Post Office Board Agenda
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[BBtET I Monday 25 March 2019
77 08.30-12.00 hrs I Eeeation I 1.19 Wakefield
erred
: Ce
Tim Parker
(Chairman) I ¢ Tim Franklin .
Jane Macleod
(Company Secretary)
‘© Tom Moran (items 6. & 7.)
(Network Development Director)
Alisdair Cameron (CFO)
© Shirine Khoury-Haq I #
Veronica Branton
(Head of Secretariat)
* Owen Woodley (items 9. - 10.)
(CEO - FS&T)
* Ken McCall © Carla Stent © Debbie Smith (item 7.) © Chrysanthy Pispinis (item 9.)
(CEO - Retail) (Director PO Money}
* Tom Cooper ® Martin Kearsley (item 8) © Rob Clarkson (item 10.)
(Banking Director)
(MD ~ PO Insurance)
Apology: Paula Vennelis
‘Amanda Jones (item 3.2)
(Retail Sales Director)
© Julie Thomas (item 3.2)
(Network Operations Director)
1. I Welcome and Conflicts of Interest Noting Chairman
08.30 - 08.35
2. I Minutes of Previous Board meetings including I Approval Jane Macleod
Status Report
3. I Postmaster Litigation (to follow) Noting and Input 08.35 - 09.35
3.1 Case Jane MacLeod/ Mark
Davies
3.2 Contingency planning Julie Thomas/ Amanda
Jones
4. I CEO Report Noting & Input cro 09.35 - 09.55
5. I Finance CFO 09.55 — 10.25
5.1 Financial Performance Report Noting & Input
5.2 Draft 2019/20 Annual Strategic Plan and Noting & Input
Budget
6. I Network reporting Noting & Input CFO/ Tom Moran 10.25 - 10.40
7. I Network Plan Noting & Input Debbie Smith /Tom 10.40- 11.10
Moran
8. I Banking Framework 2 Approval CFO/ Martin Kearsley 11.10-11.25
9. I Bank of Ireland Negoti Noting & Input Owen Woodley / 11.25 - 11.40
Chrysanthy Pispinis
10.I PO Insurance Capital Injection Approval Owen Woodley/ Rob 11.40- 11.45
Clarkson
11.I Contracts/ funding for approval Approval
- Global Payments Agreement 11.45 - 12.00
- Branch Hub
12.I Items for Noting Noting
12.1 Belfast Exit Plan
12.2 Sealings
12.3 Health and Safety Report
12.4 Future Meeting Dates
12.5 Forward Agendas
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Post Office Board Agenda
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13. I Any Other Business
Noting and Input
Chairman
14, I Date of next meeting
28 May 2019: 11.30 - 16.30 hrs
Noting
Chairman
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POST OFFICE LIMITED BOARD MEETING
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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)
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)
Cathy Mayor Finance Director, Retail (CM) (item 6)
Colin Stuart Finance Director, FS&T (CS) (item 6)
Martin Kearsley Banking Director (MK) (item 7)
Chrysanthy Pispinis Director - PO Money (CP) (item 8)
Will Nourse Fenchurch (WN) (item 8)
Meredith Sharples Director — Telecoms (MS) (item 9)
Rob Houghton Group CIO (RH) (item 13)
Jeff Lewis ClO — FS & Digital (JL) (item 13)
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.
2. 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
approximately three years after that date
the re-appointment of Carla Stent as a Non-Executive Director of Post Office for a
period of three years from 29" January 2019 until the Board meeting occurring
approximately three years after that date.
3. 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 and
AUTHORISED for signature by the Chairman.
4. CEO REPORT
4.1 Paula Vennells introduced the report and invited questions.
4.2 A number of issues were raised, including:
the impact of a Brexit “no deal” on data sharing. It was reported that the Information
Commissioner’s Office (ICO) had issued guidance on data sharing and as the data
controller our data sharing requirements should not change, but that we were monitoring
the position
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4.3
5.1
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whether we remained on track with RM negotiations? It was reported that we intended
to seek a mandate from the Board on RM at the March Board meeting. There had been
no change in RM’s priorities for the new contract. PV was due to meet with Rico Back in
advance of the March Board meeting and it was thought helpful to continue these senior
level discussions and keep a focus on our main priorities in the new contract. The same
issues remained in discussion and it was noted that RM had issued a second profit warning
today and shares prices had dropped by 10%.
The Board NOTED the CEO’s report.
FINANCE
Financial Performance Report
Al Cameron introduced the report and highlighted a number of issues, including that:
performance had been encouraging. Mails and banking were offsetting
underperformance against plan from Telco and MoneyGram. The automation of the
banking deposit process had driven up the volume of transactions
© poor budgeting of a number of staff costs would run to the end of the financial year; we
were focussed on making sure that these errors did not happen again
e the new retail operations structure had been announced. The HR structure was being
changed and the consultation on this would start later in the week
the Telco margins were flattening out. The regulatory environment was tougher. The end
of the Fujitsu contract and development of a different partnership model would improve
our returns significantly. Current returns were not sustainable for a number of reasons
which would be discussed under the Telco strategy item later on the agenda
© depreciation levels were higher than budgeted as estimates had not been sufficient. This
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 been that
we are underspending on marketing and that the growth fund would bring the marketing
ideas to life. This had not proved to be the case and Emma Springham, the 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 our conversation rates
were insufficient and we were considering spending more on marketing in this area
© McKinsey had been engaged for a nine week period to help PO in the organisation design
(OD) work that would drive the design of the operating model for the business post DMBs.
It would be a difficult and changeable period in which we needed to be able to work as
flexibly as possible and support the franchise network. For example, there are currently
about 150 were employed in HR but we needed to outsource elements of work such as
payroll which could be simplified if staff were on standard contacts. While costs needed
to be cut, capabilities also needed to be built to allow us to serve clients and customers.
A number of points were raised, including:
« that there was a strong argument for investing more in marketing and getting a good Me fo ade
return on this. This was an important strategic issue and the Board should have an in agenda.
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 that
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 Todo:
«that as we had discovered that McKinsey had been engaged on work for RM we should Executive
take a view on the risks of this, obtain confirmation that they were using completely
different teams, and consider whether the McKinsey team should be stood down Todo: Ac
© whether we should consider charging RM less for processing online transactions, to raise
especially as we wanted to set up our online operations quickly? with Ms
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5.2
5.3
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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 next couple of
years. We would be managing a franchise and the success of this would determine the
long-term sustainability of the business. We needed a fundamentally strong mails
business and a robust model
it was requested that information on cash declarations be added back into the report It todo:
was reported that the levels were steady at around 90% AC
that it would be helpful to include commentary on the Payzone Bills Payment acquisition [0°*
it would be helpful to understand what one or two other POs or retailers were doing to
make their network operations agile and drawing on technology to keep costs low. It was
reported that this formed part of the McKinsey work
that an interim update on Identity would be brought to the Board. ME/ VB
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
a conversation would be needed on tightening the range of profits that were included in
bonus calculations
major changes were reflected in the changed assumptions on trading profits but not
minor BAU issues which we expected to work within. A “no deal” with Bol had been
assumed as that had seemed the most likely outcome at the time
we thought we should have a cost target
senior leadership capabilities had improved but capacity remained an issue.
A number of points raised, including:
that we would need to be rigorous on our commodity cost structure but with a number of
additions and subtractions
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 costs were reported Re do:
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:
that less had been spent than forecast in Q3
a number 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 costs 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
significant spend was associated with DMB franchising process. The benefits from this
programme were flowing through but it continued to draw some public criticism
that we did not include a contingency fund
BEIS would be focussed on the £445m spend over the three year period. This was a cash
flow forecast. It did not include some non-cash spend, the costs associated with the
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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 in change
without borrowing. That figure would be higher now because of higher trading profits.
that the contract for Successfactors had been entered into speedily because of a
licensing issue. It was an imperfect system and we did not think we needed the
additional functionality available at additional cost. We were too small a customer for
SAP to give us sufficient attention and while we would need to use the system for the
foreseeable future we were not confident that they were the right long-term partner for
us
that the redundancy figure of £34m was higher than AC had expected and he would be
scrutinising the figures.
A number of points raised, including:
© 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 to flow
through? It was reported that this testing process took place at the Investment
Committee
© 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 through
the change prioritisation plan. AC noted that further work was needed on investable
growth projects for next year. An insurance acquisition had not been included in the
change fund and £6m had been included for Identity rather than the £9m which would
have allowed us to more off the Digidentity platform in the short term.
The Board:
* NOTED the contents of the paper, including the approach of total change spend and
the confirmations to BEIS
¢ 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.
6. RETAIL AND FS&T QUARTERLY REPORTS.
6.1 Retail Report
Debbie Smith introduced the report and highlighted a number of issues, including:
that Mails income and banking had driven strong performance in P9. Home shopping
returns were up 29% and click and collect up 44%, while some competitors had seen
declines. Greater engagement in branches to drive customer care and targeting the 250
branches which had the highest volumes of parcels had supported growth
* automated transactions for RBS and Lloyds had driven up banking transactions and we had
on boarded two banks
Payzone PB performance was currently adverse to budget; the Co-op resale was the main
driver of this but we were addressing the issues with Allpay. Scottish power
would go live as a client in June 2019 and a number of additional clients were in the
pipeline
RM had issued a second profit warning. Letters performance had been down 8% with
GDPR and Brexit cited as the biggest drivers. UK parcels had been up 6%. The
negotiations on the new contract were on-track and we would be meeting RM next week.
DMB franchising was taking place at a rate of one branch a day. Opposition to franchising
remained in some quarters with vociferous objections to the closure of the York and
Kendle DMBs
2 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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6.2
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e changes had been announced to the field team structure last week. Sales managers
would have responsibility for approximately 100 branches, while area managers would
have responsibility for approximately 10 branches. This was designed to drive
performance by supporting agents. Branches would receive visits from area managers
twice a year and data would allow them to target particular branches, for example where
too much cash was being held or where a higher volume of calls were being made than
the norm which might indicate a training requirement.
A number of points were raised, including:
¢ whether we had a views of the number of customers we lost because of queues? It was
reported that to have a robust idea of this you would need to be able to measure footfall
versus transactions. What we did know was that our wait times were coming down and
that SSKs were working much better. Staggered posting dates at Christmas had also been
helpful. We were seeking to improve performance further through automation and
simplification. For example, the labels system we had introduced which drove efficiencies
as well as bringing us younger clients. It was asked whether there were other ideas we
could consider such as a “happy hour” with cheaper prices to encourage use of off-peak
service?
e whether there would be a turnover target for agents? It was noted that a balance had to
be struck here because we also needed to ensure compliance and avoid too much churn
within the agent community which was costly. It was suggested that we could develop a
view of what returns should be generated within a geographical area
© whether commons problems or themes could be reported back through the sales and
area groupings and if resolving these would be part of the sales and area managers’
objectives? It was reported that this was built into objectives and that we also wanted to
identify strengths within PMs who could support and train other PMs. Ultimately we
would like to be able to employ sales and area managers who had experience of running a
PO
which companies were benefiting from Paypoint losing business? It was reported that we
did not have full figures for this yet but we knew that DPD were performing well and
Yodel poorly
© how PO’s 3% growth compared with the market? It was reported that it was too early to
judge and that we still needed more data
© that it would helpful to have an update on where the Payzone BP numbers stood
compared to what we had expected. It was reported that income from rail companies
was £100k behind plan but that we had known this was a risk and had factored this into
the acquisition price. We were beginning to design the TOM for Payzone PB
© whether the number of branch openings planned was too optimistic? It was reported that
a clear plan was in place and that we were confident in delivering in all but 9 cases where
we did not have an opening date yet; however, these dates should be confirmed by 9
February 2019
a report back on Payzone BP branch performance and how we were driving this was Ds
requested after the first 6 months of trading.
FS&T Report
Owen Woodley introduced the report and highlighted a number of issues, including:
© that the next FS&T report to the Board would include the completed work on developing
the FS&T Strategy. Pieces of strategy work were taking place in each part of the business,
including insurance capability.
© FS&T was performing slightly ahead of the re-forecast. Savings had performed strongly.
Travel money was broadly in line with expectations but Brexit was driving uncertainty in
customer behaviour, as was the case for MoneyGram. Mortgages were a tough market
in which to operate because of reduced margins
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© Telco. All players in the market was reporting downturns. We were proposing to invest
in fibre as a protective measure
© general insurance was performing well but there were challenges for travel, which was
affected by the general malaise in the travel market
progress with the potential Ancile transaction had been delayed, partly because of the
concerns about TIF, which was their underwriter. We needed to accelerate work on
alternative acquisitions. Impaired travel was still a critical part of our pathway to being
no 1 in travel insurance
that Customer Hub numbers were significantly behind where we had hoped to be. The
FRES app had been disabled in December 2018 and some customers had since migrated
to the PO app. An analysis of Customer Hub was being brought to the March Board
meeting. Identity proposition would be ready to add as a vertical in Customer Hub at
the end of March 2019.
A number of points were raised, including:
© whether the problems with TIF were resolvable and could give us scope to purchase
Ancile more quickly and at a lower price, noting the suitable fit of Ancile for PO’s growth
within the impaired health market. It was reported that we remained cautious because
of poor responses from TIF to requests for data
whether we had a macro view on whether Brexit would deter people from travelling? It
reported that planning had been taking place to prepare for Brexit and that indicators
such as a further profit warning from Thomas Cook, indicating delays in selling their
holidays would have a knock on effect on travel insurance and travel money.
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Bol PROPOSALS.
8.
IRRELEVANT
? We were discussing credit card provision with the market because Bol wished to exit this market.
3 Capital One was only interested in purchasing the front book.
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_ IRRELEVANT
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IRRELEVANT
* IRRELEVANT
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IRRELEVANT
11.
aa I
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12.
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I IRRELEVANT
POSTMASTER LITIGATION (VERBAL)
Jane MacLeod reported that the judgement on the common issues trial had not yet been
issued. A Case Conference would be taking place on 31" January 2019 but it was difficult to
progress matters further in advance of the judgement. Our communications had been
prepared.
Conversations had been taking place about mediation, which was a standard request by the
court, and we were considering our “red line” issues
14.3
14.4
15.
15.1
Future Meeting Dates
The future meeting dates were NOTED.
Forward Agenda
The forward agenda was NOTED.
BOARD AND COMMITTEE EVALUATION REPORTS
Ken McCall provided an overview of the Board and Committee evaluation process and the
recommendations flowing from the Board evaluation. An annual cycle of evaluations would
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POST OFFICE LIMITED BOARD MEETING
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continue. The ARC actions had already been agreed and the Nominations and Remuneration
Committees would be considering their evaluation reports.
The strengths in how the Board operated had been shown in the scores and the feedback
received. The report had focussed on development areas. The Board had identified a
number of areas where more discussion and greater understanding would be welcome.
Today's discussions on Telecoms had started that work and developing a greater
understanding of digital identity, our competitors, postmaster/ agent needs and franchising
would follow.
The Board had also requested more updates from thought leaders, management updates on
IT and greater visibility of the management tier below the Group Executive. Papers were
better but more narrative was needed on changes in performance and the drivers for this, as
well as the reasons for changes in spend and timing of delivery.
KM would be facilitating the discussion of the Chairman’s performance after the Board
meeting and a NED meeting had taken place on 28" January 2019 with a second one to be
scheduled during the year.
The next steps would be for the actions to be taken forward as listed in the paper, including a
revised forward agenda for the March Board meeting.
TP would discuss the output from the Board evaluation with UKGI and KM would discuss the
Chairman’s review with UKGI.
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.
Date
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Post Office Limited Board Actions as at 05.03.2019
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1. Retail Strategy
1a)
The ATM Strategy should factor in our whole
Cash Strategy.
(We needed to analyse an investment in cash
machines carefully looking at how far we would
move to being a cashless society in the next 3-4
years).
Debbie Smith
May 2019
A paper on the overall position on
cash, including ATMs, is now
proposed for the May 2019 Board
meeting.
