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POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
MINUTES OF A MEETING OF THE BOARD OF DIRECTORS OF POST OFFICE LIMITED HELD ON TUESDAY 29
JANUARY 2019 AT 20 FINSBURY STREET, LONDON EC2Y 9AQ AT 11.45 AM
Present: Tim Parker Chairman (TP)
Paula Vennells Group Chief Executive (PV)
Ken McCall Senior Independent Director (KM)
Tom Cooper Non-Executive Director (TC)
Tim Franklin Non-Executive Director (TF)
Shirine Khoury-Haq Non-Executive Director (SK)
Carla Stent Non-Executive Director (CS)
Alisdair Cameron Group Chief Financial and Operating Officer (AC)
In Attendance: Jane MacLeod Company Secretary (JM) I
Veronica Branton Head of Secretariat (VB)
Debbie Smith Chief Executive - Retail (DS) (items 6 & 7)
Owen Woodley CEO - FS&T (OW) (items 6, 8 & 9) I
Cathy Mayor Finance Director, Retail (CM) (item 6) I
Colin Stuart Finance Director, FS&T (CS) (item 6)
Martin Kearsley Banking Director (MK) (item 7)
Chrysanthy Pispinis Director - PO Money (CP) (item 8) I
Will Nourse Fenchurch (WN) (item 8)
Meredith Sharples Director — Telecoms (MS) (item 9)
Rob Houghton Group CIO (RH) (item 13) I
Jeff Lewis CIO — FS & Digital (JL) (item 13) I
ACTION
1. WELCOME AND CONFLICTS OF INTEREST
A quorum being present, the Chairman opened the meeting.
The Directors declared that they had no conflicts of interest in the matters to be considered
at the meeting in accordance with the requirements of section 177 of the Companies Act
2006 and the Company's Articles of Association.
RE-APPOINTMENT OF NON-EXECUTIVE DIRECTORS
The Board APPROVED:
« the re-appointment of Ken McCall as Senior Independent Director of Post Office for
a period of three years from 29" January 2019 until the Board meeting occurring I
approximately three years after that date
e the re-appointment of Carla Stent as a Non-Executive Director of Post Office for a 1
period of three years from 29" January 2019 until the Board meeting occurring I
approximately three years after that date. I
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MINUTES OF PREVIOUS BOARD AND COMMITTEE MEETINGS INCLUDING STATUS REPORT
The minutes of the meeting of the Board held on 27 November 2018 were APPROVED anc
AUTHORISED for signature by the Chairman.
CEO REPORT i
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POST OFFICE LIMITED BOARD MEETING
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Irrelevant
43 The Board NOTED the CEO’s report.
5. FINANCE
5.1 Financial Performance Report
had been the first year we had included depreciation figures in the budget
¢ higher staff costs had been driven largely by contractor costs on three projects that
had not been budgeted for
* we had underspent the growth fund. Our hypothesis for the last two years had beer I
that we are underspending on marketing and that the growth fund would bring the I
marketing ideas to life. This had not proved to be the case and Emma Springham, the I
Chief Marketing Officer, had been asked to force rank all marketing spend requests,
including those for Bol. We were attracting people to the PO website but out
conversation rates were insufficient and we were considering spending more or
A number of points were raised, includin
* that there was a strong argument for investing more in marketing and getting a goocye toad bi
return on this. This was an important strategic issue and the Board should have an iragenda.
depth discussion on the marketing strategy at the most appropriate point during the
year
© it would be helpful to have more commentary on the growth fund. It was reported thai
we would not have a growth fund for the next financial year but would be investing more
in the brand fund over the next few weeks B
ecutive
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5.2
5.3
POST OFFICE LIMITED BOARD MEETING
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that as we had discovered that {
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ad been engaged on work for RM we shoulcTe 40: Ac to
raise with
take a view on the risks of this, obtain confirmation that they were using completelyys
different teams, and consider whether thi
e network strategy and capability would be critical and we needed to understand how
agile our network would be and have clarity on our network strategy over the nexi
couple of years. We would be managing a franchise and the success of this woulec,, 4.
determine the long-term sustainability of the business. We needed a fundamentallyac
ee
strong mails business and a robust model
e it was requested that information on cash declarations be added back into the report ine
was reported that the levels were steady at around 90%
that it would be helpful to include commentary on the Payzone Bills Payment acquisitior V8 t add to
forward
¢ it would be helpful to understand what one or two other POs or retailers were doing tCapenda,
make their network operations agile and di technology to keep costs low. It
was reported that this formed part of the ork
that an interim update on Identity would bé brought to the Board.
The Board NOTED the Financial Performance Report.
