POL00021483
POL00021483
In Strictest Confidence
POLB(03)6th
POLB03/57 to’ 78
Post Office Ltd
(company no. 2154540)
Minutes of the meeting of the Board of Directors
held at 80-86 Old Street, London
on 20" August 2003
Present:
Sir Michael Non-Executive Chairman
Hodgkinson
David Mills Chief Executive
lan Anderson Human Resources Director
Alan Barrie IT Director .
Graham Halliday Banking & Financial Services Director
Allan Leigton Chairman, Royal Mail Holdings
David Miller Chief Operating Officer
Gordon. Steele Sales & Marketing Director
In attendance:
Steve Pollock Government Relationship Manager
Tony Marsh Head of Security
Peter Martin Mergers & Acquisitions Project Director, Royal Mail Group
Vince Head of Financial Management and Control
Mulholland -
Jan O'Driscoll - Commercial. Director
Neil Owen Notes
Apologies
Peter Corbett Finance Director
Jonathan Evans Company Secretary
Elmar Toime Executive Deputy Chairman, Royal Mail Holdings
POLB03/57 MINUTES OF PREVIOUS MEETING POLB(03)4".and 5"
The Board approved the minutes of the Board meetings of 19"
June 2003 and July 1* 2003.
POLB03/58 APPOINTMENT OF DIRECTOR . POLB(03)50a
The Board noted the paper and accordingly resolved to
appoint Graham Halliday as Director of the Company with
immediate effect. The Company Secretary was duly authorised
to file the appropriate forms at Companies House.
POLB03/59 STATUS REPORT POLB(03)50
The status report was noted.
1
In Strictest Confidence
POL00021483
POL00021483
In Strictest Confidence
POLBO03/60 CHAIRMAN’S BUSINESS
Irrelevan
2
In Strictest Confidence
POL00021483
POL00021483
In Strictest Confidence
POLB03/61 CHIEF EXECUTIVE’S REPORT
IIrrelevan
In Strictest Confidence
POL00021483
POL00021483
In Strictest Confidence
~ Irrelevant
In Strictest Confidence
POL00021483
POL00021483
In Strictest Confidence
Irrelevant
In Strictest Confidence
In Strictest Confidence
Irrelevant
POL00021483
POL00021483
POL00021483
POL00021483
In Strictest Confidence
Irrelevant
In Strictest Confidence
POL00021483
POL00021483
In Strictest Confidence
Irrelevant I
POLB03/69 DELIVERING SECURITY STANDARDS IN THE AGENCY
BRANCH NETWORK — STRATEGIC CHOICES POLB(03)57
Tony Marsh presented the security paper to the Board, on
behalf of David Miller. The Board noted that:
(a) the current and historical position with regard to security
equipment provision.and investment in sub-offices;
(b) the potential financial and reputation and personnel impacts of
failing to raise standards;
(ce) further to police guidelines issued in 2001, no police call-outs
would be madé to a Post Office unless it met the prescribed
police. standards. Currently the police were failing respond to
the majority of Post Office call-outs because of a failure to
comply with these standards;
(d) current spend on security was £3.5m per annum. The paper
sought an additional £5.2m per annum over 4 years to provide
the necessary security upgrades;
(e) Banks and Building Societies had invested heavily in additional
security measures. The risk existed that increasing numbers of
Post Offices would be attacked because they would be seen
as ‘softer’ targets by criminals. Furthermore, Network
Reinvention would result in additional cash volumes being
8
In Strictest Confidence
~\
POL00021483
POL00021483
In Strictest Confidence
dealt with at Post Offices that remained in the network;
The Board agreed in principal to the suggested security
strategy.
However, the Board considered that a further Paper should be
submitted to outline in detail the security measures that would
be purchased with
(i) the £3.5m of budgeted security spend in each of
the four years (in the current. business plan);
(ii) the additional 1.7m of requested security
expenditure in each of the four years.
The Board would consider approval of the spend once a
revised paper had been submitted.
In Strictest Confidence
POLB03/71
Action:
David Miller
POLB03/72
Action:
Peter Corbett
Action:
Peter Corbett
(a)
(b)
(c)
(d)
(e)
(f)
(a)
(b)
(c)
(d)
POL00021483
POL00021483
In Strictest Confidence
RURAL STRATEGY
David Miller presented an update of Rural Strategy to the
Board. The Board noted that:
£150m of funding had been secured up until 2006;
should the government choose not to commit to a similar level
of funding after 2006, approximately 6000 of the 8500 rural
outlets would be closed;
with 2500 rural branches, this would meet Royal Mail’s access
obligations of'95% and 65% of the rural base;
it would be politically unthinkable to close 6000 rural offices;
work was currently underway to establish the options beyond
2006. In order to get into appropriate government thinking, this
would need to be done quickly. The various draft options were
currently being cleared through the DTI;
part of the funding included £20m to run trials of the new rural
models over the next couple of years
The Board agreed that a Paper would be written to detail how
the Network might look post 2006.
FINANCE REPORT POLB(03)58
The Board noted Peter Corbett's report and in addition noted
that:
the Year to Date Profit and Loss performance is £11m better
than budget, although the underlying business as usual figures
are relatively flat. The better performance is due to the timing
of strategic spend and to favourable interests costs.;
The top three in year risks include Industrial Action, the
Girobank contract renewal and the migration to banking.;
The opportunity to avoid/delay the arrangement fee on the DTI
working capital loan is to be investigated;
A profit management assessment is to be undertaken in the
event that Industrial Action becomes a reality. Risks and
opportunities would form part of the agenda for the next Board
meeting.
10
In Strictest Confidence
POLB03/73
(a)
(b)
Action:
David Miller
POLB03/74
Action: (a)
Gordon Steele
POLBO3/75
Action: (a)
Sir Mike
Hodgkinson
POLB03/75
(a)
(b)
POL00021483
POL00021483
In Strictest Confidence
OPERATIONS REPORT. POLB(03)59
The Board noted the report. In addition the Board noted that:
Network Reinvention: the business case for accelerating the
closure programme would be completed shortly. The aim
would be to close 1000 offices this year and 1600-1700 next
year. A need existed to ensure Postwatch, were on side, and a
lunch appointment had been arranged for the end of
September between David Mills, David Miller and the
Chairman of Postwatch Peter Carr;
Changes to Pay: the sub-postmasters’ bonus would be based
on increased profit. However, the NFSP had indicated that no
changes to pay would be agreed unless there no sub-
postmaster was worse off.. The estimated cost to the business
would be £8m. Details of the new arrangement would be
completed by the end of November 2003 for implementation by
April 2004. A Paper would be produced for the next Board
meeting.
SALES & MARKETING REPORT POLB(03)60
The Board noted the report.
Gordon Steele:would collect feedback from managers
concerning products that were easy to sell.
BANKING & FINANCIAL SERVICES. POLB(03)61
The Board noted the report. In addition the Board noted that:
Error Reports: Progress has been made in reducing the
number of error reports. The figure now stood at 13%. The
Chairman would discuss with the Head of Compliance at
Citibank the need to relax internal rules to help the error rate to
drop further..
INFORMATION TECHNOLOGY POLB(03)62
The Board noted the report. In addition the Board noted that:
Alan Barrie would now maintain a watching brief over the
Banking programme. The focus of his work would now move
into the EMV & Chip programme.
The number of consultants had been reduced to 6:1 froma
previous figure of 1:1. Work continued to achieve the target of
10:1.
1
In Strictest Confidence
POL00021483
POL00021483
In Strictest Confidence
rrelevant
There being no further business, the meeting was closed.
12
In Strictest Confidence