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CONSIGNIA ple
(company no. 4138203)
Minutes of the meeting of the Board of Directors
held at the Consignia Technology Centre, Swindon
on 12 June 2001
Present:
Neville Bain Chairman
John Roberts Chief Executive
Marisa Cassoni Group Finance Director
Jerry Cope ; Group Managing Director, Strategy & Business Development
Mike Kinski Non-Executive Director
Allan Leighton 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
Anna Malley Notes
Also present:
Roger Tabor Strategic Information Director, Group Centre for CB01/33
Tan Swann Public Sector Director, SAP UK, for CB01/33
Colin Burnside Commercial Director, SAP UK, for CB01/33
Paul Bateson Managing Director, Logistics and Contract Distribution, for
CBO01/34
Sue Huggins Transition Director, Group Centre, for CBO1/35
Apologies:
John Lloyd, non-executive director, was unable to attend.
CB01/28 MINUTES OF PREVIOUS MEETING CB(01)2"
The Board approved the minutes of its 9 May 2001 meeting.
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CBO01/30
ACTION:
The Secretary
ACTION:
Marisa Cassoni
(a)
©)
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(d)
(e)
CHAIRMAN’S BUSINESS
The Chairman reported the appointment of Patricia Hewitt as
the new Secretary of State for Trade & Industry, and the
retention of Alan Johnson within the DTI, as Minister for
Employment Relations and the Regions. (Secretary's note:
it was subsequently announced by the Government that the
DTI Minister with responsibility for postal services would be
Douglas Alexander MP.) The Chairman intended to seek an
early meeting with the Secretary of State and the Minister to
discuss a range of issues faced by Consignia, including
Project Olympus, pursuing commercial freedom, contracts
and remuneration;
the Chairman intended to instigate the annual review of the
performance and effectiveness of the Board, the results of
which would be discussed at the July Awayday;
the Chairman raised the Board's role given the current
difficult and unprecedented circumstances that Consignia
was facing, and whether any change in decision making
would add to the Board's effectiveness. The Business was
making operational losses, sustaining negative cash flow in
an uncertain and hostile regulatory regime, where the
industrial relations climate had worsened and where
significant change must take place;
it was also noted that achievement of the £63m tariff
increase was a serious risk in the current year and that major
change programmes were taking a substantial amount of
management resource. These were seen as very challenging
circumstances and the question the Chairman raised was
"does this merit a different approach to the business,
compared to that envisaged in the Plan";
it was noted that the Business had a strategic plan and agreed
targets, yet the risk profile was very high for a business that
was not making operational profits or generating cash. After
discussion the Board agreed to ask the Executive to consider
this, and what steps could be taken to reduce the risk profile
and in particular to review major projects that could possibly
be halted without unduly damaging the Business. It was
agreed that this would be addressed at the July Awayday.
The Group Finance Director agreed to prepare a schedule of
the current major projects and the extent to which it may be
possible to reduce expenditure without unduly restricting the
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ability of the Business to achieve its strategic ambitions. A
schedule of the current major projects would be produced,
identifying:-
i) their purpose;
ii) the total investment funding required for each project,
and the amount remaining to be spent;
iii) the external resource being used;
iv) strategic consequences of delay or termination;
Vv) exit costs associated with termination.
CHIEF EXECUTIVE’S REPORT CB(01)19
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(h) Horizon: the Board also expressed its congratulations and
thanks to the team working on the Horizon programme, on
the successful completion of the installation of over 40,000
machines and training of over 60,000 people in Post Office
Network;
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Marisa Cassoni
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FINANCIAL OVERVIEW
The Board noted a presentation from Marisa Cassoni, in
particular that:
before interest, tax and pension credit, the underlying
performance of the business was loss making, and the trend
was worsening. The benefit of the pensions credit would be
offset in 2003/4 by increased charges when FRS 17 became
mandatory;
cash generated from operations was insufficient to fund
capital expenditure, with funding from the National Loans
Fund required for acquisitions activity. As a result the
gearing of the balance sheet had increased to 16%;
all Business Unit Managing Directors had signed up to their
budgets for 2001/02, although there remained some minor
discrepancies in unit cash flows and balance sheets;
profit after tax of £5.9m in the month was £6.3m below
target. Results for May were expected to show a further
variance from target due to the impact of significant
industrial action in the month. The Executive Board was
looking at options to hold back expenditure in the early
months of the year to bring performance back on target and
to provide a contingency against shortfalls in the latter
months of the year which have more stretching profit targets.
The full year profit forecast remained as budget, at £181m;
the net risk position for the business was £61m. The
majority of the risks sat within the Mails cluster of business
units;
the Board agreed that financial performance reporting to DTI
should now be provided via the “Quarterly Shareholders
Meetings”, rather than on a monthly basis to reflect the
move to a more arms length relationship with the
Shareholder.
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CB01/35 BOUNDARY AND SCOPE DECISIONS IN THE CONTEXT
OF CREATING POST OFFICE LTD CB(01)20
(a) I The Board noted Stuart Sweetman’s paper, which identified
the outstanding issues of boundary and scope related to the
creation of Post Office Ltd under partial and total separation,
along with the high level implications for Consignia and
Post Office Ltd associated with each scenario;
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(b) _ the Board recognised that final decisions on total separation
could not be taken until the precise purpose of total
separation, and associated valuation issues, were known;
therefore at this stage any decisions would be limited to
being “in principle”. Within that context, the Board:
(c) ratified the recommendations contained in Annex A of the
paper,
(d) agreed that only minor changes would need to be made to
property ownership given existing responsibilities to reflect
the principle that ownership of a property should be vested
with the prime user of the site;
(ec) agreed that ownership of Camelot shareholding should
remain with Consignia under partial separation;
(f) agreed that control of Cash Handling & Distribution should
transfer to Post Office Ltd under partial separation;
(g) agreed that responsibility for the development of web sites,
including that for Post Office Ltd, should continue to reside
with the e-enterprise unit in Consignia within an overarching
Group strategy. However the strategy should be geared as
much as possible to accommodate the possible full
separation of Post Office Ltd, by looking to minimise the
future difficulties for Post Office Ltd to develop e-commerce
capabilities on its own. Further detailed work on options in
this area would need to be done prior to taking a final
decision;
(b) _ noted that the approach taken to the four outstanding issues
would need to be agreed with the Shareholder for both
partial and total separation.
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CBO01/37 AUDIT COMMITTEE REPORT CB(01)22x
The Board:-
(a) noted the contents of the Audit Committee Report;
ACTION: (b) requested circulation of the minutes of Audit Committee to
The Secretary all Directors;
(c) _ thanked Marisa Cassoni and the finance teams for their work
on the preparation of the accounts.
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CB01/39 ADOPTION OF THE NEW COMPANY SEAL CB(01)24x
The Board endorsed the recommendations set out in the :
paper.
CB01/40 ANY OTHER BUSINESS
The Board wished to thank Paul Bateson and his team for
accommodating the Consignia Board and for hosting the
tour of the Logistics warehousing and order processing
facilities.
CB01/41 DATE OF NEXT MEETING
9/10 July 2001
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