have recently averaged
7 per week.
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7. Customer Journeys and Data Analytics
71 The current customer experience while purchasing an FS product is often
poor and inconsistent by channel, leading to a high level of non-completion of
applications. Management is undertaking a review of all FS product journeys,
mapping the existing processes, seeking customer feedback on their
experience and requirements, and then building new processes. All FS
journeys will be mapped and new process agreed by Q1 2014/15. Changes
will be implemented as they are finalised, although some changes depend on
Post Office and partners’ systems development.
7.2 The credit card and personal loan processes have been mapped and new
models are being finalised; a review of the mortgages journey has been
completed and the review of savings products is about to commence. In all
cases, quick wins will be implemented immediately.
7.3 To confirm that these changes are benefiting customers’ experience baseline
surveys will have been completed by September to create a scorecard of FS
Net Promoter and effort scores, by product and channel.
74 Customer analytics work is behind schedule due to the audit of the Brands
database not being completed and the procurement risks being unresolved.
Management is seeking ways to bring this critical program back on track.
8. Product update
8.1 Current account
On 13" May the Post Office launched the current account in 29 branches.
Press coverage generated almost 650 separate articles across national
newspapers, regional press and broadcast media as well as online. The key
messages were successfully delivered and Nick Kennett was quoted 111
times. The story led on BBC and Sky with rolling coverage all day on both
channels. 95% of coverage was positive.
8.2 After 6 weeks, pilot applications are slightly ahead of target, although sales
are behind forecast as referrals for identity verification are higher than
anticipated. We anticipate reaching the sales threshold in September 2013.
8.3 Pre-paid debit card (PPD) — Project Penguin
Post Office is seeking to launch a new PPD card"? for Christmas 2013.
FRES" has won a tender to launch a reloadable, general spend PPD card
branded “Post Office Money Card”. It will be available in branches and online.
8.4 Investments & Pensions
A strategic working group has been established with Bol to launch simple
investments products. Research is underway to assess demand, customer
requirements and delivery models. The target is to launch in early 2014.
8.5 Post Office is also investigating offering retirement solutions to respond to the
growing demand for planning products, in particular annuities. Management is
in discussion with market providers to offer a white label on-line solution, with
a view to a possible launch in late 2014.
v0 Post Office already issues a Sterling PPD within the family of Travel Money Cards.
" First Rate Exchange Services Ltd — Post Office owns 50 percent.
4
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Payment Services Provider (PSP)"*
The Plan highlighted the opportunity for Post Office to offer payment services
to SMEs, leveraging their high branch footfall. This service, which is the first
stage of the FS SME strategy, is on target for launch in October with Post
Office acting as an agent of a global payments provider'®. The sales and
delivery model will be largely on-line and managed by the provider, minimising
systems build and branch impact. The business case will be completed in July
and is targeted to generate income of £500,000 in 2013/14.
Conclusion and Recommendation
9.1 There are a significant number of initiatives underway across FS to build a
sustainable business and deliver the long term strategy and revenue growth.
Initial results confirm the growth opportunity.
9.2 While these initiatives are broadly on track, it is critical that they complete
during 2013/14 to ensure that the business is positioned to deliver the higher
targets for 2014/15 and beyond
9.3 The Board is asked to note this paper.
Nicholas Kennett
Director, Financial Services
July 2013
A PSP enables businesses to accept card payments, either where their customer is present
with a card or where the transaction is completed remotely (“card not present” or CNP)
The shortlisted candidates are Global Payments and WorldPay.
5
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POST OFFICE LTD
Project Polo - Success Criteria
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1. Purpose
1.1 At the meeting in May 2013, Directors asked management’ to table the criteria
agreed with the Bank of Ireland (UK) plc (Bol) to confirm the success of the Polo
proof of concept (PoC). The satisfactory achievement of the criteria will confirm
the intent of Post Office and Bol to proceed to full rollout, and in particular for Bol
to procure a full scale current account platform.
1.2 This paper is tabled for noting.
2. Background
21 The current account is critical to Post Office’s ambition to build a successful
financial services business. The PoC will enable the Post Office and Bol to:
e Confirm the demand for a Post Office bank account and Post Office’s ability
to sell it;
e Understand customers’ behaviours and market reaction; and
* Assess the impact of these findings on the enterprise business case’,
product offering and sales processes.
3. Key Success Criteria
3.1 Prior to commencing the PoC, the parties agreed the criteria that would be used
to confirm the success of the PoC and hence enable the project to proceed to
full rollout. The assessment is based on four broad criteria and would apply once
1,500 accounts have been opened.
3.2 Volume and Type of Accounts — Do the accounts acquired reflect the expected
profile - volume, product type, channel of acquisition; has the sale of other
financial services products been impacted?
Measurement criteria - Sales volumes reach minimum threshold; less than 20
percent of sales arise through the contact centre®; account types broadly reflect
the wider market’.
3.3 Customer profile — Do customers’ behaviours with the product reflect that
anticipated?
Measurement criteria —Net Promoter Score exceeds 20 (confirming strong
customer satisfaction).
3.4 Prudential risk — Are there adverse product risks being experienced?
Measurement criteria - There are no significant credit or fraud losses and no
significant reputational damages for either party.
' Action item 3k.
2 The EBC is the joint business case built by the Post Office and Bol.
* These occur where an application is not completed in branch.
‘ Assumed to be Standard account 66%, Packaged account 16% and Control account 18%
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3.5 Commercial viability - Does the performance of the PoC meet both parties’
financial expectations as set out in the EBC.
Measurement criteria — The overall performance of the PoC is broadly consistent
with the EBC.
3.6 In agreeing the criteria Bol acknowledged that the assessment should take
account of the ‘lite’ version of the current account being offered in the PoC’.
4. PoC Status and Actions
44 After six weeks, PoC applications are slightly ahead, although sales are slightly
behind forecast as referrals for identify verification are higher than anticipated.
While the parties are assessing process changes to reduce the referral rate, the
parties anticipate that the sales threshold of 1,500 will be reached in September
2013.
4.2 As a result, Post Office is finalising its requirements for the full rollout for
discussion with Bol.
4.3 Initial conclusions from the PoC do not highlight material variations from the
EBC.
44 Post Office and Bol are assessing the opportunity to expand the PoC to
additional areas, ahead of full rollout. This would utilise the existing platform.
5. Recommendation
5.1 The Board is asked to note this paper.
Nicholas Kennett
Director, Financial Services
July 2013
For example, the PoC does not include an SMS or mobile app, which could lead to more
enquiries, and does not allow internet account opening, as customers can only sign-up via a
branch in the target region.
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POST OFFICE LIMITED
Performance Report
May 2013
Produced By : Financial Control and Compliance Team
For Queries & Comments Contact : Sarah Hall or Kam Bassra
CONFIDENTIAL
Commercially Sensitive and not for onward circulation
it should no’
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( Contents )
Page
Headlines 3
Profit & Loss Statement 4
Cashflow Analysis & Balance Sheet Summary 5
Net Income By Pillar vs Budget 6
Net Income By Channel 7
Crown Profit & Loss Statement 8
Business Scorecard 9
Cost Management Report
Staff Cost By Directorate 11
Non Staff Cost by Directorate & Type 12
Transformation Delivery Heat-map 13
Network Transformation Scorecard 14
Appendices
Network Transformation Scorecard Metric Definitions/ Rationale 16
Cashflow Statement 17
Income By Product Groups & Pillar 18
NN yy
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Headlines Strictly Confidential
May 2013
(Financials - YTD ~
Profit
Period 2 YTD operating profit was £7.6m, which was £6.4m adverse to budget of £14.0m, and £10.2m
adverse to prior year of £17.9m. There were a number of timing issues which will unwind next month
and the underlying variance is close to budget.
Net Income was £144.5m which was £4.3m adverse to budget and £9.3m adverse to prior year
- Versus budget - driven by Mails. Specifically International Mails, 1st class labels and Lottery, all c. £1m
below budget.
- Versus prior year, driven primarily by the buy forward last year prior to the Mails price increase.
* Staff costs were £0.6m adverse to budget and £1.8m adverse to prior year. The actual costs include
£0.7m for the £100 payment to all staff up to middle manager level which will be cleared against year
end accruals in period 3
* Agents’ costs were £6.0m favourable to budget. £3m of this relates to lower sales income. The
remainder is made of smaller variances related to some timing and recovered VAT from 2012/13
greater than accrued. £7.7m favourable to prior year, due to lower sales, predominantly Mails buy
forward pre price increase.
Non people costs were £2.0m adverse to budget, and £3.3m adverse to prior year. The overspend is
largely driven by the timing of the charge for Microsoft licences taken in full, but which will be reversed
next month and spread over the life of the licences. Versus prior year: it is the licence payments and
increased marketing expenditure.
* Interbusiness expenditure was £0.5m favourable to budget and £0.4m favourable to prior year due to
lower mails costs versus budget and separation savings versus prior year.
* Project costs were £5.4m over spent against the budget due to delay to the Brand expenditure planned
for 2012-13.
Cashflow
The YTD cashflow was an inflow of £262m which was £57m favourable to the £205m inflow budget.
(period 1 was £157m favourable).
The £57m favourable variance was due to the increased DVLA creditor resulting from the proximity of
the accounting month end to calendar month end and new contract terms.
Crown Profit - YTD
The Crown profit is £1.0m adverse to plan with income flat and Direct Product costs driving the
variance. This variance relates to costs paid earlier than planned and is expected to unwind over the
coming periods.
Non financials - YTD
* Queue time in branches (less than 5 minutes) was 3.5% favourable.
YTD Network conversions were 16 ahead of the 1531 target. S)
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Cumulative EBIT pre exceptionals
£m
400 \ctual udget
80
60
40
20
SEE PEEEEESSSE
Total Net Income - Budget to Actual Bridge
£m
148.8 ==
(3.1) (0.2) (0.0) (1.4) 144.5
: 2013-14 , Mails & Financial Government Telephony , Other 2013-14 :
YTD Net Retail Services Services YTD Net
Income Income
Budget Actual
Year to Date
Financials Act Target Var
Total Net Income (excl NSP) £m (Bonus) 144.5 148.8
Operating profit £m (Bonus) 76 14.0
Free cashflow £m 262.4 205.3
Crown Profit (Loss) £m (Bonus) (6.8) (5.8)
Non Financials
Queue time % < 5 minutes - Top 1k branches 78.0% 745th
Network Conversions (Mains & Locals) (Bonus) 1531 1515
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Profit & Loss Statement Strictly Confidential
May 2013
Current Month Prior Year Period Year to Date Prior Year YTD Full Year Prior Year
lem Actual Budget Variance I Actual Variance I Actual Budget Variance I Actual VarianceI arent Budget Variance I Outturn
External Income ah 765 70 500 ay I 1055 1065 108s (29) I 6433 on33 6513
Interbusiness Income 264 273 (0.9) 25.5 09 58.6 615 65.2 (6.6) I 368.9 368.9 3723
[TOTAL GROSS INCOME 738 738 od 755 a6 I 1640 1684 1735 (95) I 10122 1.0122 1,023.6
Cost of Sales (93) (83) (05) (90) (03) (195) (09.3) (197) 02 I (122) (12.2) (121.2)
TOTAL NET INCOME 64.5 64.9 (0.4) 66.4 as) [1445 1488 1538 (9.3) I 9000 9000 902.4
Staff Costs (213) (206) (07) (20.4) (08) (448) (44.4) (430) (28) I (2562) (256) (257.4)
Jagents Costs (33.4) (36.2) 28 (35.6) 22 (765) (825) (842) 7.7 I (480.0) (4800) (478.4)
Non-Staff Costs @5a) (40.7) (4.4) (99) (52) (27.5) (25) (262) (33) I (1600) (260.0) (1623)
Interbusiness Expenditure (62) (67) os (66) Os (14.2) (44.7) (146) 04 I (839) (83.9) (83.6)
Depreciation (0.0) (01) 02 00 (0.0) (0.4) (0.2) (04) (9 I (09) (0.9) (0.4)
[Total Expenditure (pre POC) (76.1) (74.3) (1.8) (72.6) (3.5) (263.1) (167.0) (166.2) 3.0 (980.8) (980.8) (981.8)
IFRES - Share Of Operating Profits 22 26 (0.4) 33 (1.2) 46 52 53 (o7) I 315 315 31.9
IEBIT Pre Overhead Allocations (4) 68) (26) 28) (66) 44.0) (43.0) 7 (70) I 93) (49.3) 75)
IGroup Overhead allocations (1) (1) 00 (1.2) 04 (2.3) (23) (25) 02 I (438) (13.8) (4.9)
EBrT - BAU (10.5) (7.9) (26) G.0) 65) [ 463) (45.3) 19:5) (6.8) I (63.0) (63.0) 0.0. (62.4)
One off Project costs (POOC) (3.3) (13) (20) (3.4) i (10.7) (63) (3) (2.4) I (35.0) (35.0) (53.4)
JEBIT - Post Project Costs (23.9) (9.2) (4.7) (7.4) (6.4) (27.0) (20.6) (37.8) (9.2) (98.0) (98.0) 0.0 (235.8)
INetwork Payment 15.4 15.4 0.0 15.8 (05) 34.6 34.6 357 (10) I 200.0 200.0 210.0
IEBIT pre exceptionals items 15 6.2 G7) Bub (CO) 7.6 14.0 47.9 (0.2) I 402.0 102.0 0.0 Wd
interest 10 0) 20 7) 16 10 (20) (0615 60) (5.0) (0.8)
Impairment (18) (89) 74 (26) os (63) (15.6) (162) 9.9 I (1675) (2675) (766)
Exceptionals & Redundancy & Severance Costs (92) (10.0) og (20) (7.2) (53) (226) (4a) (21.2) I (289.4) (189.4) (779)
Government Grant Utilisation 24 2.4 oo 54 193 53.4 50.0 94 443 I 3169 3169 98.2
ProfiyLoss) On Asset Sale 25 00 25 Cr) 25 25 a0 00 25 00 a0 (27.7)
Colleague Share/ Business Transformation Payments o7 00 o7 00 07 O7 00 a0 0 00 a0 (3.3)
[Total Before Tax 94 207 35 33 208 23.6 248 61367 I 57.0 57.0 0.0 70
————————————S
Period vs. Budget YTD vs. Budget YTD vs. Prior Year
Operating profit (EBIT) of (€1.5m) was £4.7m
adverse to budget.
BAU was £2.6m adverse
+ Lower income of £0.4m,
‘+ Higher staff costs of £0.7m due to the £100
payments made which will be cleared against
accruals next month, and
* Higher non staff costs of £4.4m mainly due
increased IT fees, and timing of Microsoft Licence
payments.
Offset by
+ Lower Agents costs due to reduced income and
+ Lower IB expenditure
One-off variance of £2.0m adverse was due to
'* Higher project costs primarily relating to Brand and
marketing
Below EBIT
Impairments were favourable due to slower progress.
than plan on NTP. The profit on sale related to the
lease surrender of Midway House.
