POL00021538
POL00021538
Post Office Limited — Strictly Confidential
POLB 15(5")
POLB 15/87 — 15/100
POST OFFICE LIMITED
(Company no. 2154540)
(the ‘Company’)
Minutes of a Board meeting held at 9.00am on 22 September 2015
at 20 Finsbury Street, London EC2Y 9AQ
Present:
Neil McCausland Chairman (Interim)
Richard Callard Non-Executive Director
Alisdair Cameron Chief Financial Officer
Tim Franklin Non-Executive Director
Virginia Holmes Non-Executive Director
Paula Vennells Chief Executive
In Attendance:
Alwen Lyons Company Secretary
Neil Hayward Group People Director (minutes 15/90 and 15/91)
Nick Kennett CEO, Group Director, Financial Services (minute 15/92)
Jane MacLeod General Counsel (minutes 15/92 and 15/95)
Piero D'Agostino Head of Legal, Commercial (minute 15/92)
Mark Ellis Supply Chain Director (minute 15/94)
POLB 15/87 INTRODUCTION
(a) A quorum being present, the Chairman opened the meeting.
POLB 15/88 CEO’S REPORT
(a) The CEO introduced her report and focused on the following key
areas:
(b) Sparrow
The number of cases withdrawn from the mediation scheme had
now reduced to eleven, with all other non-criminal cases being
mediated. The Criminal Case Review Commission (CCRC) was
reviewing 20 cases but was unlikely to report before December.
The CEO reported that the Minister had asked the new Chairman
for his independent review of Sparrow. The Minister had also met
Lord Arbuthnot who informed the Minister that he would use
Sparrow as the focus of his maiden speech in the House of Lords.
The CEO felt good progress had been made including a meeting
with the Chairman of the Parliamentary Select Committee who
reported that Sparrow was not on the Committee's current agenda.
A formal complaint had been made to the BBC for the inaccuracies
in the Panorama programme and meetings to brief MPs about their
specific cases continued.
ACTION: The Board recognised the progress made and encouraged the
POL Board minutes, 22 September 2015 41
POL0000071
POL00021538
POL00021538
\
Post Office Limited — Strictly Confidential
Mark Davies CEO to find different ways to inform MPs about their cases if they
refused a meeting.
(c) Sales
The Board were concerned about the effectiveness of the sales
growth strategy, specifically FS sales, and asked the CEO to
ensure more rigour in this area.
ACTION: The Board discussed digital growth and recognised the challenge
Richard Callard with Verify sales. Richard Callard offered to contact HMRC to
propose a dialogue with the Executive.
(d) Network
The CEO reported that Kevin Gilliland, Network and Sales Director,
believed that the Network Transformation (NT) targets would still be
achieved despite the delay in issuing the letters to remaining sub-
postmasters. However he was considering how NT aligned with the
wider front office IT transformation to see if a slight delay would
make sense. The Board asked the CEO to update the Board with
any significant changes to the plan or timing, as this would have
implications to the budget and the scorecard.
The Board pointed out that branch numbers now stood at 11582,
close to the floor of 11500, the target set in the funding agreement.
The CEO thanked the Board for highlighting the issue and
recognised that the number of branches had moved closer to the
target, but assured the Board that the number was monitored.
{e) clo
The CFO updated the Board on the CIO recruitment, the external
candidates being considered and the interim ClO, Chris Broe, who
had started work.
(f) I Having taken the discussion into account, the Board noted the
CEO's report.
POLB 15/89 FINANCIAL PERFORMANCE UPDATE
(a) The CFO confirmed that since the last forecast, which got the
business back to its EBITDAS target, a number of challenges had
emerged. For example; the good news on Sparrow mediation had
reversed a £1m saving; continued low interest rates would increase
POCA costs by £300k a month from 1 January; the decision by
HMRC reduced the Verify income; and Travel products continued
to perform below expectations. The CFO signalled that in his view
there was now a £5m risk in EBITDAS. The business would re-
forecast again in October and while he was still expecting to hit the
target, the Executive would need to make some unattractive
decisions.
(b) The CFO recognised the under spend in the transformation budget,
but he believed that this was largely down to timing and the large
projects would start to catch up in the second half of the year.
POL Board minutes, 22 September 2015 2
POL0000071
ACTION:
Neil Hayward
ACTION:
Mark Davies
ACTION:
CFO/ Richard Callard
POLB 15/90
(c)
(d)
(e)
(f)
g)
Post Office Limited — Strictly Confidential
The CFO reported that the Executive were considering further
investment to grow the digital FS sales. The Board stressed that
the Post Office’s USP was its bricks and mortar channel and
suggested that they focus on optimising network FS sales. The
CEO assured the Board that she was leading a meeting on
leveraging the network for FS sales.
The Board asked for a note to explain the high level of turnover in
the new starter population.
Initial discussion interim results
The Board discussed the paper setting out the likely narrative and
communications for the half year results. It was agreed that the
results showed steady progress in tough conditions where the
market was uncertain. The Board debated the audience and timing
for the report. Mark Davies would coordinate the optimum date of
publication with Richard Callard.
