Post Office Limited — Strictly Confidential
POLB (12)9""
POLB 12/88-98
POST OFFICE LIMITED
(Company no. 2154540)
Minutes of a Board meeting held on 19" September 2012
at 148 Old Street, London EC1V 9HQ
Present:
Alice Perkins Chairman
Neil McCausland Senior Independent Director
Tim Franklin Non-Executive Director
Virginia Holmes Non-Executive Director (items 12/88-12/93)
Alasdair Marnoch Non-Executive Director
Susannah Storey Non-Executive Director
Paula Vennells Chief Executive
Chris Day Chief Financial Officer
In attendance:
Alwen Lyons Company Secretary
Sue Barton Strategy Director (item 12/89 only)
Charles Colquhoun (CC) Head of Corporate Finance (items 12/94 and 12/95 only)
Susan Crichton HR and Corporate Services Director (item 12/91 only)
Nick Kennett Financial Services Director (item 12/90 only)
Ken Potter Pensions Consultant (item 12/91 only)
Nick Farhi OC&C Strategy Consultants (item 12/89 only)
Vivek Madan OC&C Strategy Consultants (item 12/89 only)
POLB 12/88 APPOINTMENT OF DIRECTOR
(a) The Chairman opened the meeting and introduced Tim Franktin, who
absented himself whilst his appointment was approved.
(b) Approval from the Shareholder having been obtained, it was resolved
that Tim Franklin is appointed as a non-executive director of the
Company with immediate effect. Tim Franklin joined the meeting
ACTION: (c) The Company Secretary was instructed to arrange all relevant statutory
Company and regulatory filings, including filing form APO1 at Companies House.
Secretary
POLB 12/89 STRATEGIC COST REDUCTION
(a) The CFO introduced the Strategic Cost Reduction paper. Two
consultants had been considered before the selection of OC&C
Strategy Consultants. Their remit was to present a perspective on
strategic cost reduction, to encourage the Business to take a more
radical approach,
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Post Office Limited — Strictly Confidential
The Board emphasised the need to ensure that this work was aligned
with the strategy, funding and transformation agenda and considered
alongside the Rothschild’s work on mutualisation, but stressed the
urgency required.
(b) Sue Barton, Strategy Director, and representatives from OC&C were
welcomed to the meeting.
OC&C circulated their report to the Board and presented their
recommended approach to strategic cost reduction, highlighting the
possible levers they would consider available to the Business to drive a
step-change in the cost base.
The report documented the need to redesign the operating model and
to start developing a ‘future proof’ sustainable cost base, but also
recognised that, whilst the Business wanted to develop this longer term
strategic work, it also had a desire to implement more immediate cost
savings.
The Chairman thanked OC&C and they left the meeting
(c) During the debate which followed, Sue Barton explained that work was
already underway to identify some areas for cost savings, including the
Cash and Supply Chain strategy and the Call Centre strategy, but
acknowledged that using an external consultant like OC&C for a short
period of time could challenge and stretch thinking within the Business.
The Board recognised the value of using OC&C but asked the Business
to be very clear about their remit and ensure they demonstrate how
they could add value in the medium term, in redefining the operating
model appropriately to meet the key requirements for the Business in
the future.
(d) The Board also emphasised the urgent need for cost reduction and
asked the Business to implement savings in the areas it had already
identified, alongside the strategic review. it was agreed that a list of
these savings should be provided for the October Board meeting. An
implementation plan for the work with OC&C should then be prepared
for the November Board meeting, committing to cost reductions and
ACTION: SB setting milestones for delivery.
POLB 12/90 FINANCIAL SERVICES UPDATE
(a) Eagle (Bank of Ireland Contract)
The Chairman congratulated Nick Kennett on behalf of the Board for
delivering the new contract with the Bank of Ireland.
The Eagle paper was noted. Nick Kennett was asked to provide a paper
for the ARCC, highlighting the key points of Governance arising from
ACTION: NK completion of the Eagle contract.
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(b) Project Polo
Nick Kennett explained to the Board the rationale behind introducing a
current account and the opportunities and risks to the Business, as
presented in the paper.
The Board discussed the current account; the pressures the
introductory costs would put on Bol; the appropriateness of the Post
Office being the first provider to be transparent in charging fees; and
the possible reaction from partner banks.