Operating profit (EBIT) of £7.6m was £6.4m adverse to budget.
BAU variance of £0.9m was mainly due to:
*# Lower income of £4.3m,
* Higher staff cost of £0.6m due to the £100 payments made which will be cleared against
accruals next month,
+ Higher non staff costs of £2.0m due to the timing of the charge for Microsoft licences taken
in full but which will be reversed next month and spread over the life of the licences, and
‘+ Lower JV income of £0.6m timing and not considered a concern at this stage
Offset by
+ Lower agents costs of £6,0m due to; £3m of this is related to lower sales income. The
remainder is made of smaller variances related to some timing and recovered VAT from
2012/13 greater than accrued, and
+ Lower IB and overhead allocations of £0.5m.
One-off variance of £5.4m adverse was all due to:
‘Higher project costs, specifically Brand related costs delayed from 2012-13.
Below EBIT
The main variance were the slower pace of capital spend and operating exceptionals,
including agents compensation, compared to budget. Government grant utilisation follows this,
trend, but also included utilisation against the remaining 2012/13 exceptional costs.
Operating profit (EBIT) of £7.6m was £10.2m adverse to prior year.
Like for like adverse variance of 6.8m was mainly due to:
+ Lower net income of £9.3m primarily due Mails and Government Services,
+ Lower agents costs of £7.7m mainly due high stamp volumes prior to the 2013
price rise, reduced fixed pay and WHS incentives, and
+ Lower IB and overhead allocations of £0,6m due to separation.
Offset by
* Higher staff cost of £1.8m due to £100 payments this year, increased pension
payments and increased headcount,
* Higher non staff costs of £3.3m due Microsoft payments this year and higher
marketing costs, and
* Lower income from JVs of £0.7m.
Non like for like adverse variance of £3.4m was due to:
* Higher Network payment of £1.0m, and
* Higher project costs of £2.4,
Below EBIT
2012/13 capital expenditure included £111m property transfers from Group. NT
exceptionals including compensation were ahead of the equivalent pace in 2012/13.
2013/14 grant utilisation includes €30m against 2012/13 exceptional costs not
Ne
covered by the 2012/23 grant.
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Cashflow Analysis & Balance Sheet Summary i
Cashflow to period 2 was a cash inflow of £262m versus a budget of £205m inflow resulting in a favourable variance of £57m
May 2013 This includes £415m received on 2 April for the Network Subsidy Payment and additional grant funding,
YTD Cashflow YTD Cashflow Variances
Fr
£m bad : —
215 =_— =
=
(G8) wo —
(16) Py
165
fn 205
(65)
8
Operating Network Client & Govt Funding Working -—Capital_—~Redundancy, Free cash flow
profit before Payment Network Cash Capital Ine expenditure provisions and
eee ptonels intrest tae eentonas YTD Budget Operating proft Client & Working Capital Capital Redundancy, YTD Actual
pensions, other Network Cash Inc intrest tax, expenciture provisions and
pensions, other exceptionals,
Balance Sheet P2
£m Mar-43 I Actual Budget I Variance Cashflow
Fixed Assets 71 76 76 0
Debtors 122 143 116 Pa The YTD cashflow was an inflow of £205m which was £57m favourable to the £205m budgeted.
cash 370 906 0 (a) The £57m variance was mainly due to:
+ EBIT £6m adverse to budget.
i i S 9) 9) (4
Client Balances (288) (259) (219) (40) * Client balances and Network Cash combined were £44m favourable chiefly attributable to the increased
Trade Creditors (362) (673) (665) (8)
DVLA creditor resulting from proximity of accounting month end to calendar month end and new contract
Pension (defict)/surplus 7 7 72 25 terms, which have increased the number of days to be settled.
Provisions (26) (26) (21) (5) ‘* Capital expenditure is £9m favourable driven by lower than planned expenditure on NTP.
Investments, Funding 95 67 86 (19) * Exceptionals are £11m favourable primarily due to lower than planned NTP and CTP expenditure,
Loan (294) 0 (77) 77
Net Assets 288 334 278 53
SJ
Reserves Mar-43_[ Actual Budget I Variance
[Capital and Reserves (288) (331) (278) (53)
(288) (331) (278) (53)
(Cash Management
Cash Management Table 2
£m Prior Year I Mar-13, P2 = Retail and Cash Centre cash (manageable cost) - £10m favourable to budget. Versus prior
P2 Opening I Actual Budget var year, the variance was £153m adverse. Of this variance, branches were £39m adverse due to
Retail, Cash Centres 560 650 773 723 10 holdings as a contingency for industrial action and cash centres were £114m favourable
Bureau 78 59 2 7 5 due to Treasury positioning
- + Bureau (manageable cost) - £5m favourable to budget, and £6m favourable to prior year.
Cheques, debit cards 24 164 124 110 (14) + Cheques and debit cards (customer driven) - £11m adverse to budget and £27m adverse to
Network Cash 732 870 906 910 4 prior year
I Opening I p2_ I
Headroom (£m) 862 861
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Net Income By Pillar vs Budget
Strictly Confidential
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May 2013
Period Prior Year Period Year to Date Prior Year YTD Full Year Prior Year
Net Income (Em) Actual I Budget I Variance I Actual I Variance I Actual I Budget I Variance I Actual I Variance aren Budget I Variance I Outturn I Variance
Mails & Retail 28.4 28.1 02 28.4 (0.1) 641 67.2 GB.) 715 (7.4) 414.6 4146 0 404.0 107
Financial Services 201 19.9 o1 207 (0.6) 447 449 (0.2) 429 17 2774 2774 00 279.6 (2.1)
IGovernment Services 98 80 18 107 (0.9) 209 209 (0.0) 24.9 (4.0) 115.9 115.9 (0.0) 1332 (17.4)
[Telephony 3.6 56 (2.0) 35 o1 89 88 01 73 16 50.4 50.4 00 45.0 54
other 27 32 (06) 31 (0.4) 60 74 (a4) 72 (1.2) “a7 44.7 (00) 407 10
TOTAL NET INCOME 64.5 64.9 (0.4) 66.4 (1.9) 1464.5 1468.8 (4.3) 900.0 900.0 0.0 902.4 (2.4)
ices Pillar Performance vs YTD Budget
2m 0.0
_ fm os Mails & Retail Services ~ (£31) Adv
(0.3) 44 os — << International - £1.0 adv due partly to lower volumes and partly to
5 — —_— —_— ‘the budget being stretching - £0.6m higher than prior.
o7 ne 0 oy stand dnd Cas lable “£0.8m a crv by lover st class
oO) : Volumes being down by 25%,
672 (1.0) (1.4) BERRI) II other Mais ~£0.7m adv cu primarily to lower than planned
volumes.
Lottery - £0.6m adv due primarily to lower than planned.
volumes. The income is higher than prior year, indicating @
stretching target
Financial Services - (€0.2m) Adv.
Banking Services - £0.3m adv driven by lower volumes from
banking services, bth against budget and prior year
Payment Services -£0.2m adv driven ty lower Gift vucher
volumes.
2013-14 YTD. PFW — Stamps (1st & Retail & Lottery Other Mails Labels (1st & International 2013-14 YTD ‘ATMs - £0.2m adv driven by lower volumes than planned, but
Netinecme ‘and Ces) Clas) Net incom higher than prior year.
Budget wis 14 YTD PFS Payment Tal Sowest ATM Payment Bang Ober_—2013:4 70 1] Other ~ (Em) ay du o unassigned income targets ining
oe iso anp Services Servens Netincome 1] Sales Effectiveness still to be allocated to products.
Offset by
PFS - £1.Am fav driven by savings products, specifically Growth
bonds.
i i Bill Payment - £0.5m fav driven by lower decline than planned.
Government Services Telephony Services ‘Travel - £0.3m fav due to increased higher Bureau and Travel
insurance volumes than planned.
£m bend Government Services ~ Flat
— — J Check & Send ~£0.8m fav - Higher than slanned volumes
Le) (0.0) oo — ID services ~ £0.2m fav - Higher than planned volumes.
r offset by:
(0.5) fm Motoring = 0.5m adv - Higher than planned volumes.
30v Services Other - £0.5m adv driven by smaller variances,
pat mp]
‘Telephony Services - £0.2m Fav
Homephone - £0.2m fav - Current customer numbers stand at
‘674, which is 5k higher than budget, driving the favourable
Other - (€1.1m) Adv
This relates tothe unassigned income stretch
2019-14 YTD ‘Cheskand Send ID Senices POCA Otter Go Motoring «2013-14 YTD
‘Nat incom (Net income ‘2013-14 YTD Net Income Bud ‘HomePhone/Dusl & broadband ‘2013-14 YTD Net Income Actual
‘Budget ‘Actual = ‘Customers.
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Strictly Confidential °
Net Income By Channel -
May 2013 Period 2 - Focus products were £1,0m favourable and Standard products were £3.9m adverse, with the Agency network driving
both variances.
L
£m Month Year to date Full Year
Targeted Income ‘Actual Budget Variance ‘Actual Budget Variance Budget
Focus Products
Crown Offices 28 3.0 (0.2) 64 6.6 (0.1) 39.0
WHS 0.5 05 0.0 12 12 O41 67
Agents - Managed 5.7 55 01 12.9 12.2 07 74.0
Centrally Supported 34 36 (0.2) 81 79 01 496
Direct Sales 08 0.7 01 18 15 03 9.0
Central 0.0 0.0 0.0 0.0 0.0 0.0 05
Focus Products Total 13.2 13.4 (0.2) 30.5 29.5 1.0 178.8
Standard Products
Crown Offices 3.9 3.9 0.0 9.2 9.1 04 58.1
WHS 08 08 0.0 18 18 (0.0) 10.6
Agents - Managed 13.6 14.2 (0.5) 30.9 328 (1.9) 191.2
Centrally Supported 13.3 14.0 (0.6) 31.1 33.1 (2.0) 198.1
Direct Sales 0.3 0.3 0.0 08 08 (0.0) 65
Central 0.0 0.0 (0.0) 0.0 0.1 (0.0) 0.6
Standard Product Total 32.0 33.1 (7.3) 73.9 T77 (3.9) 465.3
TOTAL TARGETED INCOME 45.2 46.5 (4.3) 104.4 107.2 (2.8) 644.0
Other Income
Cash Services 17 17 (0.0) 3.6 3.7 (0.0) 22.0
Gamma 0.8 0.8 0.0 88 8.4 4 84
Fixed Income & Other 15.0 13.8 12 22.8 24.8 (1.9) 185.0
Retentions 18 21 (0.3) 49 47 0.2 40.6
TOTAL POL NET INCOME
TOTAL POL NET INCOME
Centrally Supported Net Account Mgd Net Income YTD Crown Offices Net Income Direct Sales Net Income YTD WHS Net Income YTD
Income YTD (£m) (£m) YTD (£m) (€m)* (£m)
50 20
40 105 I
30) 107%
20
10 4 98%
i}
Actual Target Actual Target Actual Target Actual Target Actual Target
"Standard mFocus %oftarget I [ mStandard mFocus %oftarget I [ mStandard mFocus tof target I [mStandard Focus %oftarget] [“mStandard mFocus % of target
* Both target and actual exclude lead
generation income
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Crown Profit & Loss Statement Strictly Confidential -
May 2013
Period Prior Year Period Year To Date Prior Year YTD Full Year I Prior Year
£m Actual Budget Variance I Actual Variance Actual Budget Variance I Actual Variance Budget Outturn
Income and Distributions
Variable income
~ Mails 28 3.0 (0.2) 31 (0.3) 64 68 (0.4) 78 (1.4) 43.2 448
~ Financial Services 21 23 (0.4) 24 (0.3) 48 49 (0.2) 5.2 (0.5) 29.6 30.4
~ Government Services 18 16 0.2 20 (0.2) 43 38 0.6 45 (0.1) 19.9 26.4
~ Telephony 01 01 (0.0) 01 (0.0) 0.2 0.2 (0.0) 03 (0.2) 18 13
Fixed income 20 19 01 21 (0.2) 44 44a 0.2 49 (0.5) 248 28.2
Gamma/ Other 09 09 0.0 08 0.0 18 21 (0.3) 18 (0.0) 14.8 10.9
Renewals and Retentions 13 1,3 0.0 07 0.6 28 26 02 1.2 16 165 14.1,
Total Income including Gamma/other 10.9 11.0 (0.0) 11.2 (0.3) 24.6 24.6 0.0 25.8 (1.4) 150.1 153.2
Direct Product Costs (1.0) (0.5) (0.5) (0.5) (0.5) (1.6) (0.9) (0.7) (1.4) (0.5) (5.0) (8.3)
Branch costs
- Staff (8.7) (8.6) (0.2) (9.1) 04 (19.4) (19.2) 0.0 (20.2) 141 (106.0) (117.9)
- Property (27) (27) (0.0) (1.9) (0.8) (6.4) (6.1) (0.0) (4.4) (1.7) (35.4) (36.9)
- Other branch costs (0.3) (0.4) o1 (0.5) 0.2 (0.8) (0.9) 01 (0.9) 01 (4.7) (6.3)
Infrastructure costs (1.7) (1.4) (0.4) (1.7) 0.0 (3.3) (3.0) (0.3) (3.7) 0.4 (22.9) (22.5)
Allocated central costs (0.7) (0.7) 0.0 (0.8) 01 (1.7) (1.7) 0.0 (1.7) (0.1) (8.4) (7.7)
Total Expenditure (15.2) (14.3) (0.9) (14.5) (0.7) (32.7) (31.9) (0.8) (32.1) (0.6) (182.2) (199.7)
JV Share of Profits 0.6 08 (0.1) 09 (0.2) EK) 1.5 (0.2) 14 (0.0) cE] 9.6
Statutory PBIT (3.6) (2.6) (4.0) I (2.4) (1.2) (6.8) (5.8) (1.0) I (5.0) (1.8) (23.0) (37.0)
Summary
+ Income is on target, both in period and YTD:
+ Pillar income is on budget. Main drivers of favourable Government income are UKBA and Passports, with £0.3m due to timing of targets for ID Services that will unwind next
month. Adverse Mails performance has been impacted by a change in customer behaviour as a result of size based pricing, This has impacted on a number of products.
+ Costs are £0.8m greater than plan:
+ Direct product costs are adverse by £0.7m as a result of Brand spend early in the year.
+ Staff costs - A small delay in CTP savings have been offset by industrial action savings.