‘Open
‘Agent Remuneration
March 2019
II is included on the March agenda. A
paper on the long term future of
‘The Network/ Retail Strategy paper
processed our take aways from the visit to
Norway to see their banks’ cash counter
technology. It was noted that this piece of wor
would not be ready for at least a couple of
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Post Office Limited Board Actions as at 05.03.2019
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DUE DATE
2
FS&q Strategy in branches
Owen Woodley would come back to the Board
with an integrated view of FS and Telco, working
with Debbie Smith to make sure that the
insurance strategy and the retail strategy were
integrated.
‘Owen Woodiey/
Debbie Smith
March 2019
The Network/ Retail Strategy paper
is included on the March agenda.
10. Security Strategy
proposition, to be brought back to the Board.
3. Funding beyond 2021 Provide the Board with the costs associated with I AlCameron/Debbie I sanuary-2019. ‘A network reporting paper is To close
running unprofitable branches, Smith March 2019 included on the March agenda.
4. FS&T Performance Report
4.b) The learnings and next stage of the development ] Owen Woodley / ‘March 2019 The paper has been moved the May Open
of Customer Hub, including the mails Veronica Branton May 2019 Board meeting to include an update
on the future structure of Customer
Hub and the development of Digital
Identity.
Veronica Branton
10.a) ‘An additional third party review on our security I Jane Macleod March 2019 Security Strategy Plan in place and To close
arrangements to be commissioned and the process to be reviewed by ARC
reviewer to be charged with identifying gaps and quarterly.
producing a strategy to close those gaps.
Board Meeting 29 January 2019
5.1 Financial Performance Report
a) Include a discussion on the marketing strategy at I Veronica Branton TBC Item added to the forward agenda. To close
the most appropriate point during the year. Timing to be determined,
b) Provide an interim update on Digital Identity. Martin Edwards/ May 2019 Digital item (both Digital Identity ‘Open
and Customer Hub) added to May
Board agenda.
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6.1 Retail Report Report back on Payzone BP branch performance I Debbie Smith/ May 2019 Item to be included as an annex to Open
and how we were driving this after the first 6 Veronica Branton the Retail performance report.
months of trad
IRRELEVANT
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POST OFFICE LIMITED
THE BOARD OF DIRECTORS DISCUSSION PAPER
Operational Responses to the GLO
Meeting date: 25 March 2019
Context
The purpose of this paper is to share more detail with the Board on our operational
response to the GLO. Separately, we will circulate the fact base around Horizon to
explain why we believe it works at scale. Details of previous reviews together with the
full action list supporting this work have been included in the Reading Room.
Questions
The questions for this paper are:
What workstreams have been formed and who is leading them?
How are we governing this work?
What the key questions being answered within each workstream?
What are our highest priorities?
What are the financial and other implications?
wbwnye
Conclusions
We have set up 8 workstreams. We are finalising the governance to ensure we
prioritise and do not aim off BAU management or important strategic opportunities.
Within the paper, we have set out the questions each workstream is answering. These
encompass things we have to do in response to the verdict, things we wanted to do
anyway and things which might shift the balance with agents.
Our priorities are:
e Putting project governance and management in place
° Agreeing and rolling out contract variations
e Resolving issues of legal interpretation on BAU processes (new contracts, Branch
Trading Statements, Suspensions, Withdrawals) and changing how we work
« Creating, rolling out and staffing a new differences and dispute resolution process
e Creating a plan to manage a bad Horizon outcome.
e Agreeing a set of positive changes for agents to reduce tension in the relationship
Our focus is on stopping issues building momentum and undermining agents and
customers: if agents remain in BAU mode, largely reassured and pleased with
changes, other stakeholders will also relax. At the same time, we mustn’t over-react
and expend scarce resources in the wrong places. We will revert with
recommendations for 2019-20 in April.
Input Sought
The Board is asked to comment on the contents of this report, making
recommendations as appropriate and requesting an update at each subsequent Board
meeting.
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The Report
What workstreams have been formed and who is leading them?
1. As set out in the Board paper supporting the meeting on 20", we have set up the
following workstreams:
e Legal (Ben Foat)
© Operations (Julie Thomas)
« Agents (Amanda Jones)
e« Communications (Mark Davies)
© Stakeholders (Al and others)
IT/Horizon verdict (Rob Houghton)
Brand (Emma Springham)
Financials (Micheal Passmore)
How are we governing this work?
2. Governance is being finalised. This list assumes that we have completely separated
the current case management and the legal workstream will therefore be focused
on supporting the operational team - for examples on issues of interpretation to
enable better operational decisions.
3, Jane will coordinate the work of the legal team to ensure there is appropriate
balance and alignment between the Litigation and operational change. We are
setting up weekly oversight, bringing the workstream leads together with other
key colleagues and seeking an overall Project Manager. We will provide a progress
update at each Board meeting.
What are the key questions being answered within each workstream?
Legal
4. The purpose of this workstream is to ensure that we make changes that are
consistent with the judgment and are designed and introduced in a way that is fair
and reasonable and can be expected to stand the test of time.
5. The priority is to agree what contract variations we should make to resolve some
of the gaps and issues left by the judgment. We are not seeking to restore the
status quo but to achieve a reasonable balance. The process of discussion and
consultation will be important to making changes sustainable. Other urgent
questions of interpretation will enable the operational changes detailed in
paragraph 6 below.
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Operations
6. The focus of the Operations workstream is to deliver new processes including:
what contract we should be offering new postmasters; how should we proceed if
we think we should suspend or terminate a Postmaster’s contract; under what
circumstances can we retrieve cash; does the Branch Trading Statement work and
how can it be used/changed following the judgment; what process should we
follow to manage discrepancies; is our application process fit for purpose?.
7. Most critically, we need to agree and deliver a new process for managing
differences. Can we be more transparent on the information we have? How do we
speed up resolution? Do we need to communicate more and more often on the
status of outstanding differences? Do differences need to be accounted for in a
different way, perhaps with some element of “escrow”? Do we need an element of
independence in finalising disputes? Do we need to formally investigate differences
or only disputed differences and what form does that investigation take: is it
simply triangulating against known issues and client data, for example? Under
what circumstances can we trigger which follow up actions?
8. We are working through a plan to create 4 tiers of response in Chesterfield and are
currently splitting calls between a Tier 1 for easy answers and Tier 2 for more
complex balancing support. We are considering a third team to manage historical
differences and a fourth team for material disputes. Again, we need to design in
transparency and independence.
9. As well as managing differences better, we need to reduce them. We are underway
with a programme to reduce errors and repeats and we will likely invest more than
planned to re-design errors out of Horizon.
10.Culturally, we decided last year that we had a good deal of work to do to create a
culture that is focused on customers and agents and delivers continuous
improvement. We started by changing the names of some teams, so the Fraud
Analysis Team became the Branch Analysis Team. Delivering a material shift in
attitude and behaviour will need programme disciplines and will tie into some of
the cost and capability work coming back to the Board in May.
11.We have very recently delivered much better information through our Branch
Insight Tool, developed on the back of the investment in Case Management. We
have now gathered together a series of data points by branch on the number and
nature of phone calls, cash declarations, transaction corrections and so on. The
current plan is to create corrective activity, training, support etc on the back of it.
In addition, we will look to share data with branches so they can see warning signs
or issues for themselves.
12.We may also choose to accelerate investment in the Branch Hub. This can become
a single point of interface for branches to order cash, do training, receive
communications and can also be used for transparent dispute management.
Strictly Confidential and legally privileged: do not forward
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13.We have already concluded that a critical area of focus is training. Classroom
training for new agents is not good enough. On-site training is not long enough.
There is very little ongoing training, although the recent field restructure will
introduce 6 months close support for new agents. We may, over time, develop an
online Postmaster Academy to support agents through their careers.
14.To get training and communication right, we know that we need to invest in our
Communications team, which has been focused on network change. This is not just
resources: it is about using simple, jargon free language that agents can
understand. We may also need to recognise some segmentation in how we
communicate between small, subsidised Post Offices, commercial independents
and Multiples. We will also consider whether we need foreign language versions of
some material.
15.In the existing budget for 2019-20 we have increased the size of the field team
and are bringing the field teams together. Field presence will be critical to explain,
reassure and resolve issues: we have become too dependent on letters. We may
expand the team further by using some ex-DMB and other colleagues who know
how to run a Post Office.
16.Other potential investments include creating key logs in Horizon or screen sharing
to enable better explanations from the call centre. It may also be that disciplines
that help us (cash declarations, balancing etc) may need to be mandatory and
more regular.
Agents
17.A number of the operational priorities above will be owned and delivered by the
Network teams in Retail and not just in Operations. There are also bigger picture
questions around the future of our agent relationships.
18.Fundamentally the question we are due to bring back in the Autumn is to set out
how and over what timescale we can improve agents’ lives to the point where we
have a queue of people wanting to join: what is the balance of remuneration,
simplification, support and lower costs that would unlock the opportunity. The
opportunity is to create agents as advocates, training each other, supporting each
other and explaining their role to stakeholders: they are much more effective and
trusted than we are.
19.We are trying to clarify with the NFSP and others how we best help now. We are
anyway announcing improved remuneration for deposits and lower penalties on
Mails segregation. We also need to be clear on whose problems we are trying to
solve first: the hardest up agents or the most entrepreneurial.
20.Fundamentally, agents want to earn more and perceive unfairness in different
places. Which do we want to address and how quickly: can we pay them more for
digital leads and create them as advocates for our website instead of viewing it as
a competitor; should we pass on inflation increases in Mails pricing; should we
neutralise the pricing differentials on foreign currency; should we share more of
the Banking Framework premium; should we resolve the stuck agents either by
paying more, reducing network numbers or by putting employees in to run them?
Strictly Confidential and legally privileged: do not forward
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21.We need an effective representative body for agents that they support. Can the
NFSP evolve to fill this role or will agents prefer to replace it? How can we help
without undermining its independence? As a first step, we should free them from
the commitment not to criticise us in public.
Communications and Stakeholders
22.Much of this is self-explanatory and clearly the priority is to minimise the impact of
GLO criticisms on agents and customers. This requires a balance between
demonstrating operational and cultural change with a robust defence legally.
However, while there are many stakeholders: Government; the Unions; Clients;
Customers all of them will be happier and more relaxed if we make progress with
agents. It is the sense of unhappy or unfairly treated agents that causes concern
elsewhere.
23.We also note that there is a political narrative that seeks to link the GLO with
falling agents’ pay and DMB closures and we need to decide if we wish to accept
some of that narrative in our budget decisions
24.Finally, we should be strongly reinforcing the message to our shareholder that now
is not the time to be publicly discussing dividends. Nothing would infuriate agents
more and indeed it may be that we won’t be able to have that conversation
without also talking about ownership.
IT
25.The IT stream is delivering support to the operations stream to reduce transaction
failures and avoid user failure scenarios. Investigations continue into Horizon front
end design, “defensive programming” and resolving high volume transaction
corrections.
26.The critical focus is “how bad a Horizon verdict can this Judge deliver and how
would we manage it?” While he should only be able to reach a limited view, we
have to assume that he is capable of stating that Horizon cannot be relied upon.
27.This is potentially devastating, even though the vast majority of agents know deep
down that this isn’t the case. Other changes listed above may help but this
fundamental narrative will be critical. One aspect may be introducing much more
transparency around our data: how many transaction corrections; how old etc.
28.In order to rebuild trust and faith in Horizon we are investigating hiring an
independent assessment (which we could publish) of Fujitsu test coverage, test
strategy and identify gaps that we can fill against known use cases
29.We are also assessing the Known Error Logs of Fujitsu and determining the
communications and release strategy of those errors. We are also investigating the
“triangulation” of those errors against the branch incidents and ability to recreate
significant incidents to demonstrate that the issue is not Horizon related.
Strictly Confidential and legally privileged: do not forward
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30.Fundamental to this is getting deep engagement from agents and operations
teams to help design the front-end changes, the help required and the branch hub
design.
Brand
31.We have asked Emma to explore what sort of brand spend, and at what scale,
would help defend us against criticism without simply being so alien to the public
conversation that it reinforces a view that we are not listening and are out of
touch. Any brand message may have to be articulated by agents not us.
Financials
32.We have two priorities which have been rehearsed in other Board papers. In the
budget paper for this Board we have set out the questions we need to resolve for
2019-20. In the previous Board paper we listed out the options we are working
through to provide additional funding capacity over the next 2-3 years.
What are our highest priorities?
33.The above is a long list of questions which need answering prioritising and
executing. The range and variety is concerning and we must prioritise. Key issues
are: Putting project governance and management in place; Agreeing and rolling
out contract variations; Resolving issues of legal interpretation on BAU processes
(new contracts, Branch Trading Statements, Suspensions, Withdrawals) and
changing how we work; Creating, rolling out and staffing a new differences and
dispute resolution process; Creating a plan to manage a bad Horizon outcome; and
Agreeing a set of positive changes for agents to reduce tension in the relationship.
What are the financial and other implications?
34.Many of these changes were in our strategy and by accelerating them we will
become a better business. If we can do so while maintaining a calm continuity of
service it will be a significant achievement.
35.Adverse implications if we don’t manage the situation are significant. We will find it
harder to recruit and retain agents and that will cause the 11,500 target to come
under pressure. If things start to unravel along these lines, we will find it harder to
retain key people and that in turn will undermine our ability to respond to the
issues and deliver change safely.
36.We will revert on the short-term financials in April. However, it would not be
ridiculous to invest £5-10m in operational change, £10m in IT change and £5-10m
in fairness initiatives. We will also need to fund further litigation costs, as
discussed elsewhere.
Strictly Confidential and legally privileged: do not forward
24 of 19
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IN STRICTEST CONFIDENCE
Horizon volumes summary
The purpose of this note is to respond to the Board’s request to understand more about
Horizon data. Given the very limited amount of time, the data is for the last year and has not
been as fully reviewed as normal. We will validate and expand the data set and re-circulate
it.
In the last twelve months we have processed 787m transactions through Horizon. These are
broken out into key businesses below by month and do not include transactions processed
via non branch systems (eg Bol mortgages) or other in-branch systems.
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Of these 787m transactions, we identified differences through counting cash in supply
chain, reconciling transactions through Horizon versus third party data, receiving phone calls
from agents, customers, suppliers (Global Pay) and clients. These differences generated
123k Transaction Corrections, 56K of which related to errors in counting the cash sent to
cash centres.
If the agent accepts liability for a shortfall difference, it can be simply paid for by the agent
or “settled centrally’, which means they introduce their own cash or a cheque to Branch or
selecting the Settle Centrally option to transfer the debt to be paid via deductions from
remuneration. Alternatively, a small number are disputed for further investigation and in
these cases the debt would be held until the outcome of the investigation is concluded.
Within the 123k transaction corrections:
ec. 103k are due to agent error, e.g. mis-counting or mis-keying and where procedural
processes have not been followed.
ec. 10k are due to loss of connectivity with clients, e.g. banks or merchant acquirer.
ec. 300 relate to robberies in the network, although these are held and not charged to
branches
ec. 300 have been due to Back Office systems, specifically reference data issues where a
transaction correction is issued to enable the branch to balance.
Chesterfield staff reconcile daily summary data by product, matching 3 party client data
and reporting mismatches. Bill Payment and Banking are compared to 3" Party Data which
will represent their underlying customer accounts. In this area we have had c.496m
transactions processed with 24k Enquiries representing an error rate of 0.00005%. These
form part of transaction corrections.
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Unresolved differences are held in a suspense account. Last year debits of £140k were
charged to the P&L account, representing the net impact of smaller debits and credits that
could not be allocated to branch.
Credits of £4.2m are held dated back to 2010, £435k in 2018/19. Again, this is where a
surplus is held, but it is not possible to identify a customer or client to repay this to. An
example of this would be a customer paper based deposit into their account where the
account number was incorrect or not completed. In this case the bank will notify Post Office
once they have identified the customer to enable them to be credited.
Additionally, £1.4m has built up since 2015 for ATM surpluses, £301k in 2018/10. This is
where the customer forgets to take their cash and the ATM retracts this. In balancing, the
branch will identify a surplus and declare this in their balance.
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POST OFFICE LIMITED .
