POLB 16(1*)
POLB 16/1 — 16/12
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POST OFFICE LIMITED
(Company no. 2154540)
(the ‘Company’)
Minutes of a Board meeting held at 12.00 noon on 22 January 2016
Present:
Tim Parker
Richard Callard
Alisdair Cameron
Tim Franklin
Virginia Holmes
Ken McCall
Carla Stent
Paula Vennelis
In Attendance:
Alwen Lyons
Dave Carter
Martin Edwards
Mark Ellis
Martin George
Jane MacLeod
Justin Zatouroff
POLB 16/1
POLB 16/2
at 20 Finsbury Street, London EC2Y 9AQ
Chairman
Non-Executive Director
Chief Financial Officer
Non-Executive Director
Non-Executive Director
Senior Independent Director
Non-Executive Director
Chief Executive
Company Secretary
Group Financial Controller (Minute 16/7)
Head of Strategy and Corporate Planning Director (Minute 16/3,
16/4and 16/7)
Supply Chain Director (Minute 16/3)
Commercial Director (Minute 16/4)
General Counsel (Minute 16/8)
KPMG
INTRODUCTION
(a) A quorum being present, the Chairman opened the meeting and
welcomed Ken McCall the new Senior Independent Director and
Carla Stent the new Non- Executive Director and Chair of the ARC.
CEO REPORT AND TRANSFORMATION UPDATE
CEO Report
The CEO introduced her report and focused on the following key
areas:
(a) Period 9 sales
Excellent trading over the Christmas period had ensured a very good
period 9 sales result. The network had also delivered improvements
in the customer service effort measures and NPS scores both of
which had been a priority.
(b) Banking Services Framework.
The CEO thanked the Board for their support for the Banking
Services Framework, which had been agreed at the Extraordinary
Board meeting in December.
(c) Flooding
144 Post Offices had been affected by the recent floods. Support
from the network team and local communities had ensured that all
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but 5 had reopened. The CEO explained that she had visited some
of those worst affected, and that there were some real heroes in the
network.
The Chairman asked the Executive to consider how the Business
could recognise and celebrate the exceptional contributions made by
individuals. The CEO explained that in the past the Business had
celebrated significant contributions through the Chairman’s Awards
and that she would consider how best to take this forward. The Board
supported.
ACTION:CEO The CEO to consider how the Business should recognise
exceptional contribution by individuals.
(d) SGEI Consultation
Richard Callard explained that the SGEI consultation was part of the
government funding process, and a requirement of EU State Aid
clearance. The current consultation was likely to be less wide
ranging than had been initially planned, as Ministers felt a number of
questions were operational in nature and for POL to deal with as a
business as usual matter.
The only commitment in the Government's manifesto had been to
retain 3000 rural branches, although ministerial expectations are that
the size of the network should remain broadly at 11500 branches.
The funding discussions which would start after the summer should
consider the future shape of the network.
The CEO recognised that neither the Minister nor the Secretary of
State had challenged the recent Crown franchising announcement.
Richard Callard stressed that the shareholder understood that the
Executive were managing difficult challenges and that these were
Business decisions.
(e) Interim Report & Accounts
The CEO reported that the Interim Report & Accounts had been
discussed at the ARC meeting with one challenge to the narrative.
The CEO promised to circulate the Interim Report along with the
press release and the Qs & As to the Board before publication.
Circulate the Interim Report along with the press release and
ACTION: CFO the Qs & As to the Board before publication.
() Industrial Relations
The CEO reported that an IR deep dive had been organised for the
Chairman and invited the other NEDs to join the meeting if they
would find it helpful. A full brief would also be provided for those who
could not attend in person or by phone.
ACTION: CoSec Invitation to be extended to all the NEDs for the IR deep dive
(g) NFSP
The CEO explained the NFSP funding agreement and the
Federation's move to a trade association. These changes were
causing concerns within the NFSP at a time when 75% of the
Federation’s Executive was also changing. The CEO recognised the
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importance of a professional body to support subpostmasters and
represent the network which had been the reason for the proposed
trade association.
To assist new Board members the CEO promised a paper to
ACTION: CEO explain the rationale behind the NFSP funding and the move to
a trade association.
(h) Having taken all of the discussion issues into account, the Board
noted the CEO's report.
() The Board noted the Transformation Update.
POLB 16/3 ! I
ACTIONS:
Mark Ellis
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POLB 16/4 1
Irrelevant
Martin George '
POLB 16/5 MINUTES OF PREVIOUS BOARDS AND COMMITTEES MEETINGS
AND BOARD STATUS REPORT
(a) Minutes
The minutes of the meeting of the Board held on 25" November 2015
were approved as accurate records and the Chairman was
authorised to sign them.
