In Strictest Confidence
CB(01)ist
CB01/01 to 13
CONSIGNIA pic
(company no. 4138203)
Minutes of the meeting of the Board of Directors
held at 148 Old Street, London
on 10 April 2001
Present:
Neville Bain Chairman
John Roberts Chief Executive
Marisa Cassoni Group Finance Director
Jerry Cope Group Managing Director, Strategy & Business Development
John Lloyd Non-Executive Director
Miles Templeman Non-Executive Director
Rosemary Thorne Non-Executive Director
In attendance:
Richard Dykes Group Managing Director, Mails Services
Stuart Sweetman Group Managing Director, Customer and Banking Services
Kevin Williams Group Managing Director, Distribution Services
Jonathan Evans Company Secretary
Miranda Dodd Notes
Also present:
Mark Thomson MD Stamps and Collectibles, for CB01/09
David Marshall Group Personnel Director, for CB01/10
Apologies
Mike Kinski, non-executive director, was unable to attend.
CB01/01 APPOINTMENT OF DIRECTORS CB(01)01
Consent from the Secretary of State as special shareholder
haviry been received, the Board agreed the following
appointments to the Board of Consignia plc:
e Jerry Cope, Mike Kinski, John Lloyd, Miles Templeman and
Rosemary Thorne with effect from 26 March 2001
* and Allan Leighton with effect from 2 April 2001.
CB01/02 MINUTES OF THE PREVIOUS MEETING OF CONSIGNIA pic
The Board noted the minutes of the Consignia plc Board held on
22 March.
CB01/03 MATTERS RESERVED TO THE BOARD CB(01)02
The Board noted the that the powers previously reserved to The
Post Office Board had been updated to conform with the plc
status of Consignia, and agreed to the Matters Reserved to the
Board as set out in Annex B of the paper. The Board further
agreed to retain as a Matter Reserved, decisions on the
appointment and removal of auditors: such decisions would be
taken with the advice of the Audit Committee, and be subject to
ratification at the Annual General Meeting.
1
In Strictest Confidence
POL00021475
POL00021475
POL00021475
POL00021475
In Strictest Confidence
CB01/04 MINUTES OF LAST MEETING OF THE POST OFFICE BOARD
POB(01) 3
The Board approved the minutes of the Post Office Board
meeting on 13 March.
CB01/05 MATTERS ARISING FROM THE LAST MEETING OF THE
POST OFFICE BOARD CB(01)04
The Board noted the matters arising from the Post Office Board
meeting held on 13 March 2001.
CB01/06 CHAIRMAN’S BUSINESS
Irrelevant I
ACTION (iii) the Chairman reported that he had also received a letter from the
Chairman Minister on the subject of corporate governance - the eventual
and much-delayed reply to the Chairman's original letter of 27
June 2000, in which he had proposed a clear set of defined roles
for the shareholder and the Board. The DTI’s reply was
inadequate, leaving Consignia without an agreed governance
framework in place in respect of its dealing with the shareholder.
The Board agreed that the Chairman should pursue the issue with
DTI making clear the unacceptability of this situation;
ACTION (iv) the Chairman brought to the attention of the Board an article in
Chairman the April edition of the “Subpostmaster” newspaper in which the
Secretary of State had been quoted as saying to the NFSP’s
Executive Council that the Post Office Board had failed in the past
to give sufficient support to the interests of subpostmasters and to
the post office network in general. The Board felt that these
comments, if correctly reported, were without foundation, and
2
In Strictest Confidence
POL00021475
POL00021475
In Strictest Confidence
recalled the considerable time which the Post Office Board had
devoted over the past three years in particular to Horizon, the PIU
report and the future of the network. The Chairman intended to
challenge the Secretary of State about his alleged comments.
CBO01/07 CHIEF EXECUTIVE’S REPORT CB(01)05
The Board noted the Chief Executive’s report, and in particular
that:
{i) Performance: across the company performance had continued
the trend of previous months, and the forecast agreed at the last
meeting of the Post Office Board appeared to be secure. The
exception was a marked and serious deterioration in the financial
situation of the Packages and Express business unit, which was
explored in greater depth in the financial overview item;
in Strictest Confidence
POL00021475
POL00021475
In Strictest Confidence
rrelevant
CB01/08 FINANCIAL OVERVIEW
The Board noted a presentation by Marisa Cassori, in particular
that:
(i) Quality of Service forecasts had been revised during the month.