THE BOARD OF DIRECTORS DISCUSSION PAPER
CEO Report
Author: Al Cameron. Meeting date: 25 March 2019
Context
As Paula is focused on supporting her husband (communicated to the business on 14
March), I have taken on the CEO report.
The GLO
We have set aside time on the agenda to discuss where we are. The latest action list
will be placed in the Reading Room on Friday 22"¢.
The implications of the first judgement will be significant. The GE believes that we will
have to invest more resource on the litigation and on accelerating work with agents.
We are assessing what plans we can reduce and postpone to free-up resources in 2019-
20, with a focus on down-dialling work that hurts the brand or annoys agents. For
example, should we slow down DMB franchising or postpone Parcelshop? We are also
focused on our longer term cashflow, recognising that the full cost of the litigation may
be significant.
Commercial Performance
In P11 we made a trading profit of £3.5m, YTD £48.7m. We expect to outturn around
£60m for the year. As expected, using a temporary cash forecasting solution did lead
to an increase in branch cash of c. £70m, which is starting to fall. We also saw a very
significant increase in inward REMs waiting for processing but this is now at normal
levels. 11,613 branches were open.
In Q4, we are delivering restructuring in both HR and in Network Operations, partly
arising from the closure of Network Transformation. Overall, we expect this to reduce
total FTE by 104. As a result of the GLO, we may choose to retain some experienced
Network people to help with the agent changes.
In change delivery, we have stopped using POLSAP except as an archive. Disaster
recovery testing was completed in Swindon and messaging went live on the Branch Hub
for the test population of agents.
We are increasing GE's focus on underlying commercial performance, bringing in
outcome scorecards and debating a product each month, increasing our understanding
of our market positions. We are also starting to deep-dive reviews of competitors.
Unfortunately, the papers on Lottery and Paypoint were not discussed this month
because of the immediate GLO pressures.
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Delivery
Network. In today’s papers, we report back on the changes that are now ready for
delivery, following the Strategy Awayday: updating our formats and changing our
network (trialling Parcelshop, accelerating DMB franchising, converting Mains to
Locals); improving relationships with agents (a new field team structure, Branch Hub);
and digitising and automating how we serve our customers (new self-service options
for Mails and Banking). Our plans are being re-prioritised following GLO.
We will be coming back to the Board in October with the conclusions of our work on the
long-term future of agents’ pay and how we make more of our Payzone network.
Payzone. The performance of the acquired business is in line with budget and we have
won exclusive contracts with Scottish Power smart metering (potentially 800k
customers), Wessex Water and First Utility Energy, all exclusively and from PayPoint.
Tenders are in progress with British Gas and E.On and we are renegotiating reseller
arrangements with Allpay and others. On the retail side, we are increasing engagement
with Coop, SPAR and others, focusing on integrating clients across both networks, new
device development and epos integration.
Banking Framework 2. We have had further conversations with the banks, including an
all-party call under UKFI oversight. We have held our position with no further
compromise. We expect all banks to sign up, although 4 are expected to “technically”
leave now to complete their governance and come back before end May. RBS has
already done so. This is obviously worrying but we have received no suggestion directly,
via UKFI or via other stakeholders that anyone will permanently withdraw. In RBS’s
letter, the section on readmission by end May is highlighted in bold.
In the paper for this meeting, we are recommending two further changes: capping the
fixed fee at a certain volume; and enabling the banks to fix prices beyond three years.
Bank of Ireland. We have reached an agreement with Bol and will be signing non-
binding Heads of Terms shortly, in line with the Board’s delegated authority. We are
also close to signing the deal with Capital One to start a new credit card relationship.
Bol has released us from exclusivity on current accounts and notice has been given to
customers that we are withdrawing this small and imperfect product.
As a result, we were considering an opportunity to co-bid with TSB by 31 March for
£50m of RBS Remedy funding to develop a SME banking proposition, subject to the
perceptions of Banking Framework members. However, TSB now wants to defer its bid
to a later stage of the process.
Back Office Transformation. As the ARC is taking place after the Board, we have put the
full ARC paper in the Reading Room. We are now settling with clients, paying agents
and reporting our performance from one set of CFS data. There have been some specific
teething issues but these have been limited and manageable. Notably we experienced
more adjustments than we were expecting in processing cash through High Speed Note
Counters and other new processes. This is now under control but to double check the
backlog, Internal Audit has been involved. They report no risk of lost cash and are not
recommending further involvement.
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Our Go/No-Go decision highlighted two areas of concern. Cash forecasting was planned
for March, hence through February the Branches received set cash amounts each
delivery/pick up. From the second week in March we have reverted to planned cash
orders. Branch cash peaked at £560m and is now starting to fall. Full delivery of Wave
2 forecasting is scheduled for mid-April and we increase cash for Easter. We may
therefore not be back to the cash levels achieved after Christmas until end May.
By far the most difficult area has been processing cash transactions into CFS. We are
now comfortable that the transactions are recorded in CWC but many get stuck. As a
result, the CFS cash balance can be understated by initially alarming amounts of more
than £100m. We have reporting which identifies the individual transactions making up
the difference, giving assurance that there is no loss and enabling us to identify root
cause to prevent new and clear old differences.
However, Transtrack is slow to identify and correct the underlying causes. Between
Accenture and ourselves we are mobilizing the right technical skills to help but it may
be May/June before we are operating cleanly. We are working closely with PwC to
ensure that we produce timely, audited accounts. In the Lessons Learnt exercise for
BoT we may conclude that the capability of Transtrack, an existing provider, should
have received more challenge.
Security. We are seeing an increase in the risk environment through brute force
password breaking. A foreign state group, possibly Iranian, stole terabytes of data from
Citrix through this approach in March.
The board was notified that that the NCSC alerted us to 50 compromised POL accounts
in December which were part of a much wider compromise from a foreign state actor,
also believed to be Iranian.
In addition, Verizon notified us that some Post Office information appeared within a set
of 29 billion account details for sale on the dark web. Much of the data turned out to be
fake. However, there were some genuine details for 40 Post Office email accounts which
were compromised from using work emails on third party accounts (ie MyFitnessPal).
We have closed the accounts, reminded people, with the threat of disciplinary action,
to use complex passwords and advised them not to use Post Office details to download
apps that may have limited security.
Our investigations haven’t detected any data compromise, exposure to malware or
other security reduction as a result of these incidents. This does however remain our
highest risk and we continue to educate, monitor and invest in protection capability.
We have also carried out penetration testing on Payzone, highlighting a number of
vulnerabilities, with a critical issue within the tablet ePos device infrastructure that could
potentially be exploited by malicious individuals. A thorough assessment by internal and
external experts has not, to date, identified any compromises on the infrastructure but
we remain extremely vigilant.
A remediation programme is underway. We are also checking device and agent wifi
connections. We do not believe there has been any intrusion through to PO systems.
We will assess whether recourse is available from device vendors/ previous owners.
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Mails negotiations. Rico Back (Group CEO) has asked his direct report, Stephen Agar,
MD Letters, to lead the negotiations. Stephen has been an executive in the Postal Sector
at Royal Mail for almost 30 years and is much more open and engaged. We expect to
provide a meaningful update at the May Board.
Compliance and regulation: Ofcom has published its intention to investigate us over the
previously reported issue of Text Relay charges. In its letter, Ofcom notes that we have
ceased charging, that we will compensate customers and that they may settle. In the
last year, 79 customers were over-charged by c. £1,300: Ofcom’s concerns will be that
it affected vulnerable customers and the 4 year duration.
We have notified HMRC of two changes to our historical positions. On VAT we are
requesting a refund of c. £4m, going back over 5 years, arising from recalculating the
use of our Partial Exemption method.
Separately, at my request, we are winding down the self-insured trust in place to meet
our private healthcare commitments and replace it, from 1 April, with a standard
arrangement with BUPA. Arising from this, we have informed HMRC that we had not
been properly accounting for tax on the top up payments we had made to the Trust to
cover claims. £546k is payable and we may be fined an additional £80k.
While these issues have been identified by us conducting reviews and assessments, the
number of issues is uncomfortable. We are considering commissioning a wider review
of our tax outcomes by a third party to ensure we have no other exposures.
Team: We have confirmed Paula’s departure and immediate change of focus and I am
effectively but not officially operating as CEO. We have restructured accountabilities
across the GE with the Operations portfolio split between Rob, who becomes COO,
Debbie, re-uniting the field teams and Mo, who takes on Safety. Brand, PR and
Marketing have been brought together under Emma Springham within Owen’s team and
Martin Edwards now reports to Owen.
We have identified and had an indicative offer accepted for an Interim CFO who has
met with Tim and Tom. We now need the final confirmation from BEIS that we can
proceed. While she has to serve a notice period, we believe that she has great, long
term potential.
Tim Franklin is being proposed to the FCA as Chairman of POMs, with Steve Ashton
stepping down with immediate effect. We are discussing with Bol that Owen should
become Chairman of FRES, succeeding Paula, with Cathy Mayor taking Owen’s spot.
The Gender Pay Gap report for 2018 which will be published shortly. In the last year
our gender pay gap is now 0.5% lower at 17% and smaller than the UK average. Our
analysis continues to show that the Post Office gap is mainly due to higher paid, senior
roles at the Post Office being held by more men. We are now closer to our goal of filling
50% of senior manager roles with women, which was 39% in our last report, and is
now at 42%. The number of women holding mid-level managerial roles has also risen
by a third in the last year.
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Our commitment to being a great place to work was also recognised by The Times as
we made their list of Top 50 Employers for Women for the third time and we were
finalists in the Diversity & Inclusion category at the UK Business Culture Awards.
The GE and the L40 senior leadership team have both spent time together, agreeing
how we will work, with a focus on upward challenge and open dialogue. The L40 is a
new group: previously we had a larger senior leadership group made of the GE and our
direct reports. This created a disproportionate representation from heads of function in
Finsbury Dials, which has now been reduced, while adding in some big people leadership
roles that don’t report to GE, as we look to bring decision making closer to the front
line.
The GE agreed a narrative for the L40 which is attached as Appendix One, written as a
speech from me. This has been debated with the L40. I wouldn’t normally include this
level of detail but as it is the first of a temporary arrangement it seemed appropriate.
It was written before the GLO verdict but also shows that responding to that judgement
is consistent with our strategy: we will re-prioritise not change direction.
Decisions for today
Budget. We are not seeking budget approval given the changes we will need to make
to our plans following the judgement from the GLO. Our preference would be for an
additional Board call end April or we can wait until May’s Board.
Banking Framework. We are recommending approval of two changes to the Banking
Framework, a cap on the fixed fee and an extension option.
POI Capital. To support our plans and our regulatory position, we are recommending
increasing POI’s capital by £5m.
Global Payments. We are requesting approval for a further, one year extension on our
contract, which covers our fees for customers using credit/debit cards in branches.
Strategy
In Appendix 2, we have set out a list of strategic delivery and decisions. At the May
Board, we are looking to bring back our plan, based on the McKinseys work, to fill
capability gaps, deliver cost reductions and simplify the organisation. In addition, we
will revert on the Mails negotiations and on our plans for Identity.
In July, we are planning to revert with our future, financial strategy, taking us beyond
2021. We will also bring back a recommendation on the future of Telco; how we manage
the incumbency trap for Travel Money; the opportunity to support a cash utility; and a
forward strategy roadmap.
On Telco, we have received an indication of a bid for the business that could have a
compelling logic. On cash, in addition to the broader conversation with the banks, we
have started a NDA’d conversation on potential synergies with RBS.
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APPENDICES PAGE 1 OF 6
Appendix One L40 Narrative (Pre GLO verdict)
Any CEO wants to leave a business in better shape than they find it. Paula has definitely raised the
bar...
PO was separated from Royal Mail because we would ruin the privatisation. We had no
independent governance. We were losing £120m and getting £400m a year from Government. Our
IT, provided by Royal Mail, was old, expensive and vulnerable. We had thousands of shops with no
retail, open 9-5 Monday to Friday, unable to support the people who ran them. Our culture was that
of a victim: everything was worse; nothing could get better; it was someone else’s fault.
And out of that, through will, collaboration and focus, Paula has led us to be a profitable, confident
business that can believe in a stronger future. She has done it without ever being arrogant or focused
on herself. If anyone exemplifies the Sandhurst motto, that to lead is to serve, it is Paula.
I also owe Paula a huge personal debt for hiring me, for working with me in a real spirit of partnership,
for her honesty and for the best 4 years of my working life. Many of you will have similar stories. We
are finding a fitting time and place to hear them.
Let’s look forward. We are an interim Executive. We may work like this for weeks or months or years.
And you know, that makes no difference to us at all. We are leading as a permanent team. We
have known Paula was leaving and that Owen and I will throw our hats in the ring for the permanent
job since November. And no one noticed any change in our behaviour. Because there was none.
We are united around one priority: to hand the business over — whenever that happens - in better
health than it is today. And that is getting harder because of the remarkable, expectation smashing
progress you have made over the last six years.
The world is changing very fast. So we aren't going to waste a day. Some things will stay the same,
some change we must accelerate and some things will be different.
So, what will stay the same?
As an executive team, we are here because we want to be. Not tied to a career gamble or share
options. Here because we want to be. We all have our individual stories and while the details vary,
the principles are the same.
When I was looking for a job, back in 2014, recruitment consultants would ask what I wanted. It can
be big, complicated, lots to do, I would say, but it must have a team with a shared sense of urgency
and do something more than make money. I talked to lots of companies, all paying more, but my
wife told me after the first meeting that I would come here. She was right — you had me, heart and
soul.
Why? Because no one else runs a real business in competitive markets to deliver a social purpose.
No one. Profit making companies pretend to social responsibility. Hospitals pretend to be commercial
businesses. We are both and we matter. We are the last retailer standing where others retreat. We
are the only national network. We provide for people with urgent business and for the lonely, for the
digital and the paper based, for the consumer and the small business. If you have a phone, a bank
account and a PO you can trade with the world.
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What we do matters more now than it used to: just look at cash. We are already the last retailer or
bank standing in 3,500 communities. If we leave a community, we damage it. If we have to cut
branches to hit a target, we have failed our customers. So what stays the same is our purpose,
being there for every customer in every community.
We matter more, so it is more important and more urgent than ever to support ourselves from our
trading. We have to make enough profit, generate enough cash to reinvest in our technology and
our products, in our branches and our people to keep developing ahead of the market.
The Government doesn’t want to give us more money. They have been incredibly generous. £2b
and counting. So it is down to us. How should we feel about that? Should we grumble? No, we
should be proud and excited. In our first year as an independent business we used £400m of
government funding. In 2020-21 it will be £50m. I hope it can reduce to zero. If we can deliver for
our customers while releasing £400m a year for schools and hospitals then we have achieved
something amazing.
And of course being commercially sustainable is more than just making money. We have to continue
becoming stronger.
We must keep making it safer for our people or no one will go to work with confidence and delight.
Investing in IT, investing in security - we have a great ClO and he will continue that journey. And
while it may not be sexy or on the agenda of many CEOs, we will work constantly on 4 Cs - cash,
controls, costs and compliance. Companies that do these things well do them every day. And if you
don’t, you are Carillion, Patisserie Valerie, and all the others. These are core muscles. We won't be
strong and focused if they fail. Better never stops.
It is, of course a cliché to say the world is changing faster than ever. And it's true. Not one of our
products and markets looks stable over 5 years and we will have to be the most flexible business to
thrive. We cannot waste a day.
We must focus our attention on what matters, judging everything we do against three questions. Will
it be better for customers? Will it be simpler for agents? Will it make us stronger? And if it’s no to all
three — let's stop...
So if that’s what carries on, what do we have to accelerate?
Customers are the people who pay the bills. Without them, we have nothing. But we are a franchise
business. We don’t serve customers, our agents and their people do.
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We have to make it easier for Postmasters to make more money for less effort and in a better
spirit of partnership. More flexible models, more trust in their retail judgment, more practical help and
advice, encouraging them to share best practice, support services that are obsessed with helping
Post Offices serve customers, more automation, better data to identify and solve issues, less
paperwork. Enabling digital to be a valued partner service not a competitor. And communicating in
language and through channels that everyone understands.