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Business Scorecard Strictly Confidential ®
May 2013
ey Parfornvance Indicators Current Month Year to Date Prior Full Year 2012-13
id Act Target Var Act Target Var Year Ficast Target Var Outturn
Growtl
64.5 64.9 144.5 148.8 153.8 900.0 900.0 902.4
0 i it En ) 2.5 6.2 76 14.0 17.9 102.0 102.0 94.2
Earnings before ITDA and Subsidy £m* (13.8) (9.4) (26.9) (20.4) (17.7) (97.2) (97.2) (115.4)
Free cashflow £m (123.4) (22.9) 262.4 205.3 431.7 (18.3) (18.3) 132.2
Customer
Customer Satisfaction** 87% 88% 87% 88% 87% 88% 88% 87%
b th (Bor e 45% 44% 45% 44% N/A 44% 44% N/A
Net Promoter score** (4) 5 ie) 5 N/A 5 5 N/A
Queue time % < 5 minutes - Top 1k branches 81.0% 76.0% 78.0% 74.5% 74.6% 81.0% 81.0% 80.7%
Horizon availability 99.9% 99.7% 99.9% 99.7% 99.8% 99.7% 99.7% 99.8%
Branch - Compliance (new basket) 100.0% 98.0% 99.8% 98.0% 96.8% 98.0% 98.0% 97.8%
People
Engage c % (0 e onus) 55% 56% 55% 56% 55% 56% 56% 55%
(No.) % of BME appointments over total recruits at senior 17% 4% on rm NA a At NVA
leadership and senior manager
(No.) % of Female appointments over total recruits at senior 47% 40% 55% 40% N/A 40% 40% N/A
leadership and senior manager
Modernisation
(3.6) (2.6) (6.8) (5.8) 0.0 (23.0) (23.0) (37.0)
42 26 1,531 1,515 210 3,000 3,000 1,450
* ITDA Interest, Tax, Depreciation, Amortisation
** Monthly = 3 month average. YTD = 12 month average
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Strictly Confidential ®
Cost Management Report
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Staff Cost By Directorate
May 2013
Strictly Confidential
lem Year to Date Prior Year YTD I Full Year YTD Headcount
Staff Cost by Directorate ‘Actual Budget Variance Variance I Budget Actual Budget Variance
[Central (incl. MD's office) 4) (oy 02 (05) 65 12 15 3
Commercial (1.3) (12) (0.0) (03) (7.4) 1140 144 1
[Communications (0.4) (0.4) 0.0 (0.1) (2.3) 32 35 3
Human Resources (0.8) (a8) 0.0 01 (4.8) 103 110 7
IHR - Centrally Held Bonus Payments (3.0) (30) (0.0) (02) I (18.0) - - -
Financial Services (0.5) (0.7) 02 (0.2) (45) 63 70 7
Finance (1.9) (2.0) 01 (03) I (118) 242 264 22
Network (32.4) (31.2) (0.9) O4 (178.5) 6993 7,211 218
Human Resources. Staff Cost by Directorate
incl Bonus
% Strategy
8%,
Period 2 Performance Pack - Chris Day
Finance
4%
Central (incl. MD's
office)
3%
Legal (2.5) 28 30 2
Security (27) 56 57 1
Strategy (14.1) 247239 (8)
[Total Staff Costs (44.8) (44.4) (0.6) (4.8) (256.4) 7,886 8142256
PY Actual) 7,837
PY Variance] (49)
employees that will be offset against year end
accruals in P3.
Vs. Prior Year
The staff costs are £1.8m adverse due primarily to
pay awards and also to increased use of staff, both
temporary and permanent such as FO0G and the
new communications directorate,
Headcount of 7,886 is 256 below plan and is due to
vacancies with the Network directorate, of which the
‘majority of vacancies are within the NTP followed by
CTP. The adverse variance in Crowns is due to the
delay to the duty reviews. Tight control of
recruitment has partially mitigated this.
Vs. prior year headcount has increased by 49
\ primarily due to NTP. ]
16th July 2013
/ YTD Staff Costs are £0.6m adverse to budget. \
This variance relates to the £100 payments paid to
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Non Staff Cost by Directorate & Type Strictly Confidential
May 2013
ém Year to Date Prior Year YTD I Full Year I I£m Year to Date Prior Year YTD I Full Year
INon- Staff Cost by Directorate Actual Budget Variance I Actual Variance! Budget I INon- Staff Cost by Type Actual Budget Variance} Actual Variance! Budget
[Central - Centrally Held incl. Computers & Telephones (12.6) (40.8) (8) (1.4) (1.2) (75.9)
Strengthening oo 04) at fa 2B 27 Other Operating Costs (25) (25) oo I G8) 13 (16.8)
ICornmercial (1.8) (2.7) 08 (2.0) 02 (15.5) Consultancy, Marketing & Legal Fees (47) (5.2) 04 (3.4) (1.3) (29.5)
[Communications (0.5) (0.4) (0.0) (0.3) (0.2) (2.1)
Finance (2.3) (2.3) (0.1) (1.2) (1.2) (12.6)
Financial Services (29) (07) =a) I a a) I 53) Finance 62) G7) G5) I @6) (26 I G72
Human Resources (0.9) (1.0) o1 (0.8) (0.0) (6.1) Property Facilities (1.5) (1.0) (0.5) (1.4) (0.3) (6.2)
Network (3.9) (4.8) 09 (5.4) 15 (27.7) Property Maintenance: (1.0) (1.4) o1 (1.0) (0.0) (6.9)
Vehicles (0.4) (0.4) 0.0 (0.5) oO. (2.4)
Compensation (0.1) (0.4) 0.2 (0.3) O41 (2.6)
Collection, Delivery & Conveyance Charges (02) (04) (00) I (02) 01 (03)
Legal (0.3) (0.28) (0.2) (0.0) (1.9) Staff & Agent Related Costs & Consumables 0s (0.5) 10 0.0 o4 (3.4)
Security (05) (033) (04) (oa) I (25)
Programme costs o1 0.0 (0.2) 03 0.0
[Strategy (14.5) (12.0) (2.5) (12.3) (2.2) (90.1)
[Total Non Staff Costs (27.5) (25.5) (2.0) I (24.2) (3.3) I (461.1) } [Total Non Staff Costs (27.5)_(25.5)__(2.0) I (24.2)__(3.3)_I (461.1)
/Nariance \ Non Staff by Type
Non Staff by YTD non people costs were £2.0m adverse to
‘The Central directorate has a positive prior year actual which relates to the
WHS TUPE transfer provision release.
Period 2 Performance Pack - Chris Day
budget and £3.3m adverse to prior year.
By Directorate
Vs. Budget
Costs were £2.0m adverse to budget The
overspend is driven by a charge for Microsoft
licences taken in full but which will be reversed
next month and spread over the life of the
licences,
Vs Prior Year
Cost were £3.3m adverse to prior year. The
increase is driven by the timing of the Microsoft
licences expenditure and increased marketing
expenditure.
By Type
YTD versus budget variance was driven. by a
payment to HRMS which was budgeted to be
paid in P3.
Versus prior year it is the HMRC payment and
increased marketing expenditure.
16th July 2013
* Skills group is the internal ‘consultancy’ providing project
resource made up of a mixture of employees topped up with
contractors. if demand is high the contractor spend increases but
this is offset by higher recharges to projects.
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Transformation Delivery Heat-map Strictly Confidential 4
May 2013
Highlights heatmap status of key transformation programmes, and points of escalation to Transformation Board on selected
projects including resulting Transformation Board action / guidance.
Key Points of Focus
FO0G - Identity assurance (IDA) Transformation Board (TB) discussion and agreement on
revised approach to IDA market entry (i.e. buy service from established IDA supplier). Supplier
engagement now commencing in support of this. Full business case requested for approval
before contracting with Government Digital Services (due July to meet Government
timelines). Service provision due to commence in October.
IT&CT - Systems Integrator /Service Delivery (SI/SD) procurement continues to plan with
award date (along side End User Computing) in September however significant Transitional
‘Support Services (TSS) negotiations continue to impact the scope and timing of the Al tower.
Key decision on TSS options requested by programme and will be agreed by sub set of TB.
Following from this a revised business case has been requested for review and for approval
in the July Investment Committee.
©
>
Finance Roadmap - TB concerns about robustness of plans to deliver the core finance
system by April 2014 especially regarding dependencies on RMG activity, the complexity of
building and testing and the timelines currently planned for this. TB requested spotlight
session on delivery plan two weeks to test assumptions.
Penguin — Decision taken to contract with FRES on agency basis to soft launch pre-paid card
before Christmas, adding real-time loading in March 2014. TB discussion with programme
sponsor and business lead on required actions against key lessons learnt from this project ~
(+) requirements scope creep and ‘the need for strony challenge by profect,board,
Digital Multi-Channel (DMC) - Common digital platform - TB challenge on value of DMC
programme activity moving forward (post requirements definition) given range of questions
over ability of Common Digital Platform delivery timings to support integrated delivery of key
Green Amber Red requirements (e-business, online mails etc.). TB requested further work across DMC business
Delivery to Baseline Milestones owners, IT and procurement to agree programme approach and present back as part of a
spotlight session on the programme.
Programme spend
O Colour of Circle reflects 13-14 financial benefits
Shows movement from last d Mails (Small Business) - Development would allow SMEs to top-up and view detailed activity
—_ ws Movel if perios
for Drop & Go accounts on-line and via mobile (the platform would also enable customers to
undertake on-line parcel payment transactions allowing POL to compete in the postage
market). Business Case agreement pending decision on approach to DMC (see above).
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Network Transformation Scorecard Strictly Confidential
May 2013 Reporting prior months data (le. one month in arrears)
Sample size is still small but provides a starting point to build on. All branches in the financial section have been operating for greater than 12 months to allow for
steady state, and branches that had previously received overscale / one off payments have been removed to provide a clean baseline
Redeeton ence perce cer! gears te II 2 exc
Sample Size
MAINSI
Converted > 12 months 6
Finance Approved investment per Mains £000 (9) (39) 0 6 Mains >)
[Total Income: Post vs Pre Conversion Financial performance
Income - One branch has improved c40% due to a significant increase in lottery
Branches tive 12-26 months 148 (un 15% 5 income. Exclusion of this branch results in a 6% improvement which still compares
POL Branches live 24-36 months (oye TBA - a favourably to the target (control group).
Focus income: Post vs Pra Conversion ‘Agents pay ~ Excluding the branch above the average increase is 9%. Branches in
Branches live 12-24 months 18% 20% (Bye 5 sample receive new Mains pay rates that are favourable to previous rates.
Branches live 24-36 months 11% TBA - 1 Non financial performance
Encouraging results against targets for retail sales performance, opening hours and
Agent [820 Remuneration Post ve Pre Conversion 19% (on 23% 5 customer satisfaction.
ent
loperator Feedback on Retail Sales Performance 15% ot 6h 25
[average increase in Opening Hours 3x 163
Customer
[Customer Satisfaction 95% 90% 5k 601
LOCALS
Converted > 12 Months 33
Finance Approved Investment per Local £000 (aa) (4a) 0 0 Locals
[Total income: Post vs Pre Conversion Financial performance .
Income - Branch performance ranges from -58% to +49% so there isnt a consistent
POL Branches lve 12-24 months Gon eat 3 pattern in this population, The Local model assumption was that income would
Branches live 26-36 months . . . reduce by c5% due to the removal or certain products. 17 branches are performing
better than this and 16 are less favourable.
Annualised Agents Fixed Pay savings per conversion £000 10 10 0 0
‘Agents pay fixed savings ~ Savings inline with strategic plan target
[Customer Sessions 12- 24 months o Ge us 3
Agent —_ICustomer Sessions 24~ 36 months - - - - Non financial performance
Customer sessions - Strong performance compared to income. Implies greater
JOperator Feedback on Retail Sales Performance 118 i an 63 footfall but lower value transactions. Further analysis underway.
[average increase in Opening Hours 180k Th 317
Customer
customer Satisfaction 95% 90 5k 523
Financial targets reflect the equivalent performance of the control group (2967 Mains and 5030 Locals)
603 live branches within the 1489 contracts signed - April 2013
0-42 Months (May 12 - April 13) - 412
12-24 Months (May 11-April 12) - 116
> 24 Months (prior to May 2011) - 75
Note: The scorecard includes 38 branches of the 116 (12-24 months) and 1 branch of the 75 (24-36 months).
Branches with a break in customer session or branches that had previously received overscale payments have been excluded,
Period 2 Performance Pack - Chris Day
46th July 2013,
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Appendices
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Network Transformation Scorecard Metric Definitions/ Rationale Strictly Confidential
May 2013 Reporting Prior Months data (one month in arrears) 0
Key Performance Indicators Metric Rationale
MAINS
Converted >-42:monthe Source: NTP database Source: NTP database
ance Approved Investment per Mains £000. [Average investment spend approved for number of branches Recognise investment spend
otal Income: Post vs Pre Conversion
Branches live 12-24 months Total Variable Income - Source: Credence* Review impact on POL income as a result of converting to new models
ae Branches lve 24-36 months current month vs same period pre conversion
Focus Income: Post vs Pre Conversion
Branches live 12-24 months Total Focus Income - Source: Credence* Review impact on POL focus income to assess the sales model post conversion
Branches lve 24-36 months current month vs same period pre conversion
lAgents Remuneration: Post vs Pre Conversion [Total <pents remuneration exchuding overscale and NVVAT. Current:month vs same pertod I)... 4 impact on.income for our agents asa Tesuift of POL business
Agent pre conversion
Operator Feedback on Retail Sales Performance Source: Operator survey issued to branches 2 months after opening starting in Aug 12 indicative retail performance for Agents
average Increase in Opening Hours Based on systems data of open hours assess the impact of extended hours for our customers
Customer
customer Satisfaction Exit interviews conducted by research company Brass at recently transformed branches indication of customer experience
LOCALS
Converted » 12 Months Branches converted greater than 12 months Branches converted greater than 12 months
Finance Approved Investment per Local £000 [Average investment spend approved for number of branches Assessment of investment spend
{Total Income: Post vs Pre Conversion
POL Branches live 12-24 months Total Variable Income - Source: Credence* Review impact on POL income as a result of converting to new models
Branches lve 24-36 months current month vs same period pre conversion
annualised Agents Fixed Pay savings per conversion £000 Fixed pay saving per branch vs the strategic plan assumptions assess the savings to POL
Customer Sessions 12- 24 months Source: MI Database: Measurement of footfall for an Agent.
Agent Customer Sessions 24- 36 months
loperator Feedback on Retail Sales Performance Source: Operator survey issued to branches 2 months after opening starting in Aug 12 _I Assess impact of increased revenue from retail
[average Increase in Opening Hours Based on systems data of open hours assess the impact of extended hours for our customers
Customer
customer Satisfaction Exit interviews conducted by research company Brass at recently transformed branches indication of customer experience
* Same income factor used for each year. Performance is impacted by sales and product mix.
