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POB(00)2nd
PO00/11 to 28 POST OFFICE BOARD
Minutes of the meeting held at 148 Old Street
on 14 March 2000
Dr Neville Bain Chairman
John Roberts Chief Executive
Richard Close Group Finance Director
Jerry Cope Group Managing Director Strategy & Business
Development
Mike Kinski Non-Executive Member
John Lloyd Non-Executive Member
Rosemary Thorne Non-Executive Member
Miles Templeman Non-Executive Member
Jonathan Evans Secretary
Scott Childes Notes
Teresa Redler Notes
Richard Dykes, Group Managing Director, Mails Services
Stuart Sweetman, Group Managing Director, Customer and Banking Services.
Kevin Williams, Group Managing. Director, Distribution Services
Others attending: Basil Larkins, Managing Director, Network Banking,
and Paul Rich, Managing Director, Customer
Management for PO00/17
Alan Williams, Group Corporate Affairs Director, and
Susan Burgin, Director Communications Strategy,
Group Centre for PO00/18
Dom McKenna, Director Mergers and Acquisitions, for
PO00/19
TERESA REDLER The Chairman welcomed Teresa Redler who would be
i etariat vacancy during Nicky
MINUTES OF POO0/11
PREVIOUS MEETING
The Board approved the minutes of its 11 January
meeting and the special meeting held on 22 February
2000.
MATTERS ARISING PO00/12
POB(00)10
(i) The Board noted the matters arising from its meeting
held on 11 January 2000.
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FINANCIAL OVERVIEW = PO00/15
(i) Provisional profit results for January were:
~ Royal Mail = £3m
- POCL £(7)m (exec Horizon)
- Parcelforce £(9)m (inc Special Delivery)
(ii) The full year profit/loss forecasts were:
- Royal Mail £426m
- POCL £33m (exc Horizon)
- Parcelforce £(20)m (inc Special Delivery)
(iii) The Group full year post tax profit forecast was
currently £331m against a target of £350m.
Opportunities to bridge the £19m gap would be through
improved trading in all businesses and a reduced
provision for taxation.
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OPERATING PLAN Po00/16
AND BUDGET
POB(00)12 i
(i) The 2000-2001 budget process had started 6 months
previously, with initial “sketches” from each Business
Unit undergoing a series of reviews before clearance
through the Executive Board, and presentation to the ‘
Board for final approval.
(ii) This year's process - the first in the new post-SCS
organisation - was made more complicated by the lack
of historical performance trends. The main iterations
within the process had been at business unit level, and
the need for unit Managing Directors to “own” the
development of their budgets had played an important
part of the process.
(iii) Among the key issues determining the shape of the
OPB were the costs of Horizon and related automation,
productivity and internal trading.
(iv) The original Strategic Plan pre-tax profit target of
£618m could, through incorporation of a number of
changes since the Plan was produced, be re-assessed
at £373m. However indications from the DTI were that
this figure could not be assumed as The Post Office
target as it may be argued that some of the changes
were normal business volatility that should be
absorbed. The final DT! position was still awaited.
(v) Noted further that
Service Delivery was expected to reduce staff levels by
5,000. Details of this and other changes across the
Post Office would be circulated to Board Members.
(vi) 2000/01 was a year of transition, with increases in
expenditure to secure benefit in later years. In addition,
it had been recognised previously that profits of 600m
pa were not sustainable.
(vii) The plan assumed an increase in pension costs of
£62m.
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(viii)
(ix)
(x)
(xi)
Action
Richard Close (i)
The Secretary (ii)
COMMERCIAL
DEVELOPMENT OF THE
HORIZON PLATFORM
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The plan also assumed a productivity improvement in
Service Delivery of 3.9%. A critical underpinning of this
was the implementation of the Way Forward
agreement, which needed to be fully deployed by the
end of 2000.
Whilst acknowledging the particular issues which would
depress profit achievement in the year, in the view of
non-executive members the proposed OPB was
disappointing, and fell some way short of what would be
needed to compete effectively in a liberalised market.
In particular non-executive members felt the OPB
appeared to accept too readily that one-off costs were
“allowable”, and that the underlying improvement in
productivity - despite the considerable investment in the
Way Forward deal - was modest.
It was, nevertheless, recognised that 2000/01 was a
difficult transitional year, and that it was the clear
intention that the Plan targets should be exceeded.
The Board noted the assumptions underpinning the
Plan, and approved the OPB for 2000/01.
Circulate details of manpower changes to Board
Members.
Ensure that Business Unit Managing Directors are
provided with a copy of the OPB paper and Board
minutes.
PO00/17
IN POST OFFICE NETWORK
POB(00)13
(i)
(ii)
(iti
For the past seven months all milestones had been met
in the rollout of Horizon. By the end of March 4,000
post offices would have Horizon installed.
The commercial use of the Horizon platform was under
active consideration by the Performance and Innovation
Unit team looking at the future of the Post Office
Network. Their emerging conclusions were in line with
Post Office proposals for Network Banking and
Government Gateway opportunities.
Network Banking: Banks had confirmed in
discussions that while branch closures were still high on
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their agenda, a continuing physical presence in
communities would still be a necessary part of their
channel strategy.
(iv) Use of The Post Office network to enable continuing
bank branch rationalisation therefore presented a
realistic commercial opportunity. However, the banks
had already downsized without The Post Office’s help,
and therefore the size of this opportunity should not be
over-estimated.
(v) The social banking strategy - to develop a three way
partnership with banks, Government and The Post
Office to produce a proposition to provide limited
banking facilities for the “unbanked’” - was potentially a
more attractive proposition. Government's support
would be vital for this project to succeed.
(vi) Government Gateway This proposition had been
viewed as the most difficult to achieve but potentially
offered the biggest returns. A new e-business
proposition - “Eclipse” - had been developed out of the
Government Gateway strategy providing a multi-
channel approach enabling consumers to acquire
advice and information on, and undertake transactions
with, Government departments on “important life
episodes”. Early market research of customer attitudes
looked favourable.
(vii) The Board supported the outlined approach for
commercial exploitation of the Horizon platform,
recognising that more development needed to be
completed before full commercially-justified business
cases could be considered.
(viii) Thanked Basil Larkins and Paul Rich for their
presentation.
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DATE OF NEXT MEETING PO00/28
The next meeting was scheduled for 4 April 2000.
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