And look at the opportunity, 12,000 Post Offices, supported by 1,000 simple pick up and drop off
parcel shops and 14,000 Payzone outlets is an achievable and startling network and it’s within our
grasp.
Debbie is building an exceptional team, unlocking talent that is already here as well as recruiting,
working brilliantly with Operations. Of course we should all understand life in branches and for
customers — but the Retail Lead Team must drive this with both data and anecdote so we know
exactly what matters most to make it better for customers and simpler for agents.
The period after 2021 will bring new challenges, some of which aren't visible yet. We must be fittest
if we want to thrive. This is our second area of acceleration. As you know we have started work on
a 2-3 year view of that journey. How do we best work together, how do we avoid duplication and
confusion, which capabilities are lacking? It is so much more than cost. But we also have to be clear
that less fixed cost and lower costs overall will be critical. Tackling our supply chains, creating
synergies with partners, automating the way we work, driving out repeats, managing suppliers more
strongly will all create value. To achieve this we will need to make a step change in automating and
digitising the business, for customers, agents and ourselves and back that up with better data, much
better understood.
The third area of acceleration is how we unlock our talent. Making better decisions, devolving power
and growing our talent pool. Bringing care, challenge and commit to life.
As an executive team, we are re-framing our agendas to focus on the bigger, strategic decisions.
This isn’t different from the North Star but we may need to focus more. We expect to spend more
time on these strategic decisions and it will be entirely normal for us to have three goes at a big
choice: framing the questions and the data we need; challenging our assumptions at a mid-point;
and then reaching a decision or a recommendation for the Board.
GE must always be a generous and supportive place to come. But we must all, also be open to
challenge and debate — prepared to disagree, to argue, to iterate....we must even give each other
permission to get upset. I was upset when Angela Duncan in the safety team was the first person to
point out to me that the reason SC safety had dipped a couple of years ago was, in spite of our
determination not to let this happen, because we had taken our eye off the ball while we restructured.
When you are upset, there’s a reason, so pay attention. She was right, we accepted it. Fixing the
problem suddenly became easier. Honesty always helps. So disagree, challenge, speak up — if we
don’t know what the issue is, we will never fix it.
Everyone needs to feel comfortable challenging upwards. We are not there yet and in some places
we have a great deal of progress to make. For every one of us that has the privilege to lead a team,
we must remember that to lead is to serve. I hear stories of people being criticised by their boss for
asking questions and that just won't do. We want to make a real change here, across the business,
working with every leader of people. We will all have an objective to develop and bring the best out
of our teams and we are working to have that scored by the people who work for us.
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Let’s worry less about hierarchy and the way things have been done before. Let's listen most to the
customer, the agents and our front line staff, in a permanent rebellion, solving their issues before we
make life easier for ourselves, prioritising money and effort accordingly. That's why we have
restructured this team away from reporting lines, GE-1, towards the big people and strategy roles,
towards the customer and away from central functions.
Of course if the executive team is focusing on the big decisions, then running the business and
making the day to day choices is down to you and your teams. We have to bring decisions closer to
the front line. Having inherited the most command and control area in PO, I think Russell and the
Supply Chain team, who have started to make some progress, have two lessons for us.
To empower effectively, we must be very clear on the outcomes we care about and then we have to
get out of the way. Russell has given more control to depots because he is clear on outcomes. We
provide POs with the cash to keep trading. We do it when we say we will so the Postmaster is happy.
We keep our people safe, our cash secure, our costs low and our compliance high. After that, it
should be up to them — they know the best way to work — so we can let them get on with it. In addition,
Supply Chain removed two layers of management when they restructured. The depots run
themselves because they have to....there is no one else.
Those outcomes, across our business, must be explicit, measured and should be the basis for
incentives. They will be the foundation for the GE’s other responsibility: clear performance
management. But this is not about generating hundreds of new plans and targets. We must go into
next year with a rigorous focus on what matters and how it gets better over time. Budgets are for
financials and change benefits. Operationally, the focus has to be on getting better every month, not
arguing about the plan. Better never stops.
And then talent. The PO is diversity. Every customer is welcome — you have to behave very badly
to be turned away from a single Post Office. And every gender, race, sexuality, colour, health status
and religion will be represented in our 50,000 people. We must catch up with our business. Having
a diverse team with role models for more people genuinely matters and this focus will continue.
Changing the way we work matters even more. We will make it easier for everyone to be themselves
and fulfil their potential, starting with how we recruit and promote. We don't say this out of political
correctness. We are telling no one what to think. It is simply this: if we unlock the talent already inside
Post Office or able to join we will have an extraordinary competitive advantage.
And what needs to be different?
None of our markets are stable beyond the next 2-3 years. We have decisions to make — where do
we invest, own, partner or sell? How much of the value chain should we control? Making those
decisions will be a key area to focus on.
Secondly, across our markets, we need to up our ability to influence commercial performance. If I
talk to a Proctor & Gamble product owner, maybe three years out of University, she could tell me the
size of the market for her product, her market share and how it’s changing, the product's strengths
and weaknesses, what consumers care about, what marketing works and what the return is, what
causes complaints and how to fix them, how to communicate and listen on social media.
I know the argument that we don’t usually own our products. It’s an excuse not a reason — we can
strive to influence them.
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We have threats and opportunities and we have a duty to avoid classic incumbency traps in Travel
and in Mails and we have a generational challenge in who uses and cares about us. We have the
opportunity to become consistently great commercial managers and we must seize it. GE will now
be reviewing a product every month.
Thirdly, there are new opportunities we need to assess. We may have an opportunity to expand
banking beyond withdrawals and deposits to place ourselves at the heart of how the UK manages
cash. There may be a place for a digital payment proposition that replaces POCA and Post Orders
and current accounts and more. We could completely re-work how we identify, understand, service
and sell to our customers.
So in conclusion...
We will trade hard, be more commercial, generate more cash and invest it in our business, focusing
relentlessly on the outcomes we care about and the decisions that matter. We will help our agents
serve customers better, making more money for less effort. We will unlock talent and get stronger,
making decisions closer to the front line. We will get more resilient.
Better for customers, simpler for agents and making ourselves stronger.
So we can serve every customer whoever and wherever they are. Without needing to take money
from schools and hospitals. Securing a national service for our customers in every community.
What an opportunity. Let’s lead to serve our customers, our communities, our agents and our people.
When your grandchildren or your friends’ grandchildren ask what you did at work, you saved the PO,
everywhere, for another generation. It’s such a privilege. Let's seize it, let’s deliver for our customers
and let’s have the time of our lives along the way.
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Appendix Two: Strategic Delivery and Decisions
Delivery
Commercial Sustainability. What is the future financial shape of the business,
including a low and flexible cost base? Can we generate enough free cash flow to re-
invest from our own resources? What else makes up sustainability: how do we become
stronger and more resilient?
Choices in execution. Banking Framework. Bol deal. Credit cards. Bill payments.
Network strategy: branch models and formats, regional support, automation.
Enablers. Belfast to Cloud. Branch hub. Branch models. Credence replaced, data
enabled, MI improved. Regulatory compliance initiatives in the Network. Data security.
Corporate restructuring (LEO). Cash forecasting. Data analytics and digital capability,
enabling operational efficiency and radical simplification for agents. Customer insight.
Culture: outcomes; debate/challenge; inclusion. Employment model. 4 Cs (Costs,
Controls, Cash, Compliance). Target Operating Model.
Negotiations. Mails.
People. Retain the people we need, recruit and train for gaps and reinvent the stuck.
Strategic Decisions:
Incumbency threats. Mails. Travel Money.
Invest, retain, sell. Insurance. Identity. Telco. Investments. SME banking.
Other opportunity choices: digital wallet (child of POCA and Postal Orders, basic bank
accounts, Youth strategy in FS). Wider SME opportunity. Cash and ATMs: can we be
integral to a wider utility for the UK? What's the right customer journey? What is the
future of contact centres as we re-partner? What are the other adjacencies we should
pursue?
Reading Room: GLO Plans and Contingencies
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THE BOARD OF DIRECTORS DISCUSSION PAPER
February 2019 (P11) - Financial Performance
Author: Micheal Passmore Sponsor: Alisdair Cameron Meeting date: 25 March 2019
Executive Summary
Context
The purpose of this paper is to outline our financial performance in P11. A detailed
slide-deck is attached.
How did we do in P11?
em Period 14
Actual Budget Variance Forecast Variance YoY Actual Budget Variance Forecast Variance YoY
Retail a7 423 oa 417 16 2% eid 5184 30 8198 16
FSAT (incl. Insurance) 29 253A) 283 4) 2% 2906 2988 «= (BS) 293 (2.5)
Telco overstatement 08 8 09 =a 00 50 0) 00
Isentty 34 17 33 5 10% sos 438 69 487s
Supply Chawvother 19 1) 98 ot 8% 20. 132.32) 88
Total Revenue 2s OA aaa a7 ara 48) a7
Cost of Sales (95) 19) 9.8) 07) 9% i164) (115.9) 0.5) (0.9)
Net income O41 613 7634 (5.1) 28
agents Pay os 74) 35 Or
Stat Cost 1 148) (4a)
Non staff Cost 12 219) 78
PRES. 1 18 on)
inet facome 02 1 02
raging Prof 02 (0.0) 6g
Network Subsidy Payment oo 46 Oo 00
EBITDA 02 48 a2 88
‘Dapreciation (24) (66) 8) (G00) 2.3) 4)
rest 09) (4; 05) 4) 65) (£9) (0.3)
Change Spend 5) (88) 10) 8) (79) 394} 08
Investment Fundiag 86 as oo 868 1594 on a0
Prost On Asset Sales (0.4) oo 1) 90 og 35 22
Profit Before Tax (63) os (72) 6.1) 144.7 (60.8) 33
P11 trading resulted in a profit of £3.5m, favourable by the same amount to forecast.
This was predominantly driven by Home Office revenue in Identity and strong volumes
in banking services, alongside a one-off compensation sum of £1.3m related to the
Poplar branch. YTD trading profit of £48.7m is £9.2m ahead of budget.
Pil revenue was £73.4m, £2.3m favourable to forecast in the month. The delay in
migration to the new supplier for UKVI resident permits has boosted revenue by £0.6m,
with additional upside expected in P12. Paper and digital passport volumes are up 14%
to forecast also. International Driving Permits are ahead of P11 forecast by £0.3m as
the possibility of a no deal Brexit nears.
Banking services revenue is +£1.0m to forecast as manual to automated deposits have
generated greater volumes, pushing the banks into a higher fixed framework tier.
Payment services income continues to underperform (£0.3m adverse in P11, £1.3m
adverse YTD) and is likely to continue on this trend for the remainder of the year.
Post Office Insurance net income has increased 9% YoY, but was -£0.3m adverse to
forecast in period 11 due to re-phasing of trading activity. POI YTD trading profit of
£16.9m was in line with forecast, but YoY has declined -3%, despite total revenue
showing 13% growth.
Staff costs are £1.3m adverse to forecast in the period as we have continued to
accrue stretch bonus to reflect expected full year outturn. Non-staff costs are £2.9m
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favourable due to the release of uncommitted growth fund, in addition to Poplar
branch compensation of £1.3m being recognised in line with previous accounting
treatment and agreement with PwC. This compensation was received for being
compliant with landlord’s wishes to vacate part of the building, to facilitate its
redevelopment.
Network numbers increased in the month to 11,613 (P10: 11,606), being 113 above
the commitment and 13 above our target of 11,600. Further detailed analysis has
been included in the slide deck.
YTD Change spend (Capex and Exceptional) was £241.9m bringing YTD benefits of
£31.7m, both slightly ahead of forecast at an overall level. Further analysis is
provided in the slide deck.
Rems are now being processed in the normal timescales, but for P11 (during the early
stages of Back Office Transition) we saw a backlog of rems due to the team being
focused on clearing some initial problems associated with the new ways of working.
Branches were not impacted.
Conclusion
We had a strong trading month in Retail (Banking services) and Identity (delay of BRP
switch to new supplier), with increased revenues of £2.5m. Taking into account
specific issues, such as the compensation, trading profit ended £3.5m up on
forecast. YTD Trading profit is at £48.7m, just £1.3m short of our full year budget.
We are still collating the full year projected trading profit outturn, but we believe this
to be c. £60m. However, there are some trading risks which could reduce the final
profit position.
Confidentiat
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Period 11 FY18/19
Financial Performance
25 March 2019
(-
a
Post Office Limited - Commercial in Confidence
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P11 Scorecard
Post Office Business Scorecard - FY18/19
Period 11 ‘Year to Date
Full Year
Budget Forecast
Actual Budget Valance Forecast Variance Vanance Forecast Forecast Var
[Total Gross Income (excl NSP) &m 73.4 72.3 rz mA 23 @ PANAT sra7 8704 4) 871.0 37 @ 965.1 9567
{Trading Profit £m 38 33 02 0) 35 @ hh 48.7 395 92 420 68 @ 50.0 50.9
[Headroom £m (vs Board minimum limit) 364 200 1640 200 1640 @ y >£200m I >£200m
IChange benefit delivery £m 4a 43 (02) 37 o4 @ a7 347 3.0) 308 08 9 40.2 36.0
IMaits - Total Labels Volume m 124 124 00 120 04 1507 114 1903 150.5 02 ® 103.4 1632
IMails - Home Shopping Returns Volume m 34 34 00 40 06) 435 37 308 450 (15) 450 507
[Banking Volume (m) 108 10.1 o7 10.1 o7 @ LA 12331207 ar 1207 27 130.2 193.4
IClosing Telecoms Customer Base (#) 503,430 498,606 4,824 500844 2,586 @ ° °
Grow our Network - Customer
[Number of Branches 11,613 11,600 13 11,600 13 @ foe 11,600 I 11,600
INew Network Branch 45 33 12 33 12 e . 338 338
Become the Partner of Choice - Customer
[Ease of Doing Business With (Efort)* 877% 820% += ST% = 820%@ «5% “i I 846% © 820% 2.6% 820% 20%
INo. of Horizon Customer Sessions per week 100 104 (1) 10.4 01 3s 104 on 104 foay :
# of SevirSev2 Incidents 7 8 1 8 1 @ 106 88 88 ° <96 <96
Number offailed SLA's (mth in arrears) 1 3 2 3 2 e 33 30 iS) 30 ° <36 <36
Actual Incident Volumes 642210000 3878 ~—t0,000 S578 95869 110000 14,131 1100004131 @ <120,000 I <120,000
On target to
STIP Bonusable Measures
achieve?
Retaining 11,500 branch locations Gateway Y
Trading Profit of £50m 80 Y
IHNGX Decommissioning 5 Y
IHR SAP Decommissioning 5 Y
IPOL SAP Decommissioning 5 Y
2 verticals on customer hub 5 N
Post Office Limited ~ Commercial in Confidence Se
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P11 Scorecard
Post Office Business Scorecard - FY18/19
Period 14 Yearto Date
‘Actua Budget Variance ‘Forecast Variance Actual Budget. Variance Forecast Forecast Var Budget Forecast
Digital innovation - Customer :
Hrading income from customer Hub (&K) 66.1 104 (103.4) 254 407 AN] 4000 10106 (0045; 2270 1790 1160.0 I 240.9
I# of Registered customers on app. 26665 33,195 (6.530) 20,520 6,145 ev I 238701 266,055 (27,284) 198527 40264
si9410 I 215,406
I# of Al Product pages website visits 1,901,127 1,457,667 (65549) 1457667 65,540) ~» I19451,390 18,197,484 1,293,906 18,157,484 1,293,906
Website Conversion ratio 13.8% 114% 24% 11.7% 2.2%, oe 1 110% 114.2% (0.19) 11.2% (0.2%)
Care for our People
Line Manager Index
IFemale Representation in Senior Roles (3a & above)” 3 (0.9%)
IBANE Representation in Senior Roles (3a & above)” ( (0.8%)
ISenior Vacancies filed by Internal Talent (25.0% (250%) a (19.2%)
lAbsence 0.3% . (0.3%)
[SafetyLTIFR 0200 __0.200 4 wa 014
T Line manager Index calculation Is based on the weighted average results
2. Our ambition is to achieve 50% by 2020. Full year target of 43% is based on a linear increase over 3 years; this equates to replacing 16 Males with Females in Year 1 based on 460 population. Discussion to be held over changing Senior Roles to
Level 4 and above (population would decrease 250 and female ratio would be 30%).