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16th July 2013,
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Strictly Confidential
Cashflow Statement tretly Confidential 4
May 2013
YTD Full Year
£m Actual Budget Variance Forecast Budget Variance
Operating Profit 7.6 13.9 (6.3) 102.0 102.0 (102.0)
Depreciation 01 0.2 (0.1) 0.9 0.9 (0.9)
Working Capital (36.6) (31.5) (5.1) (40.9) (40.9) 40.9
Client Balances (28.9) (68.4) 39.5 (44.4) (44.4) 44.4
Network Cash (36.4) (40.4) 4.0 114.6 114.6 (114.6)
Dividends (4.6) (5.2) 0.6 (4.5) (4.5) 45
Capital Expenditure (6.3) (15.6) 93 (167.5) (167.5) 167.5
Government funding 215.0 215.0 0.0 215.0 215.0 (215.0)
NSP in advance 165.4 165.4 0.0 0.0 0.0 0.0
Exceptional Items (16.3) (27.6) 11.3 (198.8) (198.8) 198.8
Pensions 07 04 03 0.0 0.0 0.0
Proceeds from asset sales 25 0.0 25 0.0 0.0 0.0
Free cashflow before interest, tax 262.2 206.2 56.0 (23.6) (23.6) 23.6
0.0
Interest 01 (1.0) 11 (5.0) (5.0) 5.0
Tax 0.0 0.0 0.0 10.3 10.3 (10.3)
Free Cashflow 262.3 205.2 57.1 (18.3) (18.3) 18.3
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Income By Product Groups & Pillar Strety Confidential =
All close to budget, bar Mails which is £3.1m adverse.
May 2013 Other income is £1.1m adverse and relates to the income challenge.
Current Month Prior Year Year to date Prior Year Full Year Prior Year
saat Actuals rer wenn Actuals Budget YTD Actual Ma current Budget Variance anes
Parcelforce 17 13 04 38 38 29 09 307 307 0 19.9
[Special Delivery 4.0 44a (0.1) 39 85 9.0 (01) 500 500 0 53.2
International Priority & Standard 2.39 2.53 (0.13) 5.42 64 5.88 (0.46) 37.28 373 0 34.9
IStamps (1st & 2nd Class plus other stamps) 19 19 45 102 (6.9) 338 338 0 35.2
Labels (Ast & 2nd Class) 7.15 7.63 1766 (159) I 99.99 1000 0 100.2
RM Mail Fixed 43 38 98 (01) 560 56.0 0 57.9
Retail & Lottery 3.0 3.0 68 08 516516 0 45.7
Mails Other 39 44 9.2 9) 553 553 0 57.0
Total Mail Services 745 (7a)_I 446.6 0 404.0
Total Telephony Services 73 16 50.4 0.0 45.0
Motoring Services 64 (3.6) 21.4 0 318
Card Account 118 (1.3) 59.4 0.0 65.8
Check and Send 45 os 20.4 0 214
JAEI (DVLA & UKBA) 15 (0.0) 79 (0.0) 104
(Other Government Services 08 4 67 (0.0) 42
Total Government Services 24.9 Go) [145.9 (0.0) 133.2
Bill Payment Services Direct 20 (0.1) aad 0 118
Bill Payment Services Reseller 48 (03) 24.9 276
Postal Orders 44 (0.4) 20.2 23.1
Payment Services 09 (2.0) 89 (0.0) 63
Personal Banking Clients 47 0.0 25.4 264
DWP Exceptions 08 (08) oa 3.9
Business Banking 60 (23) 266 348
ATM 54 02 33.2 30.2
PFS-Savings 24 64 505 406
PFS-Insurance 07 07 67 53
PFS-Lending 03 04 49 47
Bureau (excl profit share) 45 (0.4) 23.8 23.4
Travel Insurance 18 01 10.1 101
MoneyGram 24 03 16.6 154
NS& 39
(Other
Total Financial Services
Other Income
Supply Chain
Net Income
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Strictly Confidential
POST OFFICE LTD BOARD
Chief Executive’s Report
1. Crown Transformation Programme (CTP) and industrial relations
There have now been 7 strikes since the dispute with the CWU started just over 3 months
ago, which compares with 13 strikes over a 5 month period during the last industrial action
in 2007. The percentage of staff on strike continues to fall (61% for 20 June and 58% for
29 June, compared to a peak of 72%). We chose not to deploy managers on either
occasion but did nonetheless manage to keep over half of Crown branches open. The
strike action continues to garner very limited media coverage at the national level, with just
2 reports on 29 June and none on the 20 June.
We are continuing to monitor the financial and service impacts of the strikes. While there
is typically a dip in the levels of customer satisfaction with queuing times in the Crowns on
strike days (from 83% to 63%), overall customer satisfaction levels have held up strongly
at around 86%. The net financial impact is also positive in the short-term, with the
reduction in Crown income more than offset by the wage savings and growth in nearby
agency income. However, clearly we need to remain watchful of the potential for longer-
term adverse income impacts which could undermine the breakeven target. We are also
developing detailed contingency plans to ensure we are ready to cope with strikes during
the summer (when resourcing would be stretched by staff holidays) and over the busy
Christmas period, or alternatively if the supply chain also went out on strike. Our
conclusion is that such scenarios are manageable but not without risk and some degree of
customer detriment.
Taking these considerations into account, our strategy at this stage remains focussed on
implementing the CTP while redoubling our communications to employees to increase
buy-in and counteract the CWU’s messaging. However, given the risks of prolonged strike
action, in parallel we are also reviewing the pros and cons of alternative options to resolve
the dispute. The CWU have informally indicated that they would like to start negotiations
afresh, and we have responded by saying that we would be open to discussing alternative
approaches provided they are prepared to take their existing asks off the table which are
incompatible with delivering the breakeven requirement. We will update the Board on the
latest position next week.
In relation to managers’ pay, we resumed talks with the CMA on 3 July following a new
counter proposal from Brian Scott, which would entail consolidating a proportion of the
lump sum payments with effect from April 2015. While Brian is looking for us to make an
unconditional commitment, clearly any offer of this kind would have to be consistent with
the maintenance of profitability in the Crowns. We are currently modelling the costs and
wider impacts ahead of a further meeting on 15 July, and will update the Board next week.
In terms of the CTP itself, we have informed all 292 retained branches of when they will be
visited as part of the modernisation programme. The aim is to have 45 branches
completed before Christmas and 117 by the end of 2013/14. We have already started
visiting the earliest waves of branches in order to consult staff on the proposed designs to
seek their input. In parallel, the design and customer journey for the new self-service
equipment (‘Post & Go’) are now finalised and ready for pilot later in 2013.
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Our programme of 20 ‘Vision events’ across the country is nearly complete. This is a
crucial part of our engagement plans, involving staff from every branch in interactive
sessions on topics such as the branch redesigns, our plans for financial services growth
and the new Crown Leadership Excellence Programme for managers. Feedback so far
has been extremely positive with 96% of attendees saying the event has given them a
better understanding of the Post Office vision.
We have received 305 expressions of interest covering 69 of the 70 branches advertised
for franchising, which we are now evaluating to identify our preferred partners. Work is
ongoing to find potential partners for the one remaining branch.
2. Network Transformation
The programme has finished the first quarter 54 branches ahead of target at 1,600
contracts signed. Most of these additional branches have come from independent
conversions to mains, illustrating the continuing appeal of the model to sub-postmasters.
No multiple contracts were expected in the first quarter after the large batches signed at
the very end of last year. New operator contracts are broadly in line with target. The
programme remains on track to reach 3,000 contracts signed by March 2014.
As set out in the paper discussed with the Board on 22 June, we are actively progressing
branch openings for all of the contacts that have been signed, but it is taking time for
agents to secure available builders and prepare for their works. The programme mid-point
forecast remains 1,950 branches open by year end. ‘Beat rates’ are expected to remain
fairly steady through July and August at just over 20 per week, with an increase in
September to over 30 as the number of multiple openings increases, followed by further
increases in Q4. We are confident that we have the capacity to open branches when all
parties are ready, with 37 branches opened in the last week of June.
3. Mails
We are currently pursuing two main strands of activity with RM to seek to recover the
parcels volumes lost as a result of the April tariff change. Firstly we have proposed an
extended shoe box sized template to replace the current cube shaped exception to the
medium parcel template, which would increase the number of items accepted as small
parcels and thereby substantially reduce the price (by up to 50%) for customers who fall
into this bracket. RM have indicated that they should be in a position to approve this
change within the next two weeks with a view to announcing it by the end of July.
Secondly we are working with RM on a price discount of up to 20% on certain formats
through the Drop & Go service, which we are aiming to implement alongside the roll-out of
the service to the entire network on 29 July. We are also investigating with RM what
changes could be made to Drop & Go to enable a franking style permanent discount,
which would require regulatory approval and is therefore unlikely to be achievable until
autumn 2013 at the earliest.
Good progress is being made with RM in lining up retailers to use our new click and
collect service. Of particular note is the fact that MetaPack (a widely used delivery
management intermediary) is now close to completing the platform required to enable
their clients to link up with the service, opening up access to a wide range of retailers with
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minimal integration work required on their part. Discussions are currently underway via
RM with a number of major clients who we are aiming to sign-up over the coming months,
including Wiggle, Asos, Avon, Talk Talk, River Island, Debenhams, Dixons, Pro direct
soccer, Thorntons and Ideal Home Shopping. Others are looking more likely for a post-
Christmas launch, including Marks and Spencer, eBay and Shop Direct Group.
Discussions with Amazon are still ongoing, although we are unclear of their intentions at
this stage as they are currently experimenting with their own delivery solutions and locker
box locations.
The latest results from June show that segregation performance has been clearly
impacted by the NFSP action encouraging branches to stop segregating, with mixed bag
down by 8.4 percentage points (ppt) to 46.8%, 1st class down 4.5 ppt to 68.3% and 2nd
class down by 3.2% to 68.8% compared with the previous month. However, we have had
more constructive discussions with the NFSP over recent weeks around the possible re-
instatement of the incentive payment to sub-postmasters, with the NFSP now accepting
the important principle that this needs to be directly linked to performance going forwards.
Further work is underway with the aim of introducing a new scheme by October,
dependent on the outputs of the joint RM/PO Segregation Working Group, which is
defining the revised structure of segregation requirements and measurement. That group
has now developed a simplified segregation proposal which is being trialled in July within
two mail centre catchment areas. It is also looking at potential improvements to the
sampling regime and mail bag handover process.
4. Government services
We are continuing to engage DWP on options to extend the POca contract beyond 2015,
and have now received a clearer signal that they accept that some continuation beyond
that point will be necessary for both operational and political reasons. We are currently
undertaking detailed customer research and segmentation analysis which will enable us to
present well-developed and evidenced proposals to DWP in August. The ExCo discussed
an early draft of these proposals in June, reaching the conclusion that while there are
obvious downside risks the volumes and financial projections contained in our strategic
plan remain credible as a planning assumption.
In parallel we are also re-engaging with the DWP team leading the Universal Credit
programme, in particular through the new Programme Director Howard Shiplee. He has
accepted an invitation to visit the model office to see our identity management and
assisted digital capabilities in operation.
On 1 June we went live with the extended range of services for DVLA offering six new
transaction types such as HGV taxation, changes of taxation class and issuing duplicate
tax discs. On 3 July we also launched in 13 London Crown branches a new priority check
and send service for passports which guarantees the passport will be issued within 7
days. This is the first new channel that HM Passport Office has introduced since 1992.
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5. Home services
The migration of our telecoms services from BT Wholesale to Fujitsu continues to
progress according to plan. Testing and call centre training is well advanced and a
number of live services are now in place in the new environment. New orders will start to
be placed against the platform from 22 July and the migration of the existing base is
scheduled to take place by the end of September.
We are close to being in a position to enter into exclusive negotiations with our preferred
supplier for mobile services and intend to enter into contractual negotiations in the next
fortnight. The technical solution looks strong and provides us with the opportunity to
deliver an integrated telecoms solution to support the development of attractive and cost
effective strong customer value propositions.
Work is also progressing on our plans to enter the energy market. ExCo reviewed the full
range of market entry options in June reaching the conclusion that we should look to
develop a white label branded energy solution in the short term as this provides the best
strategic fit. This would allow us to enter the market quickly, at low cost and with limited
tisk. However we will be seeking a flexible agreement with our chosen partner that would
allow the commercial model to evolve as we grew. We are now in a further phase of
market engagement with the aim of identifying a preferred partner towards the end of the
summer and launching the service in early 21014/15.
6. Marketing
The latest brand metric results show two main performance themes. Following the positive
progression over recent months, the net promoter score (NPS) has dropped from 7 to -7.
This is overwhelmingly driven by the Royal Mail price increase, although could also be
partly affected by the industrial action in the Crowns. Experience from previous years is
that the NPS quickly returns to the pre-change levels, but nonetheless we are developing
a marketing plan to address this drop in tandem with the product developments outlined in
section 3 above. ‘Easy to do business with’ meanwhile shows strong performance with a
12 month rolling average at 46% (compared with 41% a year ago), driven in particular by
the positive impact of the network and crown transformation programmes and the ‘stress
free’ focus of the mortgage brand campaign.
Since 20 June and throughout the summer period all of our marketing channels will be
focussed on the Post Office Travel Essentials range, under the headline ‘Get ready for
your holiday at the Post Office’. The campaign is focused on Travel Money, Travel
Insurance and Passport Check and Send but also incorporates the Credit Card travel
proposition. Early indications are that the campaign is delivering strong response rates
and performance in all of these product areas has been significantly above target at the
start of these crucial weeks.
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7. Project Robin
e Formal consultation with employees on the proposed changes to the pension scheme was
launched on 21 June and is due to close on 25 August. Discussions are ongoing in
parallel with the CMA who have reviewed the proposals in significant detail, although at
this stage their formal position is that they do not support the changes. We met with the
CWU in June, although they have likewise stated that they do not support the proposals
within either Post Office or the Royal Mail.
e The Regulator has now been informed by the Trustee of the delay to the valuation with a
target date of 30 September. Assuming the proposal proceeds following consultation, the
detailed implementation work such as systems configuration is on track to implement the
changes from next April.
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POST OFFICE LTD BOARD
Group Structure
1. Purpose
The purpose of this paper is to:
1.1 brief the Board on planned changes to the structure of the wider Group to
facilitate an IPO of Royal Mail Group Ltd (“RMG”);
1.2 brief the Board on the anticipated changes to the operation of Royal Mail
Holdings ple (“RMH”); and
1.3 delegate authority (in the form set out in Appendix 1) to the Company Secretary
and/or the HR & Corporate Services Director to approve and execute any
documents necessary to remove the references to the RMG Special Share from
the Company's Articles of Association.
2. Background
IPO Structure
21 The intention is for the IPO listed group to have a non-trading holding company.
ShEx have directed this will be a new non-trading entity (“Topco”) inserted prior
to listing between RMH and RMG. This is anticipated to occur during September.
22 Topco will be initially incorporated as a third direct subsidiary of RMH, alongside
RMG and Post Office Limited. Subsequently RMG will be transferred from RMH
to Topco. These changes are illustrated below, together with the consequential
structures immediately prior to and at IPO. Note that RMH will be renamed in
advance of IPO to remove the reference to “Royal Mail”.