Government Spending Review
Richard Callard explained the pressure on BIS to deliver a 40%
budget saving. The Board discussed the proposal to write to BIS to
explain that market uncertainty may require the Post Office to ask
for additional funding beyond the network subsidy payment
highlighted in the 2013 strategic pian. It was agreed that a letter be
sent to Mark Russell, CEO Shareholder Executive (ShEx)
explaining the position and asking for acknowledgement of the
contents. Richard Callard explained that officials would, in the
normal course of business, inform the Minister, BIS Finance and
the Treasury.
Having taken the discussion into account, the Board noted the
CFO's report.
POL00021538
POL00021538
Irrelevant
POL Board minutes, 22 September 2015, 3
POL0000071
POL00021538
POL00021538
Post Office Limited — Strictly Confidential
Irrelevant
POLB 15/91
ACTION:
Neil Hayward
POL Board minutes, 22 September 2015 4
POL0000071
POL00021538
POL00021538
Post Office Limited — Strictly Confidential
POLB 15/92 :
POL Board minutes, 22 September 2015 5
POL0000071
POL00021538
POL00021538
Post Office Limited — Strictly Confidential
Or
: Irrelevant.
ACTION:
GC/Nick Kennett
POL Board minutes, 22 September 2015 6
POL0000071
POLB 15/93
POLB 15/94
POL00021538
POL00021538
Post Office Limited — Strictly Confidential
IT TRANSFORMATION (BACK OFFICE PROCUREMENT)
(a)
(b)
(c)
(d)
The CFO explained that work was underway to deliver a detailed
Transformation plan by the end of October and that there was a
need to align the IT back office transformation to that plan.
Because of this and the need to understand the timing of the
obligations the Post Office were accepting the CFO proposed a
delay in the signing of the Accenture contract.
The Chairman reported the discussion on contract management
which had taken place at the ARC and the need for the business to
manage the Accenture contract effectively.
The Chairman asked it the 7 year Accenture contract contained a
break clause and was flexible enough to protect the Business if it
outsourced significant areas. The Board recognised that although
Accenture had won the tender on price this advantage could erode
quickly if the in-life contract was not managed effectively and did
not contain effective change clauses.
The Board:
1. approved the award of the Back Office contract to Accenture at
a total cost of £35m over seven years, subject to a note from
the CFO clarifying the issues raised; the length of the contract
and break clauses; flexibility to change in areas included in the
plan; and the deployment of effective contract management.
POL Board minutes, 22 September 2015 7
POL0000071
POL00021538
POL00021538
Post Office Limited — Strictly Confidential
(©) I
(a) I
() I
(g) I
ACTION: I
Mark Ellis
ACTION: '
Mark Ellis H
ACTION:
Mark Ellis 1
POL Board minutes, 22 September 2015 8
POL0000071
POL00021538
POL00021538
Post Office Limited — Strictly Confidential
POLB 15/95 '
ACTION: 1
Company Secretary I
ACTION: \
Company Secretary i
POLB 15/96 MINUTES OF THE PREVIOUS MEETING AND MATTERS ARISING
(a) Minutes
The minutes of the meeting of the Board held on 15 July 2015 and
the two meetings of the Board held by correspondence on 17 July
2015 and 23 August 2015 were approved as accurate records and
the Chairman was authorised to sign them.
(b) There were no matters arising.
(c) Status Report
The Status Report, showing matters outstanding from previous
Board meetings, was noted. Tim Franklin clarified that agendas and
POL Board minutes, 22 September 2015 9
POL0000071
POLB 15/97
POLB 15/98
POLB 15/99
ACTION:
Company Secretary
POLB 15/100
Chairman
Post Office Limited — Strictly Confidential
minutes of all future POAC meetings would be circulated the Board
when available, Action 7d (POLB 15/802 (a)).
COMMITTEE MEETING MINUTES FOR NOTING
(a) The Board noted the draft minutes of the following meetings:
1. Audit, Risk and Compliance Committee held on 20 May 2015;
2. Financial Services Committee held on 30 June 2015;
3. Nominations Committee held on 8 July 2015 and 14 July 2015
(by correspondence);
4, Remuneration Committee held on 8 July 2015 and 13 August
2015 (by correspondence); and
5. Pensions Committee held on 26 June 2015 and 8 September
2015 (extraordinary).
ITEMS FOR NOTING
{a) 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 1331 to 1345 inclusive in the seal
register was hereby confirmed.
(b) The Board noted the Health and Safety report.
ANY OTHER BUSINESS
(a) The CEO recognised that this Board meeting would be the last for
Neil McCausland, who was stepping down as SID and Interim
Chairman. The CEO thanked Neil McCausland for his significant
contribution to the Board and the Business over the last four years.
(b) The CEO asked the Company Secretary to make the necessary
filing at Companies House.
DATE OF THE NEXT MEETING
(a) It was noted that the next meeting of the Board would be on 28
October 2015.
2a hei
POL Board minutes, 22 September 2015. 10
POL00021538
POL00021538
POL0000071