3.149% is the percentage of people in the UK who describe themselves as BAVE. (Source: Most recent ONS Census, 20111). Our ambition is to achieve 14% by2020. Full year target of 11.1% is based on a linear increase over 3 years; this equates to
replacing 11 white to BANE in Year 1 based on 460 population. Discussion to be held over changing Senior Roles to Level 4 and above.
Senior Vacancies - of the 8 offers made in February for senior management grade 3A and above, 2 were made to
internal candidates.
Absence - overall absence decreased from 3.65% to 3.01% in February and Supply Chain absence decreased from
5.42% to 4.54%. YTD absence remains above target at 3.53%.
Safety LTIFR - There were 2 employee related accidents during P11 (P9: 8), but no lost time accidents. There have
been a total of 75 accidents YTD a reduction of 28% from prior year. Total lost days are 165 compared to 448 in
17/18, a reduction of 63%.
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Branch Numbers P11 YTD and forecast
Month
on
BI- month Forecast Forecast
Period Actual var pessimistic Plan
40 e Pd 11591 (Old methodology @ 11575)
P2 11623. 32 11599
P3 11595 -28 11596
P4 11571 -24 11570
PS 11574 3 11577
P6 11575 1 11569
By. Tt555. -20 11553
P8 11587 32 11566
lies) 11b78 -9 11599
P10 11606 28 11580 11609
Pil 11613 Us 11586 11609
Paz 11613 11636
In February there 28 closures forming of 11 suspensions, with 17 other closures / resignations, exceeded by 47 openings (45
NNLs, 2 branches of BAU activity), Forecast awaiting to be confirmed via NDA outturn, however, P11 saw the first spike in
NNL delivery since Qi. NNL delivery for P12 spikes with over 70 branches due to be opened
The NNL target of 338 has been achieved in the fact we have booked 345 branches to open, however, POL tend to see roughly
10% failure rate meaning some branches will slip, which would equate to 338 branches opened for the year, so target
achievement remains precarious.
The pessimistic forecast allows for some NNL slippage into 2019/20 in the event partners or suppliers struggle to meet target
opening dates, especially as the delivery plan ramps up and other programme activity (NT and DMB). By the end of Pil POL
also converted 28 Edgware branches as well continuing to over achieve against the NT target (128 delivered vs 100 target)
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P11 Trading Profit +£3.5m v forecast; YTD +£9.2m v budget
em
Actual Budget Variance Forecast Variance YoY Actual Budget Variance Forecast Variance YoY
Retail 427 42.3 04 a7 1.0 2% 5214 518.4 3.0 519.8 1.6 0%
FS8T (incl. Insurance) 24.9 25.3 (04) 253 (0.4) -2% 2906 298.9 (8.3) 293.1 (25) 3%
Telco overstatement 00 0s (0.5) 00 00 nia 0.0 5.0 (5.0) 0.0 0.0 nla
Identity 48 34 17 33 15-10% 50.8 43.8 69 467 44 %
Supply Chain/Other 09 1.0 (0.1) 08 0.4 -B% 12.0 13.2 (1.2) 115 06 — -8%
Total Revenue 34 72.3 14 1A 23) ae 874.7 879.4 (46) 871.0 a7 1%
e Cost Of Sales (10.6) (9.6) (4.0) @8) (0.7) 9% (116.4) (115.9) (0.5) _ (115.6) (0.9) 4%
FI Net Income 62.8 62.7 0.1 61.3 45 2% 758.3 763.4 (5.4) 755.5 28 1%
& Agents Pay 26.9) (27.8) 08 (27.4) 04 -20% (330.0) (335.6) 55 (330.8) 07 4%
Staff Cost (159) (13.8) 21) 4.6) (1.3) 4% (174.5) (166.4) (8.0) (170.1) (4.4) 2%
Non staff Cost (19.1) (20.3) 4.2 (21.9) 29-17% (249.0) (264.1) 15.1 (256.7) 78 5%
FRES 15 16 (0.1) 15 0.0 © 49% 30.9 314 (0.3) 313 (04) 4%
Other Income 14 10 0.2 44 01 94% 13.0 11.0 2.0 12.8 0.2 190%
Trading Profit 3.5 33 0.2 (0.0) 35 na 487 39.5 9.2 42.0 68 277%
Highlights:
+ Identity - Home Office revenue +£1.0m from increased passport volumes and the continuation of UKVI
resident permit volumes caused by delay in switchover to new supplier.
+ Staff costs - we have continued to accrue stretch bonus to reflect expected full year outturn.
+ Non staff costs - Release of uncommitted growth fund spend, in addition to £1.3m Poplar compensation
received for vacating part of the building at landlord’s requested. This has been recognised in line with
previous accounting treatment taken on Trafalgar Square compensation.
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Retail Scorecard
Period 14
Forecast RAG
Actual Budget Variance Forecast T°\V"S' Te Actual Budget Variance Forecast Forecast Var RAG © FO7 Budget
Gross income £m. 427 423 04 417 oo & 5213 5184 29 5198 16 @ 569.7 568.6
Trading Profit £m 100 a7 03 a4 1g @ 1239 11460 89 1197 42 6 1343 1282
Mails - Priority Volume m 08 08 oo OB co @ 95 09 86 o4 o4 e 10.2 16
Mails - Tota! Labeis Volume m 124 124 oo 12.0 o4 @ 150.7 114 139.3 1505 02 @ 163.2 163.4
oils - Click & Collect Vorume m o4 04 oo 04 oo ®@ 46 02 44 44 02 ® 47 4a
uils - Home Shopping Returns Volume m 34 34 00 40 6) Oo 435 37 398450 8) 507 450
Banking Volume (rm) 40g 404 o7 104 or @ 1233 1207 27 1207 27 C) 193.4 130.2
No. of Horizon Customer Sessions per week 400 40.4 (0.4) 10.4 (01) O 10 104 (0.4) 104 ei) 00 00
No. of Retail Transactions per session 16 17 @o) W7 (00) O ry) 00
Ease of Doing Business With (Effort) * 88% — 82.0% = 57% = 82% 6% @ 846% 820% 26% 08 00 C) 820% 82.0%
o Number of Branches 11,613 11,600 13 11,600 13 «@ 11,600 11,600
[New Network Branch 45 33, 42 33, 12_ @ 253 265 (12) 265 (42) ce] 338 338
*month in arrears
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Retail: P11 Trading Profit +£1.9m to forecast ; YTD +£9.9m v budget .
Increased banking volumes and release of £1m NFSP discretionary fund provision
cm
‘Actual Budget Variance Forecast Variance YoY Actual Budget Variance Forecast
sa Teng 0 ee 8a) ee 2830 DBs (08) 22
tort 08 00 32 0 82
oo 00 15 1345
nine on: me fo) 8
Oner ei (00) 20 20 32
real aa TR Tia
Tet heome Te aE Sanat
‘Consultancy & Advisory Services (0.9) (15)
‘Change Opex 00 (0.2)
‘Other Opex (6.9) (7A)
® Largely driven by Cash & Banking: +£0.5m manual to auto deposits generating more volumes; which has
also pushed banks into the higher fixed framework fee tier, and RPI.
@ Timing of DMB franchise go live.
® Reimbursement of WHSmith retail fit out costs for franchised branches.
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FS&T Scorecard
g
Period 14 Full Year
‘Actual Budget Variance Forecast heen RAG Actual Budget Variance Forecast Forecast Var RAG Budget Forecast
Net Movement of Savings balances (£m) 4125) (4100) (25) (100) 25) @ 72 200 (128) 200 (128) 6 500 (300)
HTravet Money On Demand Currency Turnover (ein 64 64 0 64 ¢ 8 1204 4.208 1 4203 1 o 4622 4,292
Travei Money On Demand sales transaction ATV 2428 © 26680 © (23.2) as @ 2844 266.0 (16) 2653 (09) 2 266 270.4
Number of MoneyGram Send tansactions 198.6808 224,244 (25638) 219507 20.901) @ 2,450,129 2,608,815 (158,686) 2.558577 (108,448) @ 5, 2.839.191
T! Policy purchased (Travel App) 622 1,602 (980) 313 soe @ 3200 20.986 (17,756) 2.899 301 @ 3.424
}# No of Tops up (Travel App} ATSB1 SBE71 (14,110) 16,520 31041 @ 251,342 439,149 (187.807) 148008 103.936 0 @ 160,884
[Closing Telecoms Customer Base (#) 503,430 498,606 4,824 495,148 6202 @ 503,430 498,606 4,824 495,148 8282 @ ° I
Net Telecoms customer additions (756) (3,282) 2,526 (2,266) 1510 @ (391) {807} 416 (41,427) 14,036 @ (4.590) (13,858)
[Telecoms ARPU 25.0 26.4 (4.4) 26.2 (12) @ 249 258 (09) 253 (Gay @ 26.2 254
VS
Post Office” Post Office Limited - Commercial in Confidence
POL00026934
POL00026934
FS&T: P11 Trading Profit (€0.5m) adverse to forecast; YTD (£5.4m) v
budget
Continued impact of Telco customer retention discounts
em
Actual Budget Variance Forecast Variance YoY Actual Budget Variance Forecast Variance YoY
PO Money (Savings Loans) 38 32 03 33 0.2G) 12% 43 38.9 24 40.4 09 1%
Travel Money 18 22 (04) 18 (00) 12% 26.4 284 (22) 26.4 o4 14%
MoneyGram 19 20 (0.1) 24 2) -17% 239 23.4 05 24.4 (06) 2%
Telephony 116 120 (04) 120 (oa) 3% 1382 01444 (62) 140.0 a7) 2%
Postal Orders 14 09 02 14 00 5% 119 WA 08 128 9) 12%
Tetephony Overstatement 00 05 (0.5) 00 00 nia 00 50 (60) 00 0.0 nla
OMB Migration Overlay 00 00 00 00 00 ola 00 0.0 00 (0.2) 02 nla
Total Revenue 799 208 (oy 202 sy “5% Bis 2613 8) 2434 0 1%
Cost Of Sales (7.3) 74 (02) 6.8) aS) _ 4% (816) (84.4) 28 (810) (0.6) 8%
Net income 4126 13.8 (2) 13.4 (0.7) 9% 159.9 166.9 70) 162.5 (26) 2%
Agents Pay 3.0) 82) 03 8.0) 00 nia 7.3) 0.1) 28 G87) 14 nla
StaffCost (1.0) (0.8) (0.3) (0.9) (0.1) 6% (10.6) @7) (20) (9) (08) A%
Staff & Agent Related Costs (0.0) (0.0) 00 00-89% (06) (0.3) (03) (04) (0.2) 10%
Bran & Marketing 40.5) 03) (0.4) 05 14% (7.9) (63) (0.0) (78) 06 8%
Consultancy & Advisory Services 40.1) (0.3) 03 o4' 62% (2.2) (38) 16 (27) 05 184%
T infrastructure & IT Senioss (0.2) 4) (02) 0.1) -175% (1.9) (0.9) (0.0) (07) (0.2) 207%
Managed Services (2.4) (19) (05) (03) % (248) (24.7) (1) (4.4) (0.4) 9%
Postage (0.3) (02) (0.4) O41) ‘ (3.0) (27) (0.3) (28) (0.2) 19%
Finance & Losses (0.2) (02) 00 00-26% (25) (29) 04 (26) O41 31%
FRES 15 16 (0.1) 00 49% 309 314 (3) 343 @a) A%
Trading Profit 64 83 1.8) (0.5) 22% 4017 107.1 (63) 103.9 (2.2) 4%
© Weare gaining customers as our competitors increase prices making us more competitive.
© Continued impact of customer retention discounts.
® Higher customer base, increased BT wholesale costs and increase in engineer visit costs.
@® Predominantly due to lower Hub run costs than anticipated, as a result of new builds taken out as part of
prioritisation exercise.
fo
)
Post Office” Post Office Limited - Commercial in Confidence
POL00026934
POL00026934
PO Insurance Scorecard
Period 14 Year to Date Full Year
Actual Budget Variance Forecast oy, RAG Actual Budget Variance Forecast Forecast Var RAG Budget Forecast
Policies Sold: Post cooling off period (k) 59 65 (6) 63 @ © 905 932 (27) 923 (18) 997 1,012
Poticies Renewed (k) 22 22 ° 22 o @ 289 7 2 289 co & 28s 285
Policies In-Force “live” (k) 686 703 (a7) 686 o @ 702 686
Net Promoter Score (Post Office insurance) 44 36 5 26 5 @ 36 36
(10
\
Post Office Limited — Commercial in Confidence 7
Post Offic
POL00026934
POL00026934
POI: P11 Trading Profit (0.3m) adverse to forecast; YTD in line with °
forecast, (£1.3m) v budget
YoY Total revenue +12% in period and +13% YTD
Period 10 Year to Date
em
Actual Budget Variance Forecast Variance YoY Actual Budget Varlance Forecast Variance YoY
Travel insurance 18 18 (03) 18 00 56% 176 219 (4.3) 179 (0.3) 26%
Car insurance 08 08 (0.0) o7 0.0 15% 95 94 04 ot 03 “11%
Van Insurance 02 02 0.0 0.2 (0.0) 0% 22 20 02 22 0.0 5%
Home Insurance 08 09 (0.1) 08 (0.0) -3% 9.0 95 (0.4) 87 03 2%
Life - Over 50s 14 10 03 14 (0.0) 9% 78 73 05 79 04) 42%
Life - SLI 04 03 on 06 (0.4) 27% 25 26 (0.0) 3.3 (08) 44%
Other insurance 0.0 0.0 00 0.0 (0.0) 73% 06 02 04 06 (0.0) 9%
Total Revenue 54 5.0 0.0 52 4) 12% 49.4 52.5 (3.4) 49.7 (0.5) 13%
Cost Of Sales (4) 7) (0.4) (0.9) (0.2) 25% (9.3) (7.8) (4.8) (9.0) (0.4) 15%
Net Income 49 43 (0.3) 43 (0.3) @) 9% 29.8 44.8 (5.0) 40.7 (0.9) 13%
Sta Cost (0.5) (0.8) ot (0.5) 0.0 53% (68) (69) 12 9) ot 62%
Brand & Marketing (07) (0.9) 04 (0.6) (0.1) 281% (68) 67) 13 (58) 03 90%
Consultancy & Advisory Services (0.2) (4) (0.1) (0.4) (0.1) 378% (0.9) 0.7) (02) (13) 04 50%
IT Infrastructure & IT Services (0.4) (0.2) ot (0.4) 00 18% (4) (1.9) 0s (1.8) 02 3%
Managed Services (07) (07) 00 (0.7) 00 2% (65) (65) (0.0) (82) (0.3) 3%
Other (0.0) (0.2) 4 (0.1) On 79% (1.9) (1.8) 09 (4) 02 29%
Trading Profit 47 17 0.0 24 (0.3) (2) 20% 169 18.2 (4.3) 169 0.0 3%
® Net Income has increased 9% YoY but was (£0.3m) adverse to the 6+6 forecast due to
rephasing of trading activity. We remain broadly in line with latest rolling forecast (10+2).
@ Trading profit of £1.7m was in line with original budget, but (£0.3m) below the 6+6 forecast
and in line with the latest rolling forecast. Year to date Trading Profit of £16.9m was in line
with the 6+6 forecast and latest rolling forecast.