Budget Update 2019/20
Al Cameron introduced the report and highlighted a number of issues, including:
¢ that we had included assumed trading profits for 2019/20
* aconversation would be needed on tightening the range of profits that were included ir
bonus calculations
* major changes were reflected in the changed assumptions on trading profits but not
--minor.BALLissues.which.awe.exnected.ta.smork.swithin..J
/ Irrelevant I
e we thought we should have a cost target
e senior leadership capabilities had improved but capacity remained an issue.
A number of points raised, including:
e that we would need to be rigorous on our commodity cost structure but with a number
of additions and subtractions
e that we needed to understand the efficiencies that had to be driven, versus elements
such as regulatory driven compliance requirements. We also needed to look at where
we could eliminate or automate work. Central costs needed to reduce and revenue
increase with more investment behind the brand. It was requested that our central cost:
were reported
whether granularity about products would be included in the budget. It was noted that
that would be included
¢ that it was surprising that non staff costs were not going down. It was agreed that these
costs should be coming down.
UKGI Quarterly Report
Al Cameron introduced the report and highlighted a number of issues, including:
e that less had been spent than forecast in Q3
*® —anumber of material projects were not delivering the benefits we anticipated at the
time we had anticipated. This included Project Everest through which we were
changing some of our committed spend with Fujitsu from opex to capex and the rollout
of new printer cartridges to branches. The latter had been designed to reduce cost:
and
generate fewer calls while the opposite had been true because a message was being
received that the cartridge was empty when it was not
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70 do:
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POST OFFICE LIMITED BOARD MEETING
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e — significant spend was associated with DMB franchising process. The benefits from this
programme were flowing through but it continued to draw some public criticism
e — that we did not include a contingency fund
— BEIS would be focussed on the £445m spend over the three year period. This was <
cash flow forecast. It did not include some non-cash spend, the costs associated witr
the Postmaster litigation spend* and £26m that had not been spent from last year’s
budget. The £445m had been forecast based on what we thought we could invest ir
change without borrowing. That figure would be higher now because of higher trading
profits.
A number of points raised, including:
e whether there had been challenges to test that the money could be spent during the
quarter, to prioritise the requests and to make sure that the benefits were going tc
flow through? It was reported that this testing process took place at the Investment
Committee I
¢ — whether the BEIS finance team were more comfortable with the reporting now being
provided? It was reported that this was the case but that we had yet to work througt
¢ NOTED the contents of the paper, including the approach of total change spend and
the confirmations to BEIS I
© APPROVED the request of £25.9m funding for Q4
© DELEGATED AUTHORITY to the CEO and CFOO to finalise the precise details and
supporting documents with UKGI.
+ Discussions had taken place with Alex Chisholm, the Permanent Secretary at BEIS, during the summer of 2018 about the
potential costs associated with the Postmaster Litigation.
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POST OFFICE LIMITED BOARD MEETING
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8.2
8.3
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9.2
9.3
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POST OFFICE LIMITED BOARD MEETING
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agreed.
The Board RESOLVED to DELEGATE AUTHORITY to appoint a new Credit Card provider to the
Chairman, Shareholder representative, Group CEO and CFOO.
The team was congratulated on their persistence through lengthy negotiations.
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POST OFFICE LIMITED BOARD MEETING
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10.
10.1,
— Irrelevant
11.
11.1)
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POST OFFICE LIMITED BOARD MEETING
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11.3. The Board RESOLVED to:
e APPROVE the terms of the parent guarantees with Thames Water, Anglian Water and
Scottish Power and APPROVE Post Office Limited entering into the three guarantees
substantially on these terms
© DELEGATE AUTHORITY to the CFOO and the General Counsel to finalise and approve
the terms of the guarantees and
e AUTHORISE execution of the guarantees in accordance with Post Office’s usual
signing authorities.
The Board’s preference for letters of comfort to be provided rather than parent guarantees
was noted.
12. POSTMASTER LITIGATION (VERBAL)
Jane MacLeod reported that the judgement on the common issues trial had not yet beer
issued. A Case Conference would be taking place on 31% January 2019 but it was difficult tc
progress matters further in advance of the judgement. Our communications had beer
prepared.
Conversations had been taking place about mediation, which was a standard request by the I
court, and we were considering our “red line” issues. I
. making changes. The scope of Fujitsu’s work had been contained to re-hosting which limitec
opportunities but also reduced risks and we would acquire benefits as we moved to the
cloud.
13.2
IRRELEVANT I
14. ‘ITEMS FOR NOTING
14,1 Sealings
The Board RESOLVED that the affixing of the Common Seal of the Company to the
documents set out against items numbered 1736 to 1743 inclusive in the seal register
was confirmed.
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POST OFFICE LIMITED BOARD MEETING
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14.3. Future Meeting Dates
The future meeting dates were NOTED.
14.4 Forward Agenda
The forward agenda was NOTED.
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15.2 The Board RESOLVED to APPROVE the actions proposed from the Board evaluation as set
out in page 3 of the report.
The meeting closed at 3.00 pm.
02107 )201%
Date
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