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The minutes of the meeting of the Board held on 17" December 2015
were approved _as accurate records and the Chairman was
authorised to sign them.
The minutes of the meeting of the ARC held on the 21*' September
2015 were noted by the Board.
(b) Status Report
POLB 15/112 (e): The Board noted the Trade Union update paper.
POLB 15/107 (d): The Board noted the Economics of the ATM
Business paper.
The Status Report, showing matters outstanding from previous
Board meetings, was noted.
POLB 16/6 FINANCIAL REPORT — PERIOD 9
(a) The CFO introduced the Financial Report for Period 9 explaining that
after a good Christmas the Business was ahead of plan for the first
time in 2015/16 and that he was now cautiously optimistic that the
EBITDAS target would be delivered.
(b) Having taken all of the discussion issues into account, the Board
noted the Financial Report for Period 9.
POLB 16/7 INITIAL DISCUSSIONS ON THE 2016/17 BUDGET AND OUTLOOK
FOR THE 3 YEAR PLAN
(a) The Chairman weicomed back Martin Edwards and welcomed Dave
Carter, Group Financial Controller, to the meeting.
(b) The CFO introduced the budget discussion and explained the work
underway to prepare the 2016/17 budget for presentation at the
March Board.
(c) The Board asked the CFO to ensure that the budget was based on
income targets which were stretching but realistic as the current
targets for some products eg Mortgages had not been robust. The
CFO assured the Board that realistic income targets would be
proposed for all products.
Ensure challenging and realistic income targets are set as part
ACTION: CFO of the 2016/17 budget.
The CFO explained that the first cut of the budget had highlighted a
gap of £91m between the initial budget bids and the plan. The
budget process had revealed the need for a radical approach to
cost reduction. The CFO stressed that the Executive were
committed to delivering the target £10m loss in the plan.
(d)
e) The Board agreed that radical solutions would now be required to
reduce and right size the cost base. The Chairman stressed that
much had already been delivered but that the Executive needed to
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consider extreme solutions even if the cost of delivery affected the
short term profitability.
() The Board recognised that Business needed to invest in growth but
would be unable to do so unless the cost base was rectified.
However it would be important to monitor the top line whilst tackling
the costs.
() Having reviewed the work to date, the Board noted the cost
challenge and asked the CFO to return with the 2016/17 budget
having taken regard of the Board discussion.
(h) Richard Callard explained that the timetable would be tight for the
Shareholder to agree the budget, after the March Board approval,
and release the funding before the end of the financial year. The
CFO assured the Board that the Business would work with the
Shareholder Executive to ensure they had sight of the budget as it
developed.
It was agreed that the Business would work with the
ACTION: Shareholder Executive to ensure they had sight of the budget
Martin Edwards/CFO as it developed to help facilitate the process which would follow
the Board decision in March.
() Dave Carter and Martin Edwards left the meeting.
POLB 16/8 TRINITY
(a) The Chairman welcomed Jane MacLeod, General Counsel, to the
meeting.
() The CFO noted that the Board had previously been briefed on
Project Trinity and provided an update on progress and the status
of discussions with the various third parties involved.
(c) The Board asked for a note
(d) The CFO explained that a final decision was likely to be needed in
February and proposed an Extraordinary Board meeting be help at
the appropriate time.
The Board noted the update and that an additional board meeting
would be called in February to be held by telephone.
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(b) Back Office
The CFO gave a verbal update on the Front Office project. He
explained that since the September Board meeting where the Board
had approved the Accenture contract, changes had occurred which
meant that the contract was no longer within the original approval.
The Board asked if the changes were still necessary, and the CFO
() explained that to do nothing was not an option, but that he would
ensure that this was explained in a paper. He thanked the Board for
their patience and promised to circulate a paper with an option for a
call to discuss.
Provide a paper on the Back Office procurement with an option
for a Board conference call if required.
ACTION:CFO/
COSEC
POLB 16/10 ITEMS FOR NOTING
Sealings
(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 1366 to 1378 inclusive in the seal
register was hereby confirmed.
Prosecutions Policy
(b) The Board noted the Prosecutions Policy but challenged whether the
policy should be available on the Post Office website, asking what
benefit this brought to the Business.
(c) The CEO explained that publishing the policy gave clarity to
subpostmasters.
It was agreed that the GC would consider whether publication
ACTION: GC was appropriate.
(d) Having taken all of the discussion issues into account, the Board
noted the new Prosecutions Policy.
POLB 16/11 CLOSE
(a) There being no further business, the Chairman declared the meeting
close.
POLB 16/12 DATE OF THE NEXT MEETING
(a) [twas noted that the next meeting of the Board would be on 21 March
2016.
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