Post Of
Post Office Limited - Commercial in Confidence
POL00026934
POL00026934
®
Identity Scorecard
Actual Budget Variance Forecast mal RAG Actual Budget Variance Forecast Forecast Ver RAG © FO7 Budget
Gross income £m 48 34 17 33 15 e 508 43.8 69 467 44 eS 473
Trading Profit £m 25 16 oo 415 10 & 29.5 25.2 43 262 33 CJ 274
Paper Passport Volumes o 4,499,479 1,189,345, 310,134 1,486,883 12,596 eo 4,325,118
Paper Passport Markel Share : 28% 29% 1% 29% 1% e 26%
Digital Passport Volumes o 82872 209,162 (126,290) 28,980 53,892 @
Digita Passport Market Share @ 11% 3.9% 28% 10% 01% = «@ 3
UKVI Volumes 35,672 e 935,823 397,149 138.674 439,383 96,440 & 402,998
[Secure Collect Volumes 4732 & 2733 285,428 (14,663) 283.641 (9.876) @ 301,080
Tax Renewal volumes 38,383. o 6,638,004 6,238,824 399,180 6,245,275 392,729 @ 6,957 814
10yr Renewal Volumes 15447 = 12,808 9,982 e 303,403 274,702 28704 262,978 40,425, @ 283,079 289,504
Service Penalties £ 3 41000 3.414 3.414 @ 489,085 (38,085) 451,000 (38.085) @ 500,000 500.000
LOA 2 Volumes 84,427 74,088 19,180 e 706,319 692,990 13,329 @ 515712 390.408
LoA2 Market Share 52% 50% «= 2% 2% «9 53% 50% 3% = @ 50% = 50%
LOA 2 Conversion rate 59% 55% 4% 4% e 55% 55% 0% es 55%
Services Live 19 20 (1) a) @ 18 (2) 20 (2) es 20
Identity - Net Income over performance of £1.4m is driven from Home Office £1m (primarily driven by
extension of UKVI £0.6m and Digital Passports £0.2m) and £0.3m upside from DVLA International
Driving Permits.
Home Office - UKVI is the main driver of upside with a delayed migration to the new supplier. Paper
and Digital passport volumes are up 14% against forecast with digital making up 17% of passport
volumes (7% more than forecasted in P11).
DVLA - International Driving Permits are ahead of P11 forecast by £0.26m and licence renewals are
ahead £0.06m.
Verify - LoA 2 volumes are ahead of forecast in P11 by 29%, driven by an upward trend in universal
credit volumes over time. The volume upside is offset by the movement of LoA 2's to price tier 2
slightly earlier than forecasted (net impact -£0.09m). PO remains Market Leader with 52% market
share and 59% conversion rate. aa
Post Office” Post Office Limited - Commercial in Confidence
POL00026934
POL00026934
Identity: P11 Trading Profit +£1.0m to forecast; YTD +£4.3m v budget
UKVI volumes still coming through as migration to new supplier is slower than anticipated
em
Actual Budget Variance Forecast Variance on Actual Budget Variance Forecast Variance = YoY
Home Office 27 17 10 17 1 13% 246 213 32 224 25 14%
DFTIDLA 08 0S 03 05 0.3(2) 46% 87 08 57 07 0%
identity Services 05 03 02 04 04 20% 44 10 ar 04 32%
Verify 08 06 2 07 04 38% 12 17 134 04 66%
Enivonment Agency 0.0 0.0 0.0 0.0 0.0 nla 06 0.2 08 O41 1%
Total Revenue 48 34 47 33 15 10% 438 63 467 44 8%
Cost Of Sales 7) (0.2) (0.4) (0.5) (0.1) 102% (4.8) 18) (64) (0.2) 79%
Net Income 42 23 13 2.8 44-18% 394 4 40.3 38 0%
Agenis Pay (0.9) (07) (0.2) (0.7) (2) nia (78) 0.6) (7.8) (5) nia
Staff Costs (0.3) (0.2) (0.4) (0.2) (0.1) nla (49) 0.1) (1.9) (0.1) nia
Managed Services - Penalties (0) (0.0) 00 (0.0) 00 0% (06) o4 (05) (00) 0%
Postage (0.4) (0.2) (0.2) (0.2) 02 5% (2.6) 05) (3.0) 0.1) 18%
Other (0.0) (0.2) 02 (0.2) 04 -377% aa) 03 (0.9) O41 33%
Trading Profit 25 16 0.9 45 40-21% 25.2 43 26.2 3.3 -1%
® Home Office strong performance against forecast of +£1.0m is driven by UKVI BRP volumes (+0.6m)
and Digital Passports (+0.2m). Forecast assumed UKVI BRP volumes stopping in P9 however due to a
delay in migration to the new supplier, we have attained additional net income of £1.2m in P10 and
P11. UKVI BRP volumes are expected to continue to bring an additional upside in P12, however at
lower levels as customers begin to complete transactions.
DVLA upside is due to current BREXIT discussions driving an over performance on International Driving
Licences.
© Postage overspend is in line with higher volumes for Passports. YTD postage is flat on forecast.
¢
Post Office” Post Office Limited - Commercial in Confidence
POL00026934
POL00026934
Finance & Operations: P11 Trading Profit +£1.5m to forecast;
YTD (£0.1m) v budget
em Period 11 Year to Date
Actual Budget Variance Forecast Variance YoY Actual Budget Variance Forecast Variance YoY
Revenue 06 07 (4) 07 (0.4) 412% 39 99 (4.0) 92 (0.2) 9%
Cost Of Sales 0.0 0.0 0.0 0.0 0.0 nla o4 0.0 ot 04 0.0 nla
Net income 06 07 (0.1) O7 (0.4) -14% 9.0 99 (0.9) 9.3 (0.2) 7%
Staff Costs (44) (42) 03) 43) (0.1) 4% (48.2) (468) (14) (47.0) (12) 3%
Staff & Agent Related Costs (0.1) (0.2) 04 (0.2) 04 55% (24) (2.3) (01) (2.5) 04 18%
Property & Facilities Managemen (1.3) G4} 18 29) 16@)-187% (29.5) (34.6) 54 (316) 21-27%
Postage (0.5) (05) 00 05) 0.0 73% 64) 63) (0.0) 64) 00 12%
Stationery 0.6) (0.3) (0.3) (0.3) 09 18% 64) (3.2) (22) 3.9) (1.8) 10%
Finance & Losses 0.5) (0.8) 03 0.8) 0.3Q) 127% (88) (86) (0.2) (83) (0.5) 17%
Vehicles (0.2) (0.2) 0.0 (02) (0.0) 28% (29) (3.2) 03 (28) (0.1) %
Other 0.2) (0.5) (0.2) (0.8) 0.4 -109% (4.7) (4.0) (0.7) (4.8) 02 60%
Trading Profit 7.8) (2.0) 42 83) 15-22% (993) (99.2) (0.1) (98.2) (1.2) 5%
@ > £1.3m Poplar compensation received; accounting consistent with treatment of
Trafalgar Square compensation and has been agreed with PwC.
@ £0.28m relates to printer cartridges with key drivers being looked into further.
©® Losses run rate has slowed down from previous periods. Also noted £0.25m of
recoveries from prior period robberies and burglaries.
Post Office” Post Office Limited - Commercial in Confidence
POL00026934
POL00026934
CIO: P11 (£0.2m) adverse to forecast; YTD (£1.8m) v budget
Period -14 YTD
it Actual Budget Variance Forecast Variance YoY ‘Actual Budget Variance Forecast Variance YoY
Staff Costs 08 05 (0.3) 06 (0.2) (48%) 60 57 3) 57 (0.3) (36%)
Staff & Agent Related Costs 0.0 0.0 0.0 04 01 976% 03 04 = 04 05 0.1 (28%)
IT infrastructure & IT Services 73 70 4) 67 06)G@) (10%) 78 810 43 754 (1.7) 9%
Managed Services 00 02 02 02 01 ~ 546% 25 29 (04 29 04 69%
Consultancy & Advisory Services 02 04 1) 02 0.0 © (94%) 09 #12 «04 17° 09 (33%)
Other (0.7) (4.5) (0.8) (0.2) 05 (124%) (1.8) (84) (6.6) (1.7) __0.1_(106%)
Total Operating Expenses 77 6.4 (1.3) 7.5 (0.2) 1%) 846 829 (4.8)(2) 842 (0.5) 9%
@® CIO network costs impacted by incremental line costs and increased bandwidth.
© Actual YTD vs YTD Budget - adverse £1.8m
Cost Challenge in FJ, Networks and ATOS not met, plus early release of security supplier costs, offset by YTD
lower licences costs and staff cost savings in CIO business processes and CTO Architects.
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Ne
Post Office” Post Office Limited ~ Commercial in Confidence —
POL00026934
POL00026934
Operating Expenses: HR, LRG, Communications, Group Change,
Central
Period - 14 YTD
(TSR sctual © Budget Variance Forecast Variance YoY ‘Actual Budget Variance Forecast Variance YoY @ Accrual of stretch
Staff Costs 18 16 0.1 44 (0.1) 9% 173° 164° 9) 168 = (0.5) (2%) bonus.
Staff & Agent Related Costs 02 0.2 0.0 02 (0.0} 78% 24 29 04 24 (0.1) (16%)
Finance & Losses. 02 0.1 0.1) 02 01 49% 22 26 04 24 02 25%
Other 0.4 0.1 00) ot (0.0) 90% 08 07 @41) 07 (01) 9% @® Release of
Total Operating Expenses 419 1.9 0.0 49 0.0 23% 228 22.6 (0.2) 223 (04) 0% uncommitted g rowth
Period 11 fund spend.
Actual Budget Variance Forecast Variance YoY Actual Budget Variance Forecast Variance YoY
Staff Costs 04 06 02 06 02 (33%) 6.2 63 04 65 03 (9%)
iy Staff & Agent Related Costs 0.0 0.0 0.0 0.0 (0.0) 255% 0.2 05 02 02 (0.0) 73%
Consultancy & Advisory Services 0.0 0.0 0.0 041 0.1 2657% 06 06 0.0 08 02 45%
Legal Costs 03 0.4 0.2) 0.1 (0.2) (44%) 4.2 15 03 4.0 (0.3) 200%
Other o.4 0.0) 4) 0.0 (01) 279% 07 05 2) 05 (0.2) 14%
Total Operating Expenses 08 08 (0.0) 08 (0.0) 12% 9.0 95 05 9.0 (0.0) 28%
Period - 14 YTD
Communications. Actual Budget Variance Forecast Variance YoY Actual Budget Variance Forecast Variance YoY
Staff Costs 0.2 0.2 (0.0) 0.2 (0.0) (45%) 19 1.8 (0.1) 47 (0.2) (19%)
Staff & Agent Related Costs 0.0 0.0 (0.0) 0.0 (0.0) (80%) 0.4 0.0 (0.1) 01 (0.0) (24%)
Brand & Marketing 03 0.4 (0.2) 0.4 (0.2) (42%) 3.4 28 (0.3) 3.3 02 (23%)
Other (0.0) (0.0) 0.0) 0.0 0.0 (1334%) 0.4 (0.5) (0.8) 0.4 0.0 (28%)
Total Operating Expenses 0.5 0.3 (0.2) 0.3 (0.2) (43%) 5.2 44 (4.0) 5.2 (0.0) (22%)
Period - 14 YTD
Actual Budget Variance Forecast Variance YoY ‘Actual Budget Variance Forecast Variance YoY
Staff Costs (0.2) (0.0) 01 (0.1) 0.1 (317%) (03) 3) 04 0.0 04 (240%)
Other 0.2 0.0 0.4) 0.0 (0.4) (90%) 0.3 03 (©.1) 04 (0.3) (66%)
Total Operating Expenses (0.0) 0.0 0.0 (0.0) (0.0) (6520%) 0.0 0.0 0.0 04 0.1 “#DIV/O!
Period - 14 YTD
Central Actual Budget Variance Forecast Variance. YoY Actual Budget Variance Forecast Variance YoY
Staff Costs 17 0.3 (1.4) 0.2 (1.5\2) (102%) 56 35 (2.1) 28 (2.8) (67%)
Finance & Losses (1.0) (1.3) (0.3) (0.3) 08 (154%) (24) (28) (0.3) (2.3) 01 (61%)
Growth Fund (1.6) 08 24 (0.7) 0.9 (171%) 4.2 87 75 68 56 343%
Brand & Marketing 0.1) 0.0 O41 0.1) 0.0 (147%) 05 05 (0.1) 05 00 85%
Other @.3) 0.0 0.3 (0.3) 0.0 (176%) 04 02 0.2) 0.3 (0.0) 871%
Total Operating Expenses (4.3) (0.2) 4.2 (4.4) 0.2 (244%) 54 10.2 48 8.2 28 101%
wr
C
Post Off
Post Office Limited - Commercial in Confidence
POL00026934
POL00026934
Operating Expenses: Summary
Actual Budget Variance Forecast. Variance YoY ‘Actual Budget Variance Forecast Variance YoY © Accrual for stretch
Staff Costs 159138 02.1) 14.6 0.3 @) 6%) 174.5 1664 © (8.0) 170.1 (44) (3%) bonus.
Staff & Agent Related Costs 07 08 O41 08 02 ~~ 22% 86 95 09 89 03 (1%)
IT Infrastructure & IT Services 79 75 04) 7.3 (0.8) (2)(12%) 83.2 87.4 42 824 (09) 6%
Property & Facilities Management 13 34 18 29 1.6 (83% 29.9 35.1 52 320 21 26% iC) C10 network costs
Managed Services 33°33 0) 300) 1%_=— HOB AT 03 HO OA) (3H) impacted by
Logistics 19 15 0.4) 17 0.2) 27%) 19.2 17.6 8) 188 (0.4) (13%) incremental line
Brand & Marketing 16 16 0.0) 19 02 33% 20.1 21.2 100 15 14 11% costs and increased
8 Consultancy & Advisory Services 08 07 1) 09 01 43% 73 82 09 92 19 (35%) .
Legal Costs o4 03 1) 02 (0.2) 102% 21 27 06 24 (00) 147% bandwidth.
Finance & Losses 08 1.0 02 20 1.2 @i13% 24.3 26.6 23 239 (05) 12%
Other Operating Costs 04 0.6 04 1 07 135% 135 14.8 14 17.6 44 2% © Poplar branch
Total Operating Expenses 35.0 34.1 (0.3) 365 15 11% 423.5 430.5 7.0 426.8 33 2% compensation
y1D
Actual Budget Variance Forecast Variance YoY Actual Budget Variance Forecast Variance YoY
Retail 93 82 1.2) 84 01 (14%) 107.1 108.5 13 109.3 21 (4%) © vat recovery £0.7m
FS&T 47 38 (0.9) 5.0 03 6% 51.8 © 50.9 (09) 511 (0.7) (1%) greater than
PO Insurance 22 26 03 22 0) (34%) 22.9 266 36 238 09 (22%) forecast
Identity o7 os 02) 06 (0.2) a (60%) 64 62 (2) 62 (0.2) (38%) *
F&O a4 9.8 13 101 16@) 27% 108.4 109.1 08 107.4 (09) 6%
iT 77 64 78 2) (1%) 846 829 (1.8) 84.2 (05) 9%
HR 19 19 19 0.0 © 23% 228 225 © (0.2) 223 (04) (0%)
LRG 08 08 0.0) 08 0.0) 12% 90 95 05 90 (0.0) 28%
Communications 05 03° 2) 03 (0.2) (43%) 52 41 (4.0) 52 (0.0) (22%)
Central 3) @2) 1.20 (tt) 0.2 (244%) 54 10.2 48 82 28 101%
SPO @0) 0.0 0.0 (0.0) (0.0) _(5520%) 0.0 0.0 0.0 O41 4 nla
TOTAL 35.0 34.1 (@.9) 365 15 11% 423.5 430.5 7.0 426.8 33 2%
Post Off
Post Office Limited - Commercial in Confidence
POL00026934
POL00026934
Change Spend
YTD spend is in line with forecast including savings of unallocated challenge
during the latest forecast submission.
er .
pene Aen Ww I Gea ww desea Key Variances
Aetual Actual,
9 Forecast 963 Forecast, «948d Forecast Forecast FYIBI. 1819
etat as a) wy ns Gt) ak a) as Variance driven due tom ssing postings of accruals in the month {will be
Mails Programmes a1 03—fot} 238d 24 : corrected in P12 for year end position)
Cash & Barking Services : : : : : Underspend mainly due to decision to change the number of DMB exits due to
Bil Paymerts Projects 00 os) eae 8B HG) AL kaka : resource constraints, (10 branches scheduled for 18/19 will now reduce to 5, all
Automation 00 on {eo} 26 25 ol 28 Ol remaining in 19/20)
owe 22-29 foe} Szt 533, fty(@) sea 75758 VID variance is mainly driven from fewer branches delivered vs. target and
Network Development 1719 oa} 150184 rr er) recharges to Parcel Shop and Automated Locals. Significant delivery in P12
Network Transformation 1924 fot uz 8 : : planned,
solar ti 0703 939 09 Variance is mainly due to PO express timing of Kick-off (saving) & Simplification
Othe Retail 04 0s fot} 5 : savings on closure,
2 Financial Services & Telecoms 1517 (02) 200204 m2 2 ns Variance is mainiy driven from Digital Identity due to re-phasing of distribution
tagle a2 of Od 18 18 _ activities to deliver MVP1 resulting in a slower burn rate (timing-phasing) and
coms 06 08 += oa} S788 na 2s 116 deiays in Digital Certified Copy project as itis stl! in assess phase due to deiay in
other 06 07 fot} = 108103 oa) 02) og Kick-off (timing -delay)
ost Offs surance at dt 0p _105__104 16 ia 4s Variance comes from a submission error in the forecast for Project Safe Haven
identity 02 0s {0.3} 27 30 . - - {saving}.
