POB(00)4"
PO00/44 to 55
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In Strictest Confidence
POST OFFICE BOARD
Minutes of the meeting held at 148 Old Street
Dr Neville Bain
John Roberts
Malcolm Kitchener
Jerry Cope
Mike Kinski
John Lloyd
Rosemary Thorne
Jonathan Evans
Teresa Redler
Richard Dykes
Stuart Sweetman
Kevin Williams
Apologies:
Others attending:
RICHARD CLOSE
MALCOLM KITCHENER
GROUP FINANCE
DIRECTOR
MINUTES OF PREVIOUS
MEETING
on 3 May 2000
Chairman
Chief Executive
Group Finance Director
Group Managing Director Strategy & Business
Development
Non-Executive Member
Non-Executive Member
Non-Executive Member
Secretary
Notes
Group Managing Director, Mails Services
Group Managing Director, Customer and Banking
Services
Group Managing Director, Distribution Services
Miles Templeman, Non-Executive Member
John Modd, Managing Director, International Services,
for POO0/49
On behalf of the Board the Chairman welcomed
Malcolm Kitchener to his first meeting as temporary
Group Finance Director.
The Chief Executive advised the Board that Odgers had
been appointed to manage the resourcing of the Group
Finance Director position. The current plan was for a
recommended short list to be forwarded to Ministers
before the summer recess, and for an appointment to
be made in the autumn.
Po00/44
The Board approved the minutes of its 3 / 4 April 2000
meeting.
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MATTERS ARISING
POB(00)38
(i)
Action
Kevin {i)
Williams
CHAIRMAN’S BUSINESS
(i)
(ii)
(ii!)
Action
Jerry Cope (i)
CHIEF EXECUTIVE’S
REPORT POB(00)39
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(iil)
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PO00/45
The Board noted the matters arising from its meeting
held on 3/4 April 2000.
Present to the September Board meeting a report on
progress with the contingency plan for Packages and
Express
PO00/46
The strategic plan had been finalised and submitted. A
copy of the executive summary would be sent to Board
members immediately, with the full version sent when it
had been printed.
The Chairman and Chief Executive had had a useful
meeting with Michael Scholar, Permanent Secretary,
DTI to discuss the challenges and opportunities ahead
for The Post Office and had invited him to join the
October Board meeting.
With the start of the new financial year the Chairman
restated the importance of aligning individual objectives
with the strategic plan. To this end a meeting had
already been held with Managing Directors to cascade
the plan. The Executive Board had identified its key
priorities, which would be communicated widely.
Final version of the strategic plan to be distributed to
Board members.
PO00/47
Project Zircon The Board confirmed its approval to the
acquisition, following agreement from Board members in
earlier correspondence. The Government had also
approved the project, subject to some minor conditions.
Completion of the acquisition was expected by 5 May. I
Liberalisation There was some uncertainty about the
European Commission's likely proposals for further
liberalisation of postal markets. Speculation suggested
that a 50g limit would be proposed together with the
liberalisation of cross-border and direct mail, a proposal
which would severely affect the profitability of The Post
Office. In addition the policing of direct mail if liberalised
would be difficult to achieve. The views of postal
administrations across Europe were divided on the issue
and it was expected that there would be considerable
debate before a clear position was reached.
PIU Study The PIU report on the viability and future of
the Post Office network had been delayed and
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(iv)
)
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FINANCIAL OVERVIEW
(i)
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Reo cep OPT (iii)
(iv)
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In Strictest Confidence
publication was now not expected until the end of May
at the earliest. The National Federation of Sub
Postmasters had led a sub postmasters lobby on
Parliament in April, with some impact. Government
Officials had been charged with looking at alternative
ways forward. It was noted that the general concern
about the potential reduction in revenue from benefit
payments business was adversely affecting the market
for sub offices.
Parcelforce Discussions on alternative resourcing
approaches had been held with the CWU. Broad
acceptance of the issues had been gained, although
deliverability was likely to be a problem.