Prior to transfer of RMG
Current Structure
Prior to IPO
PO
Ltd
Note: For simplicity the special shares in RMG, RMH and POL held by HMG are not included in the diagrams above.
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RMH Board
2.3 The RMH Board is comprised currently of two directors — Donald Brydon (RMG
Chairman) and Alice Perkins (Post Office Limited Chairman) — with Jon Millidge
as Company Secretary (also RMG Company Secretary).
24 September is viewed as the latest time for the composition of the RMH Board to
change to remove common directorships with the listed group.
2.5 ShEx plans for the future RMH Board to be composed of BIS officials acting
under direction of HMG, with this approach (i.e. acting under such direction)
entrenched in revised Articles of Association.
26 ShEx does not plan for the function of the future RMH Board to change from now
i.e. ShEx plans that it will continue to meet only as and when required to
discharge its necessary duties.
2.7 The adoption of revised Articles of Association for RMH, as well as changes to
the RMH Board, name, Company Secretary and registered office, are anticipated
to occur at or around the same time (i.e. around September).
Post Office Limited Special Share
2.8 The Secretary of State currently holds a special share in RMH, RMG and POL.
The rights attached to the special shares are set out in the respective Articles of
Association. The RMG Special Share will be redeemed or cancelled as part of
the steps to execute the insertion of Topco in advance of IPO.
2.9 The rights attached to the Post Office Limited Special Share include, for
example, the requirement for prior written consent of the “Special Shareholder”
for the “adoption of a Strategic Plan or any material variation or amendment of a
Strategic Plan previously adopted”.
2.10 However, under the current Articles of Association, the rights attached to the
Post Office Limited Special Share are “exercisable only for such time as the
Special Shareholder beneficially owns” all three of the special shares. A similar
provision exists in the Articles of Association for RMH and RMG.
2.11. Accordingly, an amendment is required to Post Office Limited’s Articles of
Association in order for the current rights attached to the Post Office Limited
Special Share to continue to be exercisable (the RMH articles will be similarly
amended). There will no longer be a requirement for the Special Shareholder to
beneficially own any of the other special shares in order to exercise the rights
attached to the Post Office Limited Special Share. It is proposed to remove any
other references to the RMG Special Share and the RMH Special Share at the
same time.
VAT Group impacts
2.12 POL and RMG (along with a number of RMG’s wholly-owned subsidiaries) are
currently constituent members of the VAT group of which RMH is the
representative member. The sale of more than 50% of the shares in either entity
would generally mean that the entity concerned would no longer fulfil the control
requirements for VAT grouping and would therefore need to leave the VAT group
(although there may be ways of retaining control and, thus, VAT grouping,
through use of alternative shareholdings). It has been agreed between RMG and
Post Office Limited that, for commercial and pragmatic reasons, RMG will retain
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the existing VAT group’s registration should the current VAT group structure
change.
2.13 To structure this change for VAT purposes, it is proposed TopCo will be
incorporated under the ownership of RMH and included in the RMH VAT group.
At the point when TopCo shares are sold, RMG and its subsidiaries within the
VAT group will remain under the control of TopCo but will no longer be controlled
by RMH. As a result, TopCo will then be considered to be the controlling body of
the VAT group (incorporating RMG and its subsidiaries). Consequently, RMH
and Post Office Limited will cease to qualify as members of the VAT group on
the basis that the controlling body will not own 50% or more of the shares in
either entity. RMH and Post Office Limited will therefore be required to register
as a new VAT group.
RMH Support Services
2.14 It is understood that the intention is to ask Post Office Limited to manage the
administration and accounting for RMH under the new structure. The following
list has been compiled as services that RMG currently provides to RMH:
* company secretarial support
* accounting services for consolidated management and statutory accounts (as
ultimate parent company and a plc there are considerable statutory reporting
obligations)
e settlement of invoices to group companies or third parties
* management of relationship with external auditors for statutory accounts and
consolidation issues (currently Ernst & Young)
* corporation tax returns, correspondence and support for payments
«tax accounting
« VAT filings
* employment tax and related support and filings for other tax as required
e provision of a senior accounting officer service
e treasury function (organising payments, management of investment portfolio,
ongoing banking and investment support services)
e insurance - provision of insurance within existing policies, participation in
current broker contract, management of the relationship with brokers,
renewal process, responding to insurance queries, management of major
loss claims
2.15 Whilst RMH is not a complex holding company, if Post Office Limited is asked to
provide these services there will be a resource cost and systems implications
which will need to be addressed. The scope of the Finance Roadmap Project to
separate our accounting systems will increase with associated cost and potential
delay.
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3. Recommendations
The Board is asked to:
3.1 note the planned changes to the structure of the wider Group to facilitate an IPO
of Royal Mail Group Ltd (“RMG”);
3.2 note the anticipated changes to the operation of Royal Mail Holdings plc
(‘RMH’):
3.3 note the additional duties that are likely to become Post Office Limited
responsibilities and that there will be additional cost as a result; and
3.4 approve delegation of authority to Alwen Lyons, the Company Secretary and/or
Susan Crichton, the HR & Corporate Services Director (in the form set out in
Appendix 1) to approve and execute any documents necessary to remove the
references to the RMG Special Share and the RMH Special Share in the
Company's Articles of Association and to do any act or thing required to be done
by the Company to give full effect to, or in connection with, the actions outlined in
this board paper.
Susan Crichton
July 2013
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Appendix 1 — Delegation of Authority
The intention is to delegate authority to Alwen Lyons, the Company Secretary and/or Susan
Crichton, the HR & Corporate Services Director to approve and execute any documents
necessary to remove the references to the RMG Special Share from the Company’s articles. In
order to comply with Article 77 of the Company's articles (see below), such authority must be
first delegated to a committee of one or more directors who have the power to sub delegate to
non-directors.
The Board is therefore asked to:
1. Approve in accordance with Article 77 of the Company's Articles of Association, the
delegation of authority to a committee comprising Chris Day, Chief Financial Officer, with
the power to sub delegate, to approve and execute any documents which are required for,
ancillary to, or desirable in connection with the removal of the references to the RMG
Special Share and the RMH Special Share from the Company’s Articles of Association,
such approval in any case to be conclusively evidenced by the execution of the relevant
document; and
2. Direct this committee of the Chief Financial Officer to meet and immediately sub delegate
its authority, without the power to further sub delegate, to a committee comprising of the
Company Secretary and/or the HR & Corporate Services Director.
The Board may wish to consider amending Article 77 at a future point.
Article 77 — Delegation of the Board’s Powers
“The board may delegate any of its powers to any committee consisting of one or more
directors with power to sub delegate. It may also delegate to any managing director or any
director holding any other executive office such of its powers as it considers desirable to be
exercised by him, Any such delegation may be made subject to any conditions the board may
impose, and either collaterally with or to the exclusion of its own powers and may be revoked or
altered. Subject to any such conditions, the proceedings of a committee with two or more
members shall be governed by the articles regulating the proceedings of the board so far as
they are capable of applying.”
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POLB 13(5")
POLB 13/30-13/46
POST OFFICE LIMITED
(Company no. 2154540)
(the ‘Company’)
Minutes of a Board meeting held on 21 May 2013
at 148 Old Street, London EC1V 9HQ.
Present:
Alice Perkins Chairman
Neil McCausland Senior Independent Director
Tim Franklin Non-Executive Director
Virginia Holmes. Non-Executive Director
Alasdair Marnoch Non-Executive Director (items 13/30-13/37)
Susannah Storey Non-Executive Director (items 13/30-13/37)
Paula Vennells Chief Executive Officer (all items excluding 13/36-13/37)
Chris Day Chief Financial Officer (all items excluding 13/36-13/37)
In Attendance:
Alwen Lyons
Mark Davies
Sue Barton
Kevin Gilliland
Martin Moran
Kevin Seller
POLB 13/30
(a)
(b)
ACTION: Sue Barton
POLB 13/31
(a)
ACTION: Sue Barton
Company Secretary
Communications Director (item 13/31-13/32)
Strategy Director (item 13/31-13/35)
Network and Sales Director (item 13/33-13/34)
Commercial Director (item 13/38)
Head of Government Services (item 13/38)
INTRODUCTION
A quorum being present, the Chairman opened the meeting.
The CEO updated the Board on the recent challenging NFSP
conference at which she and the Minister had spoken and taken
questions. She explained that it had been helpful to attend as the
specific debate around the network model had challenged the
business to produce different solutions for the ‘small rural’ and
‘urban deprived’ branches. The reception had also made it clear
that the business needs to find a more constructive way to engage
individual subpostmasters.
GOVERNMENT RESPONSE TO THE FUNDING AND
STRATEGY PLAN
The Board agreed the strategy and funding update and the
proposed delegated authorities for the Board’s Funding Sub-
Committee. It was agreed that delegated authority levels for
mutualisation should be added.
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ACTION: CEO (b) The Board valued the weekly updates sent by the CEO and asked
for them to continue.
POLB 13/32 GOVERNMENT/STAKEHOLDER INTERACTION PLAN 2013/14
(a) Mark Davies, Communications Director, presented a paper to the
Board setting out the proposed approach for engaging with
stakeholders around Post Office Limited’s strategy for 2013-2020.
The Chairman thanked Mark not only for the excellent media
coverage for the new Current Account and the network
transformation programme but also for managing the difficult
ACTION: messages around the current industrial action. Mark described it as
Mark Davies a team effort and said that he would pass on the Board’s thanks.
(b) The Board asked for a simple crib sheet of 4 or 5 communication
ACTION: points.
Mark Davies The Chairman asked Mark Davies to ensure that any statements
were checked to ensure that they were future proof.
(c) The Board endorsed the approach to stakeholder engagement.
POLB 13/33 NFSP & TRADE ASSOCIATION
(a) The Board received a verbal update from Kevin Gilliland, Network
and Sales Director, on the current relationship with the NFSP.
(b) The Board discussed the advantages of direct engagement with
individual subpostmasters and the CEO explained that the
ACTION: Kevin business would be introducing a subpostmaster engagement
Gilliland satisfaction measure this year. The Network and Sales Director
was asked to present the detail to the Board when it was available
with the timeline for introduction included in the mutual ways of
working session at the Board awayday.
(c) The CEO reported her recent positive experience of trade
associations and her view that they could have a positive and
challenging effect on the business. It was agreed that the proposal
of a trade association would be included in the mutualisation
ACTION: Sue Barton options which would be presented to the Board at their awayday.
POLB 13/34 UPDATE ON CWU AND INDUSTRIAL ACTION
(a) Kevin Gilliland, Network and Sales Director, updated the Board on
the current situation in respect of the Crown Transformation
Programme and the current industrial action.
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(b) The Board acknowledged the sensitive nature of the current
situation and agreed that it was at a finely balanced stage. They
endorsed the strategy of maintaining a firm and consistent position
with the CWU on the key points regarding consolidated pay,
franchising and the need to make any pay deal conditional on co-
operation in delivering transformation to the Crown Network.
(c) The Board supported the view that face to face communication was
the most effective way to get the business’ messages across and
increasing the ‘super-briefers’ role in the communication.
(d) The Board also endorsed a controlled and strategic approach to
sharing information with the CWU, and not supplying individual
office P&L accounts whilst the dispute continues.
The Board endorsed proceeding with the practical next steps
outlined in the Crown Network — Transformation Programme and
Industrial Relations Paper.
POLB 13/35 ANNUAL REPORT AND ACCOUNTS/RESULTS OF EXTERNAL
AUDIT
(a) The Board received the Annual Report and Financial Statements
for the 2012-13 financial year and ancillary documents. Alasdair
Marnoch, Chairman of the Audit, Risk and Compliance Committee,
reported very positive feedback from the auditors who were
complimentary about the controls in place and management
capability.
(b) With due regard to their individual duties and liabilities, the Board:
« Approved the approach to Going Concern and agreed the
Going Concern status for Post Office Limited at the full year;
e Agreed that it was appropriate for the Directors of Post
Office Limited to make the undertakings and statements in
the financial statements;
e Confirmed that, as individual directors, so far as they were
aware, there was no relevant audit information of which the
auditor was unaware and that each director had taken all
reasonable steps to make themselves aware of any relevant
audit information and to establish that the auditor was aware
of that information;
e Approved the financial statements;
e Delegated authority for reviewing final amendments and
ACTION: Mark Davies completing the Annual Report and Financial Statements on
behalf of Post Office Limited to a Sub-Committee, the
quorum for which to comprise any three of Alice Perkins,
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Paula Vennells, Chris Day and Alasdair Marnoch. The
Board asked that a final paper copy of the full report be
circulated to the Board before completion, the Board agreed
to review within 24 hours;
e Authorised Alwen Lyons to sign the Directors’ Report and
Chris Day and Paula Vennells (or, in either’s absence, Alice
Perkins) to sign the balance sheet, each acting on behalf of
the Board; and
e Approved the Letter of Representation to the auditor and
authorise Paula Vennells or Chris Day to sign and issue it
on behalf of the Board.
The Board agreed the process and timeline for production of the
Report & Accounts as set out in the papers:
(c)
* Acopy would be sent to BIS on the 21° May
* Acopy to the designers on the 22" May
© Sign off by sub-committee and the Chairman by 24'" May
¢ Revised version circulated to the Board approx. 10" June
(paper copy)
« Response by 11" June
¢ Report published 3% July
The CEO and CFO left the Meeting
POLB 13/36 BONUS PAYMENTS FOR THE YEAR 2012/13
(RECOMMENDATION FROM REMUNERATION COMMITTEE)
(a) Neil McCausland, Chairman of the Remuneration Committee
informed the Board of the outturn of the 2012/2013 scorecard
measures for the Short Term Incentive Plan (STIP) and the Long
Term Incentive Plan (LTIP).
(b) The Board noted the outturn of the STIP against the scorecard
targets and approved the recommendation of the Remuneration
Committee for the STIP payments for the CEO and CFO.
(c) The Board noted the outturn of the LTIP against the performance
conditions and approved the recommendation for the LTIP payment
for the CEO.
ACTION: Company = _(q)_ The Board asked the Company Secretary to seek consent for these
Secretary payments from the Shareholder Executive as required by the
Company's Articles of Association.
POLB 13/37 LONG TERM INCENTIVE PLAN (LTIP) AND SHORT TERM
INCENTIVE PLAN (STIP) BONUS SCORECARD MEASURES
(a) Neil McCausland, Chairman of the Remuneration Committee,
presented the Board with the Scorecard measures for 2013/2014
for the Short Term Incentive Plan (STIP). He recommended the
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adoption of a new STIP design for the Chief Financial Officer (CFO)
for 2013/2014, to align it with the design of that of the Chief
Executive Officer (CEO), albeit with a lower potential.