8 Distal $3___67__ (04) _ 6160 44 36 084269 Variance mainiy driven from payments brought forward, overall project will
UC Branch Deptoyment (04) (eal 30030 U3 06 ffl 073) 3) (06 increase by £0.1m,
Teck Ofce po 20 TAB RSNA Tee 04098 Variance is mainiy driven from project Arrow where there have been delays in
wee te oon te ny “ RYO) Ce os os eg project team expansion whilst project deliverables are reviewed along with YTD
Pentti Boo mot oas OF so ao Ga Warsi of Back Ofer Transformation cos s in January & partially from a
won a 0s hg? BON) ot submission error related to prior month postings,
feplacement of Counter Reet Sip Pit 00 00 «fe; (siSssC}C(itié‘iSCtKSCSsHS Variance is mainly driven from Agents Portal where efficiency savings were
Finance & Ops 1319 (06) tat tsa 83) tgs : made on Fujitsu delivery management,{saving)
Finance ol 02 (Oj 1925 aa CY 27 Severance accruals brought forward in line with communication, (timing)
Operations 05 0g faa} 5S 62 {07} 82 : — = " ~ ~
once ty or he ws Variance due to idgation costs Drought forward in the month, (timing)
supoly Cain 0d Cit on : : Variance is driven from Travel insurance project where net rate &
Human Resources 07 od 06 23.18 05 C9) 20 32323 as web/aggregator improvements were higher than anticipated during the 943
egal Risk & Governance nr) 18017208 (41) 192 : = : forecast period
em ion 03 ta] 472003] "23 2 Variance related to forecast submission error
Grand Total FY 2018/19 Setore Sale Of Assets 2A Bo {2.8} 281 2515 (33), 278.2 317308 08 360 402 7 -
Sas Ol heats - a - Variance related to contractial remediating of prior shortfall in benefits during
Tota Ginge Gi Bs ia) is ss aay a oe project's completion.
hallenge 3] 23 =o] 46 72) -
‘Total Change FY 2018/19 RA Ee 05 219413 06 264.5 317 308 08 360 402
ofw
capex 6 10S a8 ass 28355
Exceptional 3696 00” ile ~1167 ~~) ~~—~1290 (a8
EY)
Post Off Post Office Limited - Commercial in Confidence
Cash Holding Position
POL00026934
POL00026934
Reporting
Period
cm Period! Period 2 Period D I Period 1
Fy-me FY-T/8 I FY-eB I FY-B/D
Network Cash Inventory (before Demonet.)
Branch
£ Cash Holdings 4864 543.2 449.7 506.3
FX Cash Holdings 557 60.0 80.7 59.8
5421 603.2 5004 566.1
Cash Centres,
Awaiting Processing
Inward Rems 48.1 21.2 33.4 158.4
Outw ard Rems in Transit 372 55.2 287 39.2
‘Machine Room - Awaiting Processing
(Old £1 Coins
Total - Awaiting Processing (Cash Centres) 138.8 112.9. 62.5 197.8
Total - Buffer (Cash Centres) 50.4 134.5 83.0 60.3
Cheques, Debit Cards, ete. 133 139 36 134
ATM Holdings - Cvit filed 142 147 213 180
Other 30 26 - (1.9)
Network Cash (before Demonet.) 761.8 881.8 670.8. 853.7
Cash in BoE Bond
Total Cash Holdings 1,364.5 1,386.9 1,478.9 I 1,643.3
Funding Position
~ Cash Avaliable to Treasury 49 04 (1.0) 09
~ Government Loan (451.0) (623.0) (4850) I (586.0)
~ NRF Usage (270.4) (2376) (171.0) I (240.5)
~ WC Funding Network Gash Inventory (453) (216) (13.8) I (28.4)
(261.8)
(853.7)
Net Funding Position (761.8)
Notes - P11 FY18/19:
(1) - the equivalent data in CWC for Outward Rems in Buffer is not known
(2) - Cash Bin Holdings balance is at 4/3/19 due to timing of data collection from CWC.
vs vs vs
Prior Year Prior
Year End Period
199 (369) 56.6
41 (0.2) 94
240 © (37.1) 65.7
590 849 135.3
99 (742)
on (05)
38 33
(49) (48)
91.9 (28.1)
1869 284.5
2788 256.4
(40) os 19
(135.0) 970 (101.0)
299 (29) (69.5)
172 (65) (14.3)
“(e1s) 284 (182.9)
@ Rems are now being processed
in the normal timescales, but for
Pi1 (during the early stages of
Back Office Transition) we saw a
backlog of rems due to the team
being focused on clearing some
initial problems associated with
the new ways of working.
Branches were not impacted.
Post Offic
Post Office Limited - Commercial in Confidence
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Balance Sheet & Headroom
Balance Sheet
£m Period 11 Period 10 vPi0 I PIZFYI7 I vPi2 I Perlod 11 eVI7I VPY
Fixed Assets 542 540 2 478 63 467 75 -
Debtors 329 304 25 336 i) 296 33
Cash 626 515, m1 655, (29) 503 124
Creditors (686) (539) 49) (589) 3 (655) 1)
Pension Surplus 3 3 = 3 0 2 1
Provisions 1) (76) ©) (66) i) (65) (16)
x other 10 10 0 9 1 7 3
a Loan (686) (485) (101) (623) 37 (@5y] (135)
g Net Assets / (Liabilities) 287 272 (15) 204 53 203 53
Balance Sheet Headroom
ém Period 11 Period 10 vP10 I PI2FYI7 I vP12 I Period 11 FVI7I vPY
[Government Loan - Available Amount 950 950 : 950 - 950 :
JGovernment Loan - Drawn Amount (586) (485) (101) (623) 37 (453)[ (135)
a Headroom 364 465 (101) 327 37 499 (135)
& [Target Minimum Headroom 200 200 . 200 . 200 -
Headroom Above/ (Below) Target 164 265 (101) 127 37 299 (135)I
Security Headroom
fm Period 14 Period 10 vP10 I PIZFYI7 I vP12 I Perlod 11 FVI7I vPY
Network Cash 613 500 113 644 (31) 491 122
[cash at Bank - POL 1 3 (2) 0 1 0 1
Client Debtors 152 123 28 132 19 132 20
[Trade & Other Debtors - Business DebtorsI 474 178 (4) 188 (14) 150 23
[Total Sec 940 804 136 964 (25) 774 166
Government Loan (586) (485) (101) (623) 37 (45y)[ (135)
Santander (64) (83) 2) (100) 16 (100) 16
[Total OI (670) (568) (103) (723) 53 (551)I (119)
Headroom 270 237 33 241 28 223 46
(20.
; \
Post Office" Post Office Limited ~ Commercial in Confidence 7
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POST OFFICE LIMITED PAGE 1 OF 8
BOARD OF DIRECTORS DISCUSSION PAPER
Author: Cem Oztoprak Sponsor: Alisdair Cameron Meeting date: 25 March 2019
Executive Summary
Context
Following the Board in January we were expecting to revert with a budget for 2019/20
recommended for approval.
Trading profit was projected at £77m before any accounting changes, an increase both on
the current year (c. £60m) and on the Three Year Plan (£66m). This included one quarter’s
benefit assumed from Banking Framework 2 net of the change in Verify pricing, the impact
of the Bank of Ireland deal, reverting to 52 weeks and starting higher agents’ pay for deposits
three months’ early.
We were going to recommend STIP at 90% EBITDAS with the 10% on change benefit delivery
with 10% gaps from one target to minimum and stretch.
This had been largely agreed across the business with some £9m of ungrounded challenge
being sought from further cost reductions, largely assumed to be flowing from the McKinseys
work. The change plan of £170m left us broadly cash neutral for the year.
Questions addressed in this report
1- What are we now recommending?
2- What was the supporting detail from the draft budget?
Conclusion
As a result of the verdict on the Group Litigation Order, we are no longer recommending a
budget at this stage, for reasons set out below. The report therefore sets out the basis of
the budget we would have recommended to give a context for future discussions and does
not represent a final view.
We are requesting approval from the Board to revert with a revised budget at end April
(special call) or at the next meeting at end May.
We have reached this conclusion reluctantly because we simply do not yet have a shared
view of the right budget given the GLO verdict. The questions we need to answer are:
- What additional work should be undertaken to create agent processes that are
consistent with the new contractual obligations and which demonstrate fairness and
transparency?
- Do we want to spend to accelerate change that simplifies processes, designs out errors
and reduces differences with agents?
- If we do, to what extent do we want to take cost savings now or improve working with
agents?
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POST OFFICE PAGE 2 OF 8
- Do we want to retain some experienced DMB staff to supplement our regional field
teams?
- What are the appropriate budgets now for losses and for the litigation itself?
- Should we spend more in 2019-20 on brand protection and support?
- Should we fund this additional change spend by slowing or stopping other initiatives,
perhaps postponing work on franchising DMBs or on parcelshop, changes that
respectively cause brand noise and irritate agents?
Input Sought
The Board is asked to add an additional call at end April to approve the budget for 2019-20
and is asked to comment on the questions being answered and the underlying content.
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POST OFFICE PAGE 3 OF 8
The Report
How is trading profit progressing YoY?
1. We expect to grow our trading profit by 66% (£77m vs. £46m) on a like for like basis
given that this years expected £60m trading profit has one-off upsides such as Wk53 and
landlord compensations for Trafalgar and Poplar branches. In addition, we expect £8.8m
of costs moving from change to BAU. These are being offset by £4.4m bonus stretch we
expect to pay this year (£60m vs. £50m) which will be budgeted at 100% achievement
for next year.
2. There has been various moving parts to deliver trading profit growth, however the key
items helping us to deliver £77m trading profit are change benefits(£42m) and banking
framework 2 upside(£18m).
3. Although there has been significant cost improvement on the back of change benefits,
there has been adverse cost implications especially in non-staff costs. £4.2m other non-
staff cost increases has been made up of;
e Call Centre costs (+£2.1m), primarily due to growth in insurance sales volumes.
e Price increase in Mail Pouches (+£0.9m)
e Telco price change & regulatory costs (+£0.5m)
e HMRC Fees for Travel Money (+£1.0m)
e Verizon bandwidth increase (+1.7m)
e Other non-staff cost efficiencies across business (-£2m)
How has the Budget moved since the last Board meeting?
4. Following the Board review in January a number of changes/challenges have been
proposed to finalise the budget with a target of £77m trading profit. These changes have
now been agreed and the final proposed P&L is as following. Please see Appendix I
breakdown by BU.
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POST OFFICE PAGE 4 OF 8
2019-20 2019-20 2018-19
=m Budget Jan Current
a Proposal 7 Board Changes Forecast YoY soctmam¥ OY,
Gross Income 989 966 23 961 28 2.9%
Cost of Sales (432) (126) (6) (127) (5) 3.9%
Net Income 857840 17 834 23 2.8%
Agents’ Pay - (383) (383) : (361) (22) 6.1%
Staff Costs (167) (466) (1) (188) 22° (11.7%)
Non Staff Costs (276) (281) 5 (274) (2) 0.7%
FRES 30° "33 (3) 34 (4) (11.8%)
POCA Other Income 12 a 1 14 (2) (14.3%)
Payzone 4 3 1 1 3 207.7%
Trading Profit 77 57 20 60 17 28.3%
5. After the first round of reviews, revenue has improved by £23m which is the main driver
for trading profit increase. A major part of the increase came from FS&T following BOI
negotiations which has contributed £13m of £23m revenue improvement.
em
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6. As we have increased revenue by £23m compared to the initial submission, the bottom
line has also improved by £22m as most of the improvements have fallen down to the
trading profit line, along with inclusion of missing change benefits. However, we had to
unwind PO Money cost reductions we had embedded in a BOI no deal scenario, as we
have concluded negotiations with a positive outcome.
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POST OFFICE PAGE 5 OF 8
em
se Marketing improvement +£3.9m
mmo BO! Deal improvement +£1.5m
7. There have been significant YoY movements in Revenue, but the majority of growth is
expected to be achieved by volume growth in banking services as well as Banking
Framework 2; which will increase the prices by Jan 20 onwards. This growth more than
offsets the reductions in POCA, PO Money, Verify and ATMs. Please see Appendix II
breakdown by product.
em
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010.0
1020.0 16.6 RY ee se
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ae _—
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8. In addition to revenue growth there has been significant reduction in various cost areas
and the main reasons behind these are as following:
e Cost of Sales (+£5m): The increase is due to growth in Insurance revenues (i.e.
volume) and higher usage of aggregators (i.e. unit cost)
Strictly Confidential
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POST OFFICE PAGE 6 OF 8
e Agent’s Pay (+£22m): DMB closures increases the agent’s pay as the revenues
transition from DMB to agency branches (£17m). Additionally, the growth in banking
revenues and our decision to compensate the agency Q3 onwards is another major
factor in YoY growth (£8m)
e Staff costs (-£18m): Following DMB closures, we reduce c. 600FTE and hence the
relevant payroll savings contributes to the reduction in staff costs (-£26m).
However, this has been partly offset by the heads moving out of change to BAU
(+£9m)
¢ Non-Staff costs (-£6m): Change benefits being delivered as IT cost reductions
contributes to non-staff cost reduction.
9. Lastly, the changes in other income lines are;
e FRES: (-£3m): As part of BOI negotiations, we have secured £6m fixed commissions
which helps to grow our revenue, but this results in FRES profit share reduction.
e POCA Other Income (£2m): This reflects the slight reduction in interest earning total
POCA balance held in JPMorgan.
Is the proposed trading profit target the right one?
10.There has been a few key commercial changes in the business as previously discussed
and the proposed £77m trading profit target reflects all of these changes post 3YP. In
addition to £77m trading profit, we will show additional £9m improvement in our trading
profit budget to incorporate the anticipated impact of the new lease standard (IFRS16).
£m
3YP Target 66
Banking framework rate upside 18
Verify pricing downside (6)
BOI negotiations (5)
Payzone 4
Change to BAU (5)
Further cost challenge 5
2019/20 Target 77
Change in Lease Accounting Standards * 9
2019/20 restated Target 86
*Because we are in the process of selling quite a few long leasehold properties,
disposing/terminating other property leases, and we are switching supplier for
motor vehicle leases, the IFRS 16 benefit is still to be confirmed.
11.As we can reconcile the target back to 3YP with key commercial movements, we still have
c. £9m unallocated challenged sitting in business unit's submissions which is one of the
main reasons why we can’t shoot for higher trading profit target.
12.The marketing plan has been increased YoY to incorporate the additional activities we
would like to do such as direct TV campaign for life insurance, digital identity product
launch, new credit card communications as well as telco fibre broadband offering. Unlike
previous years there is no growth fund as we have a fully allocated marketing plan for
the year.
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POST OFFICE PAGE 7 OF 8
What's the status on change plan?