Envision The BBC had requested a meeting with the
Chief Executive to discuss the future of Envision. The
Post Office was already reviewing possible options.
IT Projects The first of the new style reports on IT
projects would be included in the July Board.
PO00/48
Provisional profit results for March were:
- Royal Mail £441m
- POCL £29m (exec Horizon)
- Parcelforce £(36) (inc Special Delivery)
The group full-year post-tax profit forecast was currently
£352m against a target of £350m, excluding the
impairment of Parcelforce assets at a cost of £50m.
There was a risk to the forecast from the potential
impairment of goodwill on German Parcel. Discussions
were still ongoing with the auditors on the issue and if
unresolved they would be invited to meet with the
Chairman and Chief Executive to discuss further.
The Board agreed that the declared operating profit
should not include the Parcelforce impairment, although
it was recognised that this would ultimately require DTI
approval.
The Board noted that in view of the complexity and size
of some exceptional items in the 1999/2000 accounts,
internal and external communication of the results would
need to be carefully constructed to ensure an accurate
picture of underlying performance was portrayed.
An analysis of Group capital expenditure and the
property estate was requested after the annual accounts
had been completed.
Agreed that the following full year Group post-tax profit
forecast be released to DTI:
42
In Strictest Confidence
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Action
Malcolm (i)
Kitchener
INTERNATIONAL
LETTERS: STRATEGIC
INTENT POB(00)40
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Jerry Cope (i)
POST IMPLEMENTATION
REVIEW POB(00)42x
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MAJOR IS/IT
INVESTMENT PROJECTS
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- £352m (excluding Horizon and Parcelforce
impairment)
Provide for the July Board meeting:
« Analysis of capital programme showing split
between core infrastructure projects and one-off
projects together with depreciation effects.
e Analysis of the opportunity for maximising the
financial efficiency of the property estate.
Poo0/49
In light of changing market conditions, a review of the
strategy in the International letters market had been
undertaken.
The effects of technology, liberalisation and regulation
were uncertain in the letters market; therefore, the
strategy was more tentative with some focused
opportunities.
The vision would focus on the “development of owned or
partnered pick up and delivery networks in major
countries and cities world-wide to create end to end
control of key liberalised mail flows, domestic and
international”.
A potential issue that had been highlighted was transfer
pricing. It was considered that our in-house pricing was
not competitive for pricing within a joint venture.
It was expected that the market would be price sensitive
with value adding taken for granted.
There was some evidence that existing companies were
looking to acquire global mail capability.
The Board supported the proposals as a first step and
would next need to know how the strategic intent would
be taken forward and how the priorities would be
assessed.
Present to the Board a further paper exploring how the
strategic intent will be taken forward, together with an
assessment of priorities.
PO00/50
The Board noted the report.
PO00/51
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In Strictest Confidence
QUARTERLY REVIEW
POB(00)43x
(i)
PREPARING THE POST
OFFICE FOR ECONOMIC
AND MONETARY UNION
POB(00)44x
()
Action
Malcolm (i)
Kitchener
THE EVEREST PLAN
FOR PACKAGES AND
EXPRESS — KEY
MILESTONES
POB(00)45x
(i)
Action
Kevin (i)
Williams
ANY OTHER BUSINESS
Report and (i)
Accounts
Action
Secretary (i)
DATE OF NEXT MEETING
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The Board noted the report. Future reports from July
onwards would be in a revised format, as requested
earlier by the Board. This would include plans for
recovery of any slipped milestones.
PO00/52
The Board noted the report
Present to the July Board a paper on Group Treasury
policies and focus.
POO00/53
The Board noted the report.
Quarterly report on progress against milestones to be
presented to the Board starting in July.
POO0/54
The annual Report and Accounts were due to be
delivered to the Secretary of State on the 16 June 2000.
The Chairman’s and Chief Executive’s reports would be
circulated to Board members for comment.
Chairman's and Chief Executive's draft reports to be
circulated to all board members for comment.
POOO/55
The next meeting was scheduled for the 5 June 2000.
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In Strictest Confidence