(b) He also informed the Board of the Long Term Incentive Plan (LTIP)
performance conditions for the award dated April 2013. He brought
to the Board’s attention the fact that the framework of the STIP and
LTIP design and measures for the CEO and CFO required Special
Shareholder approval which would now be sought.
(c) The Board discussed the recommendations and noted that the
performance measures had hardened with the threshold collar
tightening towards the target and the stretch cap becoming more
stretching. They discussed the likely outturn and which was thought
to be between target and stretch.
(d) They were assured that these bonus scorecard measures would be
replicated down through the ExCo and throughout the business.
(e) The Board:
¢ Accepted the Remuneration Committee's recommendations
for the Scorecard Measures subject to STIP for 2013/2014;
e Approved the change to the STIP design for the CFO;
« Accepted the Remuneration Committee’s recommendation
for the LTIP performance conditions for the award dated
April 2013; and
e Noted that the framework for the STIP and LTIP design and
measures for the CEO and CFO require Special
Shareholder approval.
Sarah Storey and Alasdair Marnoch left the meeting.
Paula Vennells and Chris Day rejoined the meeting.
POLB 13/38 FRONT OFFICE OF GOVERNMENT PROGRAMME (FOOG)
(a) Martin Moran, Commercial Director, updated the Board on the
current position of the Front Office for Government (FOoG)
Business and the revised FOoG strategy.
(b) The Board supported the scaling back to focus on real prospects
but emphasised the need remain alert to wider opportunities
especially if they could be positioned as helping government
departments during the current funding round.
(c) Kevin Seller, Head of Government Services explained that the
Government could make better use of the DVLA framework
contract and he suggested updating the stakeholder plan to that
effect. This would then be shared with the Chairman and CEO to
agree how the Board could support the stakeholder engagement.
ACTION: Kevin
Seller
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(d) The Board noted the revised income forecasts and progress to date
and the changes in the FOoG strategy.
POLB 13/39 MINUTES OF PREVIOUS BOARD MEETINGS
(a) The minutes of the Board meeting held on 20 March 2013 were
approved for signature by the Chairman.
(b) The minutes of the Board meeting held on 9 April 2013 were
approved for signature by the Chairman.
POLB 13/40 COMMITTEE MEETING MINUTES FOR NOTING
(a) The Board noted the minutes of the Audit, Risk and Compliance
Committee meeting held on 13 February 2013.
(b) The Board also noted the minutes of the Nominations Committee
meeting held on 5 February 2013.
(c) The Board noted the minutes of the Pensions Committee meetings
held on 4 March and 8 April 2013.
(d) The Board also noted the minutes of the Remuneration Committee
meeting held on 13 March 2013.
(e) It was noted that the minutes of each of the above Committee
meetings, provided for information, had been formally approved by
the relevant Committee.
POLB 13/41 MATTERS ARISING STATUS REPORT
(a) The Status Report, showing matters outstanding from previous
Board meetings, was noted.
POLB 13/42 CHIEF EXECUTIVE’S REPORT
(a) The Board noted the Chief Executive’s report and discussed the
following specific items:
(b) Parcels Tariff
The new Parcel prices were already affecting the sales in branch
and the Mails team are discussing this with RMG to try to negotiate
a price discount for drop and go small business customers. The
Chairman also reported that this had been a topic at her meeting
with Donald Brydon, RMG Chairman, which had been very positive.
(c) Current Account
The CEO reported a successful first week with the number of
accounts opened ahead of target.
The Board asked for a note explaining the success criteria on
ACTION: Nick which the pilot will be evaluated. They also asked if they could have
Kennett the opportunity to open their own accounts.
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Crichton
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(d)
(a)
(b)
(c)
(d)
(a)
(b)
Horizon
The Board asked for a note to update on the Horizon position with
the Second Sight review
ITEMS FOR NOTING
The Board noted the update on various Financial Services matters,
including Bank of Ireland (UK) ple capital & liquidity.
The Board noted the Health and Safety report.
The Board noted the Significant Litigation report.
The Board noted the Report on Sealings and resolved that the
affixing of the Common Seal of the Company to the documents
set out against items numbered 865 to 1039 inclusive in the
seal register was hereby confirmed.
ANY OTHER BUSINESS
Financial Update
The CFO reported that period 1 reports showed a positive EBIT
variance after adjustments mainly driven by lower staff and agent
costs. The one off project costs were 25% above target and he
assured the Board that he would monitor these closely over the
following period.
The next full financial update would be available at the July Board
with PIR and benefits realisation work reporting to the ARC on the
5" June 2013
DATE OF NEXT MEETING
The Board away day would take place on the 18” &19" June 2013.
The next full Board would take place on the 16" July 2013.
CLOSE
There being no further business the meeting was declared closed
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Notes of the discussions and Actions from the Board Awayday on the 18" and 19"
June 2013
Mutualisation overview
Twin track approach discussed, needs to be without onerous costs or governance
Concept of a council similar to a building society ‘members’ council’ supported by
user-groups was a preferred approach.
The nature of the debate has changed and we need to tell the Minister what we can
do, what can be announced to show a positive move to more mutual ways of
working, without compromising the governance.
ACTION The Board asked that the updated Rothschild report be circulated.
cD
ACTION Check that the strategic plan refers to commercial sustainability and not
mutualisation and change of ownership SB
Do not assume that change of Ownership has gone from the Govt. agenda. So we
need to stress the positive things we can commit to especially over the next 2 years
All agree that aiming for sustainability is the goal and that focussing on new ways of
working makes business sense irrespective of ownership model.
New ways of working
Direct communication to staff, subpostmasters and multiples are the top priority,
using the appropriate channel.
The approach will cost time and money with possible deployment of super briefer into
the subpostmaster network. ACTION Suggestion that we ask franchise partners
what they do to engage branches MD/KG
Concerns that POL and NFSP have very different ideas of how a Trade Association
relationship would work.
Support to drive forward as quickly as quickly as possible with the ways of working
but take the Trade Association/ NFSP approach more carefully to give time to
explore
ACTION Agreed that we would look at introducing a ‘members’ council of 20-30
people, with unions/staff/ subpostmasters and customers all represented. Return to
the Board with a full proposal in line with the agreed timeline SB
ACTION The Board agreed the outline of the WoW timeline. Final proposal to be
circulated, excluding Trade Association ( although recognised that this may be
necessary, so SB to develop a TA proposal but off the page for now) SB
The Board were uncomfortable with anyone but the shareholder ‘holding them to
account’. ACTION Check where the term ‘hold the business to account’ is used, and
come back with options for taking this forward without introducing additional
governance. SB
Agreed that a ‘share scheme’, meaning ‘sharing in success not giving away shares
would be a possible approach but not until the Business ceased to be loss making.
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This could be included in the pay principles in the long term strategy aligned with
Wow.
People
.
.
Structure means business focusing more on the customer, supported by a
transactional service delivery function (with work which could be outsourced), and a
very small corp. function ( which should also include HR and IT architecture for
thought leadership).
ACTION Show how many people as a % in each areas scicD
Need to isolate Customer functions from the ‘glue’ that stops the business delivering
at pace. Need a ‘heavyweight HR and Commercial Director. Commercial Director
seen as a successor for the CEO who needs to challenge the organisation.
ACTION Business to consider whether POCA should sit within FS in the new
structure PV
Discussion about moving to one Customer Director now. But too much going on in
Retail and FS to risk a new person straight away covering three big roles. Could
possibly put FS and marketing together, decided to leave three as a transition.
Service Delivery is also a key job, as it needs to drive out costs and move to an
outsourced model. The Business had three possible internal candidates but was
asked also to search the market for possible external candidates PV/SC
If an internal candidate was chosen they would need short term external support to
drive the programme.
ACTION The Board asked to see the proposed structure charts for the final and
interim stages. sc
The ExCo would now meet weekly for an hour or two to drive pace in the big
programmes (NT,CTP, FS and IT) and monthly for a full performance review, with
smaller Sub Group called for specific tasks.
The top 30 chosen for talent would receive more development and the top 150 would
meet quarterly for business performance which they would then cascade and
development.
ACTION ExCo succession plan to return to RemCom sc
ACTION Outstanding questions to return to NomCom sc
Qutsourcing
Discussed the different options for outsourcing and the different skill required. It is not
always necessary to sort out the business processes before OS, as long as the
business produces clear requirements; clear rules and then manages the
relationship. CD/SB
Cost is only one aspect of the arrangement also about expertise and leveraging the
outsource skills
The Business has aggressive cost reduction in the plan but does not have an OS
strategy, although it does have 3" party arrangements. The IT strategy was
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discussed and whether the SI was taking enough accountability for the Towers.
ACTION Sue Barton/ Lesley Sewell to meet Tim to revisit the SI Terms of Reference
and the relationship with the Towers. Neil McCausland was unsure that the Board
should be revisiting a decision it had already made. SB
e Discussed Call centre outsourcing to drive costs and service, expect improvements
from day 1.
* Need to decide what is Core to the business and look to outsource the rest. Possibly
partner with an independent 3” party to look at the core and help with the
procurement.
« ACTION Chris to send a note to the Board before the next meeting setting out a
timeline for the next steps including: defining core; defining requirements;
procurement; the effects of separation; and management information. cD
e« ACTION Return to the November Board with the plan and milestones, showing
direction of travel and the prize, having consulted TF & AM CD/SB
« Heavy hitting external programme manager needed to deliver, which could possibly
be the Transformation Director (COO).
Lunchtime discussions
Bricks & Mortar surviving as people move to digital
e Need to change how you work with the customer. Promotions on the web and mobile
drive customers into store
« Click & Collect — onestop partner with My Hermes meeting customer demands
e Need a distinctive High St. People can do the boring stuff on line
e Focus on communications, don’t be parochial add value globally
e Use retail localities as the linchpin of communities
« How could you combine with other CAB/ Libraries
« Strategy makes sense to have branches alongside, inside convenience stores
e Things opening up on line, online will be the growth, but face 2 face as the fulfilment
if it works
PO as a challenger FS brand
e Huge gap in basic bank accounts — banks not trusted
e Short term credit — credit unions are not working
« PO has tried this 3 times but could not get critical mass
« Clarity about products is missing, don’t always have to be the cheapest, but be clear
and fair
« Needs to be simple to operate for the branch
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Gillian called out two conversations were going on, opportunities for the future along
with constraints of the present
Engaging our people
Don't confuse leadership with control
Different people want different things, ask them, some people just want support and
to know they are doing the right thing.
Onestop run monthly regional meetings with staff and managers 20 people, viewpoint
survey twice a year, letters on the internet, pull not push
Leadership team in shop 2 days a week
PO comms too long and confusing onestop rewrite
NFSP send branch circulars, magazine, GT meets 1000 spmr a year
Spmr feel voice less heard since independence
Recent improvement in how business communicate
British Youth council — national members day, on line voting on issues but want
debate and engagement as well. Possible role for younger people as spmr, help
them with a framework for starting a business, offer a bridge, mentoring, knowledge
transfer
Be careful about consensus. Democracy and over consensus can cause paralysis.
Be clear about what is non-negotiable.
The Board agreed that these would be strong candidates for any advisory council
Mails
The Business are recruiting for a Head of SME, the SME ‘hit squad’ meet every
week, the most important thing to deliver is the expansion of Drop & Go and the Click
& Collect customers
Expanding to the whole network, now part of the sales focus, targets and weekly
review in place, discounts for Drop & Go customers, qtr 4 improve the online
capability to include hybrid to pay on line and drop of in branch.
Click & Collect goes live in 10500 branches next month, 4500 with extended opening
hours, several big retailers close to signing up.
Board asked if anything could be done to accelerate
ACTION Investigate options to incentivise quicker growth PB
ACTION Spend time in branch to understand the barriers in the sales process and
make it as easy as possible for people PB
ACTION Once we have a story to communicate make sure we do so loudly! PB
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No substantial issues with RMG privatisation. ACTION Think radically about how we
would respond to changes in the USO. Are there any opportunities for us PB/MM/SB
Board meeting to be called for Monday 24" June
The Board meeting would include:
An update on the NTP conversion information, with clarity the run rate for
conversions
Update on conversations with the Minister
Proposed changes to the planned strategy being presented to BiS.
Clear cost implications of those changes
The Board will need to sign off any changes outside the delegated authorities
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REMCOM
13/20-13/31
POST OFFICE LTD
REMUNERATION COMMITTEE
Minutes of a meeting of the Remuneration Committee of the Board
held at 148 Old Street, London EC1V 9HQ on Wednesday 1 May 2013
Present: Neil McCausland (Committee Chairman)
Virginia Holmes
Alice Perkins
In Attendance: Paula Vennells (PV) CEO (from minute 13/25)
Chris Day CFO (minutes 13/26-13/28)
Susan Crichton (SC) HR and Corporate Services Director
(minutes 13/20 — 13/28)
Karen Hamer (KH) Reward Manager
Fay Healey (FH) Chief HR Officer
Jonathan Hutchings (JH) New Bridge Street
Alwen Lyons Company Secretary
REMCOM OPENING OF MEETING AND CONSTITUTION OF COMMITTEE
13/20
(a) A quorum of two directors being present, the Chairman of the Committee
opened the meeting and welcomed those attending.
REMCOM MINUTES OF PREVIOUS MEETING AND MATTERS ARISING
13/21
(a) The minutes of the meeting held on 13 March 2013 were approved for
signature by the Chairman of the Committee.
(b) The Chairman asked if a communication had been sent to the
participants explaining the new LTiP measures. SC explained that
knowledge of possible changes in the 2015 Network Transformation
ACTION: targets and the current Industrial Relations environment had delayed the
Susan correspondence but that she was reluctant to delay any longer. The
Crichton Chairman asked SC to discuss and decide on the approach with the
CEO, letting the Committee know their decisions.
REMCOM SHORT TERM INCENTIVE PLAN (STIP) - OUTTURN AND PAYMENTS
13/22 FOR 2012/2013
(a) The Committee received an update from FH on the internal audit review
of the outturn of the 2012/2013 scorecard measures completed on 30
April 2013. FH explained that the outturn had been capped in line with
the rules.
(b) Alice Perkins reported to the Committee that the CEO had achieved 80%
ACTION: of her personal objectives which were attributed to 20% of her bonus,
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Alice and that in light of this the total STIP payment awarded to the CEO for
Perkins 2012/2013 should be £157,936. Alice Perkins undertook to inform the
CEO of this result.
(c) It was noted that the CFO had received a 4 marking Performance
ACTION: Review and the Committee were comfortable with the effect this would
Paula have on his bonus. It was agreed that the STiP payment for the Chief
Vennells Financial Officer should be £129,053. The CEO would be asked to
inform the CFO.
(d) The Committee noted the outturn of the Post Office scorecard 2012/2013
and the percentages to be applied to STIP payments for the Executive
Committee, Remco and SLP populations. It was noted that the STiIP
would be paid in June 2013 in accordance with the plan rules.