The Board agreed that the decision on whether to proceed would be
discussed at the November strategy session, Nick Kennett was asked
to provide research on customer appetite for fees, more information on
the implications of the change (including on our partner banks); and to
ACTION:NK raise any contingency issues in his next paper.
POLB 12/91
(I
@ &
‘Irrelevant
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ACTION:VHISC/CD i
POLB 12/91 MINUTES OF PREVIOUS MEETING AND MATTERS ARISING
(a) The minutes of the meetings held on 4 July 2012 and 17 July 2012
were approved for signature by the Chairman
(b) The Status Report, showing matters outstanding from previous Board
meetings, was noted.
om Irrelevant
POLB 12/92 CHIEF EXECUTIVE’S REPORT
The Board noted the CEO's report and discussed three specific items:
(a) Network Transformation
The CEO drew the Board's attention to the new Network
Transformation report appended to her report. She explained that the
financial assessment of the subpostmasters’ business plans had
created a bottleneck but this financial rigour was essential and the
Business had provided more field advisors to help facilitate the process.
The Board found the report helpful but asked for each quarter to be
shown separately rather than cumulatively.
ACTION: CD
The Board expressed that it would feel more confident when the
Business began to deliver the higher volume weekly conversion rate.
The CEO assured the Board that the Business had experience of
delivering this rate of change. She was confident that her team would
deliver and she would be in a position to confirm this at the next Board.
ACTION: The Chairman asked that if the necessary run-rate had not been
Company achieved by mid-October, the Board agenda should allow for a full
Secretary discussion on Network Transformation.
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The CFO explained that there was a possibility for confusion over the
definition of ‘completed’. Some of the conversions took 8-12 weeks to
complete after contract signature. The CEO stressed that the Business
was aiming to deliver 6,000 open offices by the end of the three year
plan. However, some of the conversions in year one might be ‘contract
signed’ but not open by the end of the year.
ACTION: CFO The Chairman asked that ShEx should be fully briefed about this point
so that there were no surprises at the end of 2012/13.
Irrelevant
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POLB 12/93 FINANCE AND PERFORMANCE UPDATE
(a) Profit and Loss Statement
The CFO presented his report and explained that there would be a full
review and reforecast at the half year, which would be presented at the
October Board meeting. It was likely that the deficit (PBIT) would be
lower than budget and this might present an opportunity for additional
revenue- generating investment.
ACTION: CD
ACTION: CD
ACTION: CD
POLB12/94
ACTION:CD
ACTION:CD
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The Board expressed concern about the programme investment (which
was currently above budget) and asked for detail of this investment
against the original budget of £39m. The CFO pointed out that the plan
had always included spend of £53m. The CFO was asked to provide an
analysis for the Board of the programme investment spend for the year
to date against the budget.
The CFO was asked, as part of the half year review, to provide a paper
setting out the options available if the forecast deficit was less than
target.
Virginia Holmes left the meeting.
Irrelevant
Transformation
The Board asked for a more dynamic RAG status report, with red
highlighting ‘urgent action needed’ and a monetary risk value put on
items marked as amber, to help monitor and prioritise action.
(a);
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ACTION: CD
POLB 12/95
ACTION: CD
POLB 12/96 ANY OTHER BUSINESS
Tax Losses
The CFO reported that the Business had sold its tax losses to RMG at
50% of their value, generating income of £2m for 2011/12 and £10m for
2012/13. This sale had been made possible by the negotiations during
separation and the Board congratulated the Business for securing this
additional income.
POLB 12/97 ITEMS FOR NOTING
(a) The Update on IT&C Transformation was noted
(b) The Risk/Resilience Review was noted.
(c) The paper on Horizon Evolution was noted
(d) The Significant Litigation report was noted
(e) The Board noted the Report on Sealings and resolved that the
affixing of the Common Seal of the Company to the documents set
out against items numbered 802 to 817 inclusive in the seal
register is hereby confirmed.
(f) The minutes of the June and July meetings of the Communications
Action Group were received
(g) The minutes of the latest Health and Safety meeting were received.
POLB12/98 CLOSE
There being no further business, the meeting was then closed.