In mails services 10 out of 13 forecasts had been revised
4
In Strictest Confidence
(ii)
(iii
(iv)
(v)
(vi)
(vii)
(viii)
(ix)
(x)
In Strictest Confidence
downwards with the second class letters target now being
forecast to be failed. Two forecasts in Distribution Services had
been revised upwards and three downwards;
significant contributors to the variance against forecast for the
month had been caused by delays to realising savings in the
Gemini hubs, failure to realise negotiated productivity gains in
Post Office Network, a reduced write down provision for vehicles
and a reduced spend on group centre projects;
Group income was showing an 8.6% increase in over the year,
the increase stemming mainly from the inclusion of foreign
acquisitions. The adverse variance against external income
excluding acquisitions was in the main the result of lower than
expected volume;
turning to the budget for 2001/02, Trading model changes were
being planned to ensure that units worked together in partnership
to achieve the best results for the company;
£95m in savings had been identified against £60m external
income risk as requested by the Post Office Board at its last
meeting. Savings in Purchasing Services, Service Delivery,
Business and Consumer Markets, capital expenditure and
Business Systems had been included into unit budgets; additional
funds would only be released during the year when and if the
overall performance of the company allowed it.
The Board agreed the full year Group post-tax profit forecast,
before ringfenced items, of £175 million should be released to
DTI.
The Board noted a presentation from Kevin Williams on the
significant deterioration in the position of Packages and Express
business unit. In particular:
the unexpected change in the report to the Board - the profit
forecast had worsened by £15m in a single month - had resulted
in part from the incompetent actions of a senior accountant who
had since left the company. Some other senior staff were having
their careers re-assessed;
P&E’s performance in 2001/02 was now seriously adrift from the
targets agreed with the Board under Project Everest. A new five
year plan had been constructed which returned the unit to being
‘on track by year 5, but this was very ambitious and risky. A profit
improvement of £25million was assumed in 2001/02 alone, which
was seen as a very tough task;
the proposal now was to continue to drive hard on the Everest
actions - and there were signs of solid progress, especially in the
resourcing area - and in parallel to mobilise a team to build on the
earlier Project Apollo work outlined to the Post Office Board, to
identify the best commercial options for the future. A report back
5.
In Strictest Confidence
POL00021475
POL00021475
POL00021475
POL00021475
In Strictest Confidence
would be made to the Board in July.
(xi) The Board expressed intense disappointment that it had been in
receipt of misleading performance information in earlier months,
together with great concern that the true underlying performance
now cast considerable doubt on the ability of the unit to transform
itself into running at acceptable levels of profitability. The Board
would need to return to this in July, when the Apollo work had
been further progressed. The Board would be looking for options
which created value for the company, and which the Board could
have confidence of being delivered.
CB01/10 IMPROVING SENIOR MANAGEMENT CAPABILITY CB(01)07
The Board discussed Jerry Cope’s paper, supported by.a
presentation from David Marshall.
(i) It was intended to facilitate an improvement in company
6
In Strictest Confidence
POL00021475
POL00021475
In Strictest Confidence
performance by completing a major overhaul of the treatment of
the “Top Y” managers who comprised in the main business unit
executive committee members and group centre directors;
(ii) over the course of the three year plan outlined, Consignia should
become more like other companies subject to market forces in
the way that it both treats and is treated by its senior
management population;
(iii) successful work had been undertaken to ensure that Consignia
had access to an ethnic and culturally diverse population of
applicants from whom the best could be selected;
(iv) the need for honest appraisal of individuals against the
dimensions of performance and potential was paramount,
together with supporting individuals who felt threatened by the
new process;
(v) The Board noted and supported with encouragement the
progress on the strategy, and the further issues yet to be
CB01/12 AUDIT COMMITTEE REPORT CB(01)09
(i) The Board noted that guidelines on the governance arrangements
of overseas subsidiaries were being developed, and would be
agreed by the Executive Board prior to implementation;.
7
In Strictest Confidence
POL00021475
POL00021475
In Strictest Confidence
(ii) The Board noted the audit committee report.
CB01/13 DATE OF NEXT MEETING
The next meeting was scheduled for 9 May 2001.
8
In Strictest Confidence