REMCOM LONG TERM INCENTIVE PLAN (LTIP) OUTTURN AND PAYMENTS
13/23 2012/2013
(a) The Committee received an update from FH on the outturn of the
2010/2013 LTiP performance conditions and considered a proposal for
payments under the Long Term Incentive Plan (LTiP) 2012/2013.
(b) The Committee approved the LTiP payment for the Chief Executive as
detailed in appendix 1 of the LTiP Outturn and Payments for 2012/2013
paper and noted the outturn of the LTiP for the Executive Committee,
Remco and SLP populations. The LTIP would be paid in June 2013 in
accordance with the plan rules.
ACTION:
Karen The Committee asked KH to produce a table comparing the CEOs total
H remuneration package in 2011/12 to that of 2012/13, for circulation to the
jamer .
Committee.
REMCOM CLAWBACK FOR SCHEME RULES
13/24
(a) The Committee considered the proposals to enhance the Clawback
clause in the LTiP rules and to include a Clawback clause in the terms
and conditions of the STiP for the Chief Executive (CEO), Chief Financial
Officer (CFO), Executive Committee, Remco and SLP.
(b) JH (NBS) informed the Committee that 3 years’ clawback would be the
longest he would expect to see in the market. FH explained that this
would require a change in the scheme rules which people would have to
sign up to if they were to be eligible for the LTIP.
(c) The Committee approved:
i. the change in the LTiP rules, effective from April 2013, to
enhance the Clawback clause as detailed in appendix 1 of the
Clawback Clause Paper; and
ii. I the change in the terms and conditions of the STiP, effective from
April 2013, to include the Clawback clause as detailed in
appendix 2 of the Clawback Clause Paper for the following
employee grades: CEO, CFO, Executive Committee, Remco and
SLP.
The CEO joined the meeting.
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REMCOM SHORT TERM INCENTIVE PLAN (STIP) DESIGN FOR THE CHIEF
13/25 FINANCIAL OFFICER
(a) The Committee considered the proposal to change the design of the
Short Term Incentive Plan (STiP) for the role of Chief Financial Officer
(CFO) to align it with the STiP of the Chief Executive.
(b) I JH (NBS) had supported the proposed increase of potential percentage
range of 40% on target and 67% for stretch and reported that the
changed gearing aligned with the market benchmark. The Chairman
noted that this was a significant reduction in maximum potential bonus
and asked the CEO if she thought the CFO would accept the changes.
The CEO was hopeful that the CFO would accept.
(c) The Committee approved the STIP design and increase in on-target
percentage for the CFO and agreed that the proposal should be
presented to the Shareholder Executive (ShEx) to review on behalf of the
Special Shareholder. KH was asked to produce a draft paper for review
by the Chairman setting out the proposal for ShEx.
ACTION:
Karen
Hamer
REMCOM SHORT TERM INCENTIVE PLAN (STIP) MEASURES 2013/2014
13/26
The CFO joined the meeting
(a) The Committee considered the proposed Post Office Scorecard for
2013/2014 with particular reference to those measures which form the
Short Term Incentive Plan (STiP).
(b) FH clarified that ExCo was considering changing from the current PDR
multiplier to a more flexible approach but that no decision had yet been
reached.
(c) The CFO explained the trajectory to Crown breakeven in 2015 from the
outturn of a loss of (£37m) in 2012/13, and that the target for 2013/15
was likely to be a loss of (23m).
(d) The CFO explained that the Network Conversions target was to be set at
1550 contracts signed in the year, bringing the cumulative target by the
end of 2013/14 to 3000. He recognised that this would be contentious as
it was 600 less that the current strategic plan but assured the Committee
it was still a very stretching target. The Committee discussed the
problem of changing a target during the year if the strategy changed, but
agreed that the network measure should have a footnote to explain the
assumption that if the strategy changed the targets would need to
change too.
(e) The Committee agreed the ranges in the Growth, Profit and Easy to Do
Business With measures but asked that Plan target be referred to as
Threshold.
(f) The Crown Profit (loss) would be set at Threshold (£23m), Target (£23m)
and stretch (£21m).
ACTION: (g) I The CFO was asked to email the final scorecard to the Committee and
CFO then present the proposal to the full Board.
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ACTION: (h) JH explained to the Board that they should bear in mind the disclosure
Karen requirements for the Report & Accounts and it was decided to report the
Hamer KPls as categories of Growth, Customer, People and Modernisation.
(i) The Committee approved the Post Office Scorecard with particular
ACTION: reference to those measures which form part of the STiP for Executive
CFO Directors and agreed that the proposal should be presented to the Board
and then the Shareholder Executive to review on behalf of the Special
Shareholder.
REMCOM LONG TERM INCENTIVE PLAN (LTIP) AWARD DATE APRIL 2013
13/27
(a) The Committee received a proposal on the performance conditions for
the Long Term Incentive Plan (LTIP), award date April 2013, payment
date March 2016, and performance conditions to be tested in the
financial year 2015/2016.
(b) The Committee discussed the structure of the proposal with Access
Criteria as the gateway and EBITDAS and EBITDAS/turnover as two
separate measures. It was recognised that the EBITDAS measure would
focus on driving the Business back to profit and that the artificial
measure of EBITDAS/turnover did not add any value.
ACTION:
pode (c) The quantum awards presented in the paper at para 2.4 were not correct
Hamer and a replacement paper would be filed with correct stretch percentages.
(d) The Committee approved the design of the LTIP, award date April 2013,
and resolved that the performance conditions should be: a gateway of
Access Criteria; and a measure Earnings Before Interest and Tax,
Depreciation, Amortisation and Subsidy (EBITDAS).
REMCOM DISCLOSURE
13/28
(a) The latest draft of the Directors’ Remuneration Report (DRR) was
considered.
(b) JH (NBS) explained that usually the DRR was presented in the structure
of a letter from the Chair of the Remcom showing the context for the
report; an explanation of remuneration strategy for the current and future
years and a look back at the year of the accounts.
ACTION: ; ; ; ;
Karen (c) Alice Perkins asked the Business to ensure that the DRR was aligned
Hamer with the rest of the R&A.
(d) The Committee agreed that the key messages should be:
There are a constrained set of circumstances, we are in a
turnaround business
Trying to keep people motivated with no flexibility on pay
Are open about pay
We benchmarked our remuneration and people are underpaid
Every decision taken is subject to agreement with the shareholder
We have inherited the schemes we are currently using, they were
put in place by a different organisation, without this Board or
Remcom
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ACTION:
Karen
Hamer
REMCOM
13/29
(a)
(b)
(c)
REMCOM
13/30
(a)
REMCOM
13/31
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The CFO explained that the internal team were working on the R&A
document this week and they would ensure that they took advice from
NBS as well as the input from the Committee to redraft the DRR.
EXCO SALARIES
The CFO and Susan Crichton left the meeting.
The Committee having received and noted the refined Executive
Committee benchmarking data considered the proposal to increase the
salaries of Susan Crichton, HR and Corporate Services Director, and
Mark Davies, Communications Director.
JH (NBS) reported that Susan Crichton was well within the benchmark
for a General Counsel role without her other responsibilities and similarly
Mark Davies was at 62% of the market median for a Director of
Communications.
The Committee approved:
i. anincrease in salary for Susan Crichton to £185,000 in respect of
additional accountabilities, taking effect from 1 September 2012
when responsibility for the Human Resources function was
transferred; and
ii. an increase in salary for Mark Davies to £125,000 in respect of
progression in role following appointment in July 2012, taking
effect from 1 April 2013.
ANY OTHER BUSINESS AND DATE OF NEXT MEETING
The next meeting of the Committee was scheduled for Thursday 4 July
2013.
CLOSE
There being no further business, the meeting was then closed.
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POST OFFICE LIMITED BOARD
Status Report
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No.
REFERENCE
ACTION
BY WHOM
STATUS
1. Network Transformation and Crown Offices
ta
January 2013
POLB 13/03(h)
Idea of high profile event suggested for early adopters being planned.
Mark Davies
Ongoing
2. Finance
2a
January 2013
POLB 13/07(c)
To check with ShEx what has to be reported to Brussels. CFO to email the Board
regarding actions being taken.
Chris Day/
Susan Crichton
The funding for Post Office is
based on cumulative
performance over 3 years up
to March 2015 — so an
underspend in the first year is
not an issue in itself. Post
Office Finance has checked
with ShEx who have
confirmed that there is no
need to report the current
financial position of Post
Office to Brussels. Post
Office does have to provide a
report to BIS, independently
verified by Deloitte, later this
year which compares last
year’s performance against
the calculation agreed with
Brussels for SGEI costs. This
report has been shared with
the Board.
2b
November 2012
POLB12/122(c)
CFO would produce a project spend benefits realisation analysis for ARC to give
more detail on project spend against forecast.
Chris Day
Completed. Approved by
ARC on 5 June 2013.
3. Strategy
3a
January 2013
POLB 13/04(e)
A Champion on ExCo for the Digital Programme to be nominated.
Implementation of Digital Programme to proceed with all urgency, working in
alignment with the strategic plan. Updates on progress to be brought back to the
Board.
Martin Moran
Martin Moran is the
nominated Champion.
Status Report at 4 July 2013
Alwen Lyons
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3b I November 2012 I “Point person” to be identified for SME’s, across pillars Martin Moran Interviews for a new Head of
Strategy Evening SME are to commence in
July.
3c I March 2013 Business to consider fully whether running Travel insurance ‘in-house’ was a Nick Kennett To July Board.
POLB13/15(c) core competence for the business. To be reviewed at sign-off for phase 1.
3d I March 2013 Business to hold early exploratory discussions with Bank of Ireland regarding Nick Kennett To July Board.
POLB13/15(d) possible buy-out of insurance, using KPMG to establish possible value.
3e I March 2013 Paper to be prepared on IT Architecture and Customer Database Development, I Sue Barton/ See Appendix A.
POLB13/15(e) with particular focus on future FS requirements. Lesley Sewell/ To July Board.
Nick Kennett
3g I March 2013 Business to prepare Board paper on investment requirement for the FS Chris Day CFO to provide update at
POLB13/15(i) strategy, including any effect on self-funding and state aid. July Board.
Seven year P&L to also be produced showing the investment milestones.
3h_ I May 2013 Continue to send Strategy and Funding weekly updates to the Board. Paula Vennells Ongoing
POLB 13/31
3i May 2013 Prepare simple crib sheet of 4-5 communication points to be used for engaging I Mark Davies
POLB 13/32 with stakeholders around Post Office’s strategy for 2013-2020. To ensure that
any statements used left room for manoeuvre in case circumstances changed in
the future.
3 May 2013 Update Stakeholder Plan to make better use of DVLA framework contract. To Kevin Seller
POLB 13/38 be shared with CEO and CFO to agree how the Board can support the
Stakeholder engagement.
3k I May 2013 Prepare note for the Board explaining the success criteria on which the Current I Nick Kennett Noting paper going to July
POLB 13/42 Account pilot will be evaluated. Board.
3I May 2013 Board asked for opportunity to open their own Current Accounts. Nick Kennett
POLB 13/42
4a I November 2012 I The Board requested an update on the people and performance management Susan Crichton The People Plan was
POLB 12/116 (h) I framework at the February Board meeting. presented as part of the June
Strategy day.
4b I May 2013 Seek consent from ShEx for STIP payments for CEO and CFO, and LTIP Alwen Lyons Completed — notification sent
POLB 13/36 vayment for CEO. 13 June 2013.
rsonal Injury Referral Fees
5a Post Office Insurance will work with BGL to evaluate the impact on the business I Nick Kennett I have evaluated the position
model (including income and incentives) and management proposes to update and with the regulatory
the board later in 2013 of any changes. changes having being
implemented only in April it is
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rather early to have seen the
impact - I suggest that this
would be better presented
back to the Board in the
autumn when we will have
seen both a better
understanding of the market
impact and how BGL has
responded.
6. Mutualisation i
6a I March 2013 Business to ask Rothschilds to update Mutualisation report to include the new Chris Day Verbal update to May Board.
POLB13/16(d) strategy, and get their view on sustainability and balance sheet requirements in
the light of this, within a tightly managed set of Terms of Reference and budget.
6b I March 2013 Board to have sufficient time to consider proposed Public Purpose statement Alwen Lyons To be considered at July
POLB13/16(f) during the Summer. Mutualisation Sub
Committee.
6c I March 2013 Business to consider its future stakeholder engagement and the most effective I Sue Barton/Alwen I Completed. Presented at
POLB13/16(g) meeting structure to be put in place. Lyons June Board in Ways of
Working paper.
6d I May 2013 Add delegated authority levels for Mutualisation Committee. Sue Barton Completed.
POLB 13/31
6e I May 2013 Proposal of a trade association to be included in the mutualisation options tobe I Sue Barton Completed. Proposal
POLB 13/33 presented at the Board awayday. presented at June Board
meeting.
(I WINESP Wl Trade Association l
Ta I May 2013 Present the detail of the subpostmaster engagement satisfaction measure when I Kevin Gilliland
POLB 13/33 available.
7b I May 2013 Include timeline for introduction in the mutual ways of working session at the Kevin Gilliland Completed.
POLB 13/33 Board awayday.
8. Information Security _ i i !
8a I May 2013 Provide update to the Board on the Horizon position with the Second Sight Susan Crichton Update to July’s Board.
POLB 13/42 review.
Qa I January 2013 Business to reassess the Click and Collect and Failed Deliveries services Martin Moran Closed - see CEO Report.
POLB 13/05(b) (including escalation and looking again at the MDA as necessary).
9b I November 2012 I Aplan to be presented to enable members of the Board and ExCo to have Sue Barton/ Completed. Board met
POLB12/120 (c) I greater exposure to the people involved in the Stakeholder Forum. Alwen Lyons Members of Stakeholder
Status Report at 4 July 2013 Alwen Lyons Page 3 of 4
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Forum at June Board Dinner.
9c I March 2013 Organise Board awayday for 18-19 June. Alwen Lyons Completed
POLB13/23(a)
9d I May 2013 The business was asked to develop a more constructive way to engage with Sue Barton Completed. Included in
POLB 13/30 individual subpostmasters. Mutualisation Paper and
Timeline presented at June
Board.
Ge I May 2013 Circulate final paper of copy of the full Annual Report and Financial Statements I Mark Davies/All Circulated 11 June 2013
POLB 13/35 to the Board, for comments within 24 hours, before being reviewed by the
Annual Report sub-committee.
APPENDIX A
March 2013 POLB13/15(e'
There are a number of activities, detailed below, which are currently underway and by October we will have a view of the business and
technology roadmap to support our strategic aspirations, at which point a paper will be placed in the Board reading room.
All of the activities support the 15 — 20 Strategy, and include the capabilities to deliver the FS income growth and have been included in our IT
plans and funding. We are currently defining our Customer Management Strategy and subsequently the technology roadmap. Javelin have
supported the definition of the strategic digital requirements which has included customer, complemented by a project to define our customer
management strategy by the end of June led by Nick Fox in Marketing, supported by Berkeley. We will take a pragmatic and incremental
approach to how we will deliver our customer management capability.
In addition, for Financial Services we are working with BOI to pilot a more detailed analysis/segmentation exercise to identify cross/up-sell
opportunities at a very granular level. The outcome is to generate targeted campaigns to fewer customers. This is a pilot and will inform our
strategic approach.
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POST OFFICE LTD BOARD
Health & Safety Report
1. Purpose
The purpose of
this paper is to:
A Provide an update on safety performance.
1.2 Outline risk reduction activities.
2. Current Situation
21 I
Injury accidents, up to period 2, are showing a positive trend against last year, and
against the target reduction of 5%. Accidents involving absence have increased
from two to three compared to the same period last year but minor monthly
fluctuations are not unusual. The “per 1000 staff in post” comparison indicator,
which takes account of head count fluctuation year on year, is showing a slightly
more favourable trend for ‘all accidents’.
Table 1 All Injury accidents and those resulting in absence (Cumulative)
350
300
=a
yon
Sa
6.6
2 2012/13 All
—#- 2013/14 All
~~» 2012/13 Absence
Accidents
a
Ss
f=)
t=}
>= 2013/14 Absence
a
o
°
Pt
Co a
P2 P3 P4 P5 P6 P7 P8& P9 P10 P11 P12
Period
2.2 The number of days lost due to accidents is showing a positive trend compared
to last year and against a target reduction of 5%. (Table 2) Indicating that there
is a positive trend on frequency along with a reduction in severity of those
accidents.
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Table 2 Days lost resulting from injury accidents (Cumulative)
—— 2012/13
= 2013/14
P1 P2 P3 P4 P5 P6 P7 P8& P9 P10 P11 P12
Period
23) The number of road traffic collisions (RTCs) during the first two periods has
increased significantly compared to the same period last year although the
trend during period 2 is more in line with expected monthly performance and ‘at
fault’ incidents are running at the same level as last year. Road risk reduction
opportunities continue to be the subject of analysis at the Road Risk Forum with
a view to identifying improvement activities in addition to those already in place.
(3.1 below) Injuries as a result of road traffic collisions are infrequent. Road
traffic collisions account for less than 3% of the overall number of injury
accidents, however they have the potential for high impact in terms of injury and
loss.
Table 3 Road Traffic Collisions (cumulative)
250
200
3
E160 —— 2012/13 All
S —# 2013/14 All
5 ~~ 2012/13 ‘at fault!
2 100
= 2013/14 'at fault’
2 50
ie)
P1 P2 P3 P4 P5 P6 P7 P8& P9 P10 P11 P12
Period
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24 The majority of accidents currently fall into three main categories: lifting and
handling, stepping and striking and outdoor falls. These are high frequency
events with, in the majority, relatively low severity. The lower frequency types of
incident can carry the potential for very high impact, for example, assaults and
road traffic collisions. .
25 Robberies on Post Office Cash and Valuables in Transit (CViT) crews are at the
same level as last year at 7 cumulative for the first two months. Physical injuries
during robberies, of which there have been 2, the same as last year, remain
relatively minor in severity. Two of the seven robberies were enabled by the
presence and/or threat of use of fire arms however the firearms were not
discharged. Risk reduction activities are identified at 3.2. (Appendix 1 —
Significant Incidents refers)
2.6 Robberies and attempted robberies on the Post Office network, cumulative to
period 2, are significantly lower than last year — 11 compared to 18. The ratio of
successful robberies has reduced from 78% to 54%. Supporting activities have
been introduced to continue to mitigate this risk and are identified at 3.2.
(Appendix 1 — Significant Incidents refers)
Burglaries and attempted burglaries (which do not involve personal attack) have
reduced from 13 to 8 compared to the same two month period last year.
ies
3.1 Road Risk
Current activities to mitigate road risk are:
e Road risk forum in place to scope and develop road risk reduction initiatives
and activities
« Analysis of effectiveness of face to face training given to top 50 high risk drivers
has indicated that accidents amongst this community have reduced significantly
following the refresher training
e Eye sight checks for operational drivers are in place
Technical accident reduction interventions on new vehicles e.g. Reversing aids
Analysis and evaluation of data (e.g. risk profiles) to determine further accident
reduction interventions
Introduction of coloured ‘high visibility’ seat belts on new vehicles
Safety team input and concurrence for vehicle specification and changes
Safe driver of the year award
Weekly case conferences to ensure consistent approach to accident
investigation, follow up activity and sharing of best practice
3.2 Robbery/Burglary Risk
Current activities to mitigate robbery and burglary risk are:
« Active liaison activities with the police and increased police support activity
e Liaison with Met. Police on the increase in gun enabled robberies
«Introduction of new deterrent technologies e.g. Smartwater — a solution that
contains a unique identifier that is released automatically in the event of a
robbery, spraying those involved and enabling identification of the individuals
involved in the robberies
« Significant reduction in opportunities for duress type robberies linked to the
introduction of single person vehicles
* Increased security support visits to Post Offices in ‘hotspot’ areas
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e Increased use of crime alert communication techniques to Post Offices
e Trialling new point of transfer arrangements to reduce exposure
e Increased use of surveillance vehicles
3.3 Health and Wellbeing
Current activities to enhance wellbeing
« Programme of visits to all Post Office sites to offer and encourage the use of
health check equipment that provides a wide range of indicators on physical
wellbeing
« Plans in place to re-visit all Post Office Crown Branches and Supply Chain sites
within 18 months
Health and wellbeing ‘Team Talk’ modules
Health and wellbeing poster themed campaigns
Online wellbeing monitoring tool to support health check initiative
Enhanced Occupational health service provision from January 2013
eoee
4. Residual Risks
44 Driving activities have the potential for high impact/loss and remain a significant
residual risk. However, the actions identified above are aimed at mitigating that
risk and improving performance.
5. Recommendation
The Post Office Ltd Board is asked to:
5.1 Note the overall safety performance
5.2 Note the risk reduction activities.
Susan Crichton
July 2013
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Appendix 4
Significant Incidents (Period 2)
Crowns and Network
Location Loss Circumstances Physical Injuries Any further details
Friday 24/05/2013. £17,000 I Two masked males, one with a shotgun None 6 arrests have been made
Skelmanthorpe demanded cash. They demanded the safe was following the robbery and 2
Huddersfield opened and made customers (5) lie on the floor. have been charged.
HD8 9AA
Supply Chain (Cash, delivery and collection)
Wednesday None Guard was just removing pouch from Ibox when None
22/05/13 attacker calmly approached the counter as if to
South Lambeth, inquire about a service. At the point of transferring
London. the pouch to the Postmaster, the observant post
master pushed the offender and snatched the
pouch, securing the parcel hatch. The offender left
the office and was chased by two staff, who were
then threatened with a knife.
Thursday 23/05/13 £26,000 I Trip 2 of 3, pouch passed to the counter staff None
Portland Road when two assailants entered the office. One stood
SPSO. London. by the door with a hand gun covering the office
SE25 and outside. The other assailant went up to the
counter where the custodian was stood and
demanded that the crew hand over the money.
The crew explained that his box was empty and
suggested to the counter staff that he pass the
money back over, this he did and the assailant
grabbed the pouch and they both made a
getaway. Shotgun and handgun used as a threat.
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POST OFFICE LIMITED BOARD
Sealings 15 May — 9 July 2013 inclusive
Register of Sealings
The Directors are invited to consider the seal register and approve the affixing of the Common Seal of the Company to the documents set out against items
numbered 1040 to 1058 inclusive in the seal register.
“The Directors resolve that the affixing of the Common Seal of the Company to the documents set out against items numbered 1040 to 1058 inclusive in the
seal register is hereby confirmed.”
Alwen Lyons
Company Secretary
16 July 2013
Register of Sealings 09/07/2013 Page 1 of 3
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Date 5 . Company Number
09/07/2013 Register of Sealings 2154540
Seal Number Date of Date of Persons Attesting Destination of
/ File Ref. Sealing Authority Description of Document To Document Document
1040 20/05/2013 15/05/2013 Lease between POL and Archrise Limited of premises at Alwen Lyons Jean Reynolds
__59/61 Grange Road Middlesborough TS1 SAT i
1041 20/05/2013 15/05/2013 _ Licence for alterations between POL and Archrise Limited. _ Alwen Lyons _ Jean Reynolds
1042 20/05/2013 20/05/2013 Counterpart underlease relating to Unit 1 Babington Court, I Alwen Lyons Jean Reynolds
Gower Street, Derby, DE1 1JU between POL, Babington
Court Commercial Limited, Babington Management
Company Limited and Hugh McGill, Leonard McGill, Shane
McGill and Victor Costello.
1043 24/05/2013 24/05/2013 I Agreement for Surrender relating to Unit 1, Southside Paula Vennells Jean Reynolds
Shopping Centre, Wandsworth between POL, Metro
Nominees (Wandsworth) (No 1) Ltd and Metro Nominees
(Wandsworth) (No 2) Ltd
1044 24/05/2013 24/05/2013 TR1 relating to Unit 1, Southside Shopping Centre, Paula Vennells Jean Reynolds
_ Wandsworth L
1045 04/06/2013 04/06/2013 Lease between POL and Real Estate Investors plc relating © Alwen Lyons Jean Reynolds
to 6 - 8 Alcester Road South, Kings Heath, Birmingham B14
7PU
1046 04/06/2013 04/06/2013 I POL and Primeco Limited - TR1 relating to 41 - 43 Market — Alwen Lyons Jean Reynolds
Place, Chippenham SN15 3HR:
1047 04/06/2013 04/06/2013 Deed of Settlement between POL and Primeco Limited Alwen Lyons Jean Reynolds
relating to 41 - 43 Market Place, Chippenham, SN15 3HR I
1048 17/06/2013 14/06/2013 Deed of surrender relating to 35 Broadgate Circle, Central I Alwen Lyons Jean Reynolds
Square, London EC2 between POL, BLCT (PHC 2) Limited
and Broadgate (PCH 2) Limited
1049 17/06/2013 14/06/2013 Service Tenancy Agreement (Temporary SPM Alwen Lyons Jean Reynolds
Appointment) of the Post Office being part of 18 John Street,
Llanelli, Carmarthenshire, SA15 1AA between POL and
I_Mary Stewart i
1050 20/06/2013 20/02/2013 Licence to carry out works relating to 3rd and part 4th Gill Catcheside Jean Reynolds
Floors, 120 Bark Street, Bolton between POL and Gordon
Neville Moon
1051 20/06/2013 20/06/2013 Lease of floor of office 3rd Floor and part 4th Floor, 120 Bark Gill Catcheside Jean Reynolds
Street, Bolton between POL and Gordon Neville Moon.
Date 09/07/2013 Registered Office: 148 OLD STREET, LONDON, EC1V 9HQ, ENGLAND: Page 2 of 3
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Date 5 . Company Number
09/07/2013 Register of Sealings 2154540
Seal Number Date of Date of Persons Attesting Destination of
[File Ref. Sealing Authority Description of Document To Document Document
1052 28/06/2013 27/06/2013 Deed of Settlement for Bristol Cannon Street FPO, 8 Alwen Lyons Jean Reynolds
Cannon Street, Bristol, BS3 1BL between POL and Primeco
__Limited i
1053 28/06/2013 27/06/2013 TR1 for Bristol Cannon Street FPO, 8 Cannon Street, Alwen Lyons Jean Reynolds
Bristol, BS3 1BL between POL and Primeco Limited
1054 04/07/2013 04/07/2013 + Underlease of 238-242 Essex Road, London between Post Gill Catcheside Jean Reynolds
Office Limited, Mazat Limited and Syed Mehdi Abbas
Razavi and Sayyada Razavi.
1055 04/07/2013 04/07/2013 I Tenancy Agreement for Unit 124 North Mall Southside Gill Catcheside Jean Reynolds
Shopping Centre, Wandsworth between Post Office Limited
and Metro Nominees (Wandsworth) (no. 1) limited and
Metro Nominees (Wandsworth) (No. 2) Limited.
1056 04/07/2013 04/07/2013 Licence for Alterations relating to Unit 124 Southside Gill Catcheside Jean Reynolds
Shopping Centre, Wandsworth between Post Office Limited
and Metro Nominees (Wandsworth) (No. 1) Limited and
Metro Nominees (Wandsworth) (No. 2) Limited. i
1057 05/07/2013 05/07/2013 Lease of Ground Floor 119 Wandsworth High Street London Susan Crichton Jean Reynolds
SW18 4HY between POL and Husseyin Arif, Aysel Arif and
_ Gengiz Arif. L
1058 05/07/2013 05/07/2013 Licence to Carry Out Works relating to Ground Floor at 119 © Susan Crichton Jean Reynolds
Wandsworth High Street London SW18 4HY between POL.
and Husseyn Arif, Aysel Arif and Gengiz Arif.
Date 09/07/2013 Registered Office: 148 OLD STREET, LONDON, EC1V 9HQ, ENGLAND: Page 3 of 3
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Post Office Limited Board and Audit, Risk and Compliance Committee Dates 2014 and Q1 2015
[Meeting [Date of M _[Leeation’
Possible Board Dinner 20 January 2014 Board dinner, evening only TBC
Board 21 January 2014 9am - 1pm Boardroom
Mutualisation Committee 21 January 2014 1.30pm - 4pm Boardroom
Audit, Risk and Compliance
Committee 12 February 2014 2pm - 4pm. Boardroom
Board Breakfast 26 February 2014 8.15am - 9.15am TBC
Board 26 February 2014 9.30am - 1.30pm Boardroom
Audit, Risk and Compliance
Committee 19 March 2014 2pm - 4pm TBC
Board 26 March 2014 9am - 4pm Boardroom
Board 30 April 2014 9am - 4pm TBC
Audit, Risk and Compliance
Committee 15 May 2014 2pm - 4pm TBC
Board 21 May 2014 9am - 4pm TBC
Board Strategy Awayday 17/18 June 2014 TBC TBC
Board 16 July 2014 9am - 4pm TBC
Audit, Risk and Compliance
Committee 10 September 2014 2pm- 4pm TBC
Board 24 September 2014. Q9am- 4pm TBC
Board 29 October 2014 Sam - 4pm TBC
Audit, Risk and Compliance
Committee 12 November 2014 = 2pm - 4pm TBC
Board 26 November 2014 9am - 4pm TBC
Board 28 January 2015 9am - 4pm TBC
Audit, Risk and Compliance
Committee 11 February 2015 2pm - 4pm TBC
POL-BSFF-0199291_0109
Board
Audit, Risk and Compliance
Committee
Board
25 February 2015
18 March 2015
25 March 2015
Sam - 4pm
2pm - 4pm
9am - 4pm
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TBC
TBC
TBC
POL-BSFF-0199291_0110