13.The proposed budget for 2019-20 change spend is £170m which reflects the prioritisation
review results and it’s expected to deliver £42m YoY benefit. Please see the Appendix III
for project level details. The change plan may need to be re-prioritised as a result of the
GLO.
What should be our STIP target for 2019-20?
14.Our 2018-19 STIP targets is made up of 80% trading profit and 20% delivering key
change initiatives (POLSAP, HRSAP, HNGX and Customer Hub) along with a gateway
criteria of retaining 11,500 branch locations.
15.We propose to have the similar pattern for 2019-20 STIP targets.
Gateway: retaining 11,500 branch locations
Performance:
© 90% Trading Profit of £77m with (+/-) 10% range in each side.
« 10% Delivery of change benefits with (+/-) 10% range in each side.
How are we proposing to manage the balance sheet in 2019-20?
16.The Balance Sheet, Cash and Headroom positions have been prepared and are subject to
update following the final 2018-19 outturn position. The key assumptions made are:
e £50m Network Subsidy payments will be drawn down on a quarterly basis in line with
previous years and £42m investment funding will be drawn in Q1 in line with the
proposed spending pattern.
e Branch holdings are reduced down to c. £500m, including the adverse impact of banking
framework by end of next year vs. 2018-19 YTD avg. of £520m.
e Cash centre balances are held at current levels, subject to seasonal fluctuations.
17. The net inflow for the year is c. £25m which will be kept as a contingency for Group
Litigation.
FY1920
Trading Profit 77.0
Interest Expense (8.5)
Change Spend (incl. PayZone Acq.) (170.0)
Investment Funding 42.0
NSP 50.0
Incremental Working Capital 35.2
Available funding 25.6
18.Incremental working capital improvement is mainly as a result of how the year end dates
fall within the calendar month (31-Mar-19 v 29-Mar-20) which increases the payables
balances for 19/20; specifically agents pay and salary payables balances.
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POST OFFICE PAGE 8 OF 8
19.Month-end headroom is not expected to exceed the £750m threshold but as always will
be tight over the Christmas period and will need to be closely monitored.
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POST OFFICE
Appendix I - Trading profit by BU
2019-20 2018-19
Budget 2019-20 Changes Current
J
fi
Retail
Payzone 4.0
FS&T 109.4
Marketing (14.7) (18%)
PO! Marketing (9.7)
PO Insurance 19.5 3.7 19%
(excl. marketing) 32.9
Identity 15.6 32.0 (16.4) (51%)
F&O (102.9) (106.3) 3.4 (3%)
it (83.5) (91.9) 84 (9%)
HR (13.3) (11.2) (21) (41.2) (2.4) 49%
LRG (11.0) (10.2) (0.8) (10.5) (0.5) 5%
Comms (3.5) (4.9) 14 (6.1) 26 (43%)
Central (10.7) (214) 10.4 (46.6) 59 (36%)
Trading Profit 77.0 56.7 20.3 60.0 17.0 28%
88 of 19
POST OFFICE
Appendix II —- YoY Revenue Progression by product
18/19 I 19/20
Mail Trading 288.6
Mail Non-Trading 57.3
Retail and Lottery 40.8
Payment Services 24.7
POCA 29.9
ATM 29.7
Banking Services 98.6
TOTAL Retail 569.7
PO Money 44.4
Travel Money 28.2
Moneygram 27.0
Telephony 154.7
Postal Orders 14.0
Other FS&T 0.1
TOTAL FS&T 268.4
General 22.7
Life 13.2
Travel 19.9
Total PO Insurance 55.8
DFT/DLA 6.3
Home Office 23.9
Identity Services 5.1
Digital Identity 0.0
Verify 14.0
Other Government Services 0.8
TOTAL Identity Services 50.2
SuppW Cha. _ 104
Other Income
TOTAL GROSS INCOME
Strictly Confidential
I Budget
292.8
54.3
38.5
22.7
20.4
25.0
139.7
593.6
35.9
35.4
26.7
155.0
12.7
2.7
268.3
25.6
22.0
24.8
RA
68
20.3
6.2
15
5.4
0.6
40.8
98
4.2 1.5%
(3.0) 5.2% &
(23) 5.7%
(2.0) -7.9% &
(9.5) -31.6%
(4.7) -15.9% I
41.1 41.7% ¢
23.9 4.2%
(8.5) -19.2% &
7.2 25.3% 4
(0.3) -1.2%
0.4 0.2%
(1.3) -9.6%
2.7 5300.0% 4
(0.1) 0.0%
2.9 12.7%
8.9 67.4% 4
4.9 24.4% 4p
16.6 29.8%
0.5 7.5% 4
(3.6) -15.2% &
11 22.5% 4
1.5 100.0% 4
(8.7) -61.6% G
(0.2) -28.6% &
(9.4) -18.6%
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2 Draft 2019/20 Annual Strategic Plan and Budg
POST OFFICE
Appendix III - Change Plan & Benefits by BU
4 a70
066
400.00
2im002 I I
163.500, i
ye
75000
1g00000 38000
400 906
ssrso00 20000
cree "Bock Oftce Systems 4.875.000.
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2.268.177 ‘375.000.
700.250
eo
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_ \z80m ena
2 soeos.eas 75357 A ‘iaa.b00)
: 0.200 ane : aaa
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{Taleo Pr Ss 240,000 a 272,500
ee ME cc _Rowasan "4sr2 00
ee z 1,200,683. Seale Wiaeain o Tevee Wa emeen Gk rem seni) 6.526.105, 1.405 108,
ne <fono00
806 252 = 9 367208 sea 408
deel Sern fon Petre) eee Sh ae - i 1
53,005 7 2,195,000, °
1,002,988, 10 169,980,107 41,881,605,
1,290,805. “518,622. —_—_—_—_—_—
tease 7,570,658
Strictly Confidentiat
@ Lirnited Board-25/03/19 89 of 191
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POST OFFICE BOARD PAGE 1 OF S
Network Reporting
Author: Tom Moran Sponsor: Alisdair Cameron Meeting date: 25" March 2019
Executive Summary
Context
Post Office is proud of its social purpose, codified in our funding agreement with
government as maintaining a network of at least 11,500 branches providing access to
an agreed set of ‘services of general economic interest’ (SGEI). We currently receive a
Network Subsidy Payment on this basis. This paper updates on our strong current
performance and proposed next steps to further improve how we monitor and report.
Questions addressed in this report
1. What are Post Office’s commitments under the funding agreement and how does it
perform against them?
2. What are our current processes for calculating and assuring these requirements
and how will we be improving them?
3. What is the Network Subsidy Payment (NSP) and how is it calculated?
4. What do we need to do next to progress?
Conclusion
1. Post Office is meeting its targets on branch numbers, access criteria and provision
of SGEI (core services such as cash, pensions and bill payment).
2. Internal Audit has just assessed our approach and compliance and not identified
any significant issues. We have recently automated the branch number report and,
after extensive dual running, will move to the new approach in April. SGEI
reporting will follow, and we will be presenting key reports to Board for approval.
We are moving to a quicker, automated system and presenting the annual Network
Report to the Board for approval for the first time this year.
3. The Network Subsidy Payment, up to £60m in 2018-19, is capped at the economic
cost of operating loss-making branches. This is currently estimated at just over
£70m for the full year.
4, Plans are already in place: the Network Report and SGEI Statement will be
produced and assured after year end and automated reporting will start in April.
Input Sought Input Received
1. To note the paper and endorse the 2. Existing agreed processes and the
proposed approach to strengthen recent Internal Audit report on this
assurance by having Board review the subject. The paper has been reviewed
Network and SGEI reports. by the Group Executive.
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The Report
What is the need or opportunity and why now?
he s. of our work numb criteria
1. Post Office is unique amongst commercial businesses in having a social purpose to
provide essential products and services to communities across the country, even in
the thousands of locations where it is not commercially viable. We are proud to do
so, and have confirmed this position in our Funding Agreement with government.
This makes clear that "the Secretary of State expects POL to maintain a network of
at least 11,500 Branches for the duration of the Funding Period...[of which]...at
least 11,000...shall be required to provide all of the SGEI Services.”! SGEI, or
Services of General Economic Interest, include: benefits such as pensions;
passports; bill payments; postal services, and universal access to cash.
2. Providing these SGEI is a prerequisite of the (up to) £160m of Network Subsidy
Payment (NSP) for the period 2018-2021.? Post Office has maintained a network of
at least 11,500 and we will end the year at c11,600. Government clients can and
do withdraw services from branches on occasion, driving licences being one
example. These instances are allowed for in the Funding Agreement.
3. We also have a set of ‘access criteria’ designed to ensure our network remains
representative of the communities we serve, particularly in rural areas. These
largely relate to x percent of the UK population being within y distance of a Post
Office, e.g. we need to ensure that, "99% of the population to be within 3 miles
and 90% of the population to be within 1 mile of their nearest Post Office outlet.’?
4. Two crucial activities are based on this: first, operational activity to ensure we
meet the criteria; and second, a calculation of the cost of maintaining “a network
of post offices beyond its optimal commercial size”. This is what determines the
amount of NSP the Post Office is given by each year.
5. We consistently exceed the criteria, as demonstrated by the latest figures from
December 2018 at Appendix 1.4 We will continue to do so and aim to increase our
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network to c12,000 in the longer term. We also assure actual availability of SGEI
across our network through “extensive operational monitoring’”® and ongoing
central analysis which identifies any issues and ensures they are both resolved in
branch and noted for reporting purposes.
6. The NSP has reduced by 72% from £215m in 2011-12 to £60m in 2018-19 (see
Appendix 2). We agreed some additional provisions relating to the NSP for the
Funding period 2018-21 and, as a consequence, will be providing a ‘Cumulative
SGEI Statement’ to UKGI for the financial year 2018/19. The provisions are:
e The amount available is "up to” a stated amount, i.e. if the cost was a figure
below £60m, it is the lower figure which would be paid;
e We must evidence the net difference between our actual performance and our
performance were we “operating without any SGEI obligations”; and
e If the cost of providing the SGEI is found to be less than the SGEI payment,
“Post Office Limited will be required to repay to the Government”.®
7. We are projecting the Cumulative SGEI Statement to demonstrate a net cost of
providing the SGEI of c£70m. This would mean that the full £60m would be paid to
Post Office (assuming appropriate validation, please see paragraphs 12-14 for
details). This figure is similar to 2017/18, reflecting the fact, that despite improved
Group profit, the number of branches required to deliver our SGEI, and the costs
associated, are largely unchanged. This is likely to improve slightly over the next
couple of years through a combination of increased contribution from Banking
Framework 2 and ongoing reductions in central costs. We do not anticipate this
resulting in the annual cost being less than the maximum amount provided for in
the Funding Agreement for the two remaining years of 2019/20 and 2020/21.
Longer term, we would expect the cost to reduce but remain significant.
What do we propose to do and why?
8. We report monthly to UKGI and produce an annual Network Report which is laid
before Parliament. We have developed and trialled a new, automated system
which will allow us to replace the existing, labour-intensive process which takes 6-
8 weeks with a near real-time output.
9. We have undertaken extensive analysis and assurance to ensure that the new
methodology retains accuracy while improving speed of reporting. Having ‘dual
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run’ the current and existing methodologies and taken UKGI through the new
approach, we will be moving to the new methodology from April 2019. The existing
approach will continue for our regular reporting on Access Criteria.
€ tive S t
10.We are proposing to introduce an additional level of assurance and to submit both
the draft Network Report and the draft Cumulative SGEI Report to the Post Office
Board this June and each subsequent year. Details of why this is needed and how
it will work are below.
11.Network numbers: each report is subject to extensive internal assurance and the
final draft report is formally signed off by the Network Development Director and
the Network Operations Director. The same process applies to the annual Network
Report, with the additional sign-off of the Retail and Group CEOs. This process has
recently been subject to an Internal Audit and found to be fit for purpose.”
12.NSP/Cumulative SGEI Statement: the Cumulative SGEI Report will be produced
using an ‘Agreed Method of Calculating Compensation’ agreed with UKGI and set
out in our Entrustment Letter.® To ensure accuracy and independence, the final
statement, which we must submit "as soon as reasonably practicable following
publication of its audited accounts” must be “accompanied by a supporting
statement from an independent financial adviser”. Accordingly, we plan to
produce the report, assure and sign it off internally and then submit it for formal
review by our external auditors as part of the Annual Reporting Accounts process.
13.While we will not be able to formally submit our final SGEI Statement until after
our Accounts are published, we will be able to produce a full draft statement,
internally approved, for Board review and assurance. We plan to do this for the
June Board, with the aim of securing Board approval of the Cumulative SGEI
Statement so it will be ready for formal submission as part of the account auditing
process shortly afterwards.
What do we need to do next to progress?
14.All plans and required resources are already in place. All required activity would
continue ‘as is’ if we decided not to progress, however we would forego the
opportunity to improve and automate our processes and to strengthen our
assurance approach.
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Appendix
1. Post Office performance against Access Criteria, December 2018
Deprived Urban Rural Postcode Districts
Criteria Total Pop. I Total Pop. Urban Pol Pop. Pop. with less than
within 3m I within im Heat P- I within within I 95% Pop. within
within 1m
im 3m 6m
Minimum 99% 90% 99% 95% 95% 0
requirement
Dec 18 99.8% 94.0% 99.9% 98.9% I 99.1% 0
Performance
2. Post Office Network Subsidy Payment and investment funding 2013-21
=NSP Investment funding Current funding period
~ (£370m funding secured:
£210m Investment and
ad £160 NSP)
nas
a0 170
we 150
259 140
£210m Investmant over 3 years
3. Services of Generali Economic Interest provided by Post Office Ltd
Categary ot service Service Provided
Processing social benefit and tax + Cash payment of state benefits including state pension, child benefits and tax credits.
credit payments to the public. + Tesuing of vouchers to eligible asyium seekers.
iding passport application forms for customers to complete and return
Processing of nationat identity cking and authentication of passport applications and supporting documentation
and ficensing scheme a data for Biometric Residence Permits,
applications + Providing vehicle licance application forms for customers to complete
+ Receiving payment for vehicle licences and Photocard Licences,
+ Services for the sale of Rod Fishing Licences.
+ Provision of facilities for payment of eleczricity, gas, telecommunications and water bills.
Payment options include pre-payment and other budgeting schemes (e.g. savings stamps)
+ Provision of facilities for payment of tax bills and social housing rents.
3 Universal payment facilities fo"
public utility services.
= Provision ef access te postal services which the universal service provider (Royal Mall Group
Limited) Is required to provide under regulatory conditions and directions issued by OFCOM in
accordance with section 36 of the Postal Services Act 2013 and the designated Universal
Service Provider Conditions issues by Ofcom 27 March 2012
4 Access to postal services
Universal access to basic cash + Provision of basic community banking facilities {cashing of cheques, cash deposit, Post Office
and banking facilities and card account and automated cash withdrawals and deposits) and cash transmission facilities
3 Government savings instruments, {postal erders), in particular to sociaily excluded customers. This includes deposits and
expecially for rural customers and withdrawals of cash by businesses local to Post Office branches.
those on Social benefits. + Access to certain Government savings instruments
Network Repor
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POST OFFICE BOARD NOTING PAPER
Retail Network Plan
Author: Torn Moran Sponsor: Debbie Smith Meeting date: 25" March 2019
Executive Summary
Context
This paper provides an update on our implementation of the customer-focused Retail
Strategy approved by Board last year. It covers the choices and progress we have
made, and how we are re-assessing our priorities and plans for the retail network in
the light of the recent GLO judgement. We also identify what further work is required
and when we intend to return to the Board to discuss our findings and proposals.
Questions addressed in this report
1. What are the key pillars of the Retail Strategy approved last year?
What progress and choices have we made and what are the next steps?
How are we changing our plan to respond to the GLO judgement?
Which topics do we need to come back to the Board on and when?
What are the latest commercial projections for the Retail business?
WPWN
Conclusion
1. The pillars are: new, segmented formats; stronger franchise relationships; and
best in class in core markets through digitisation and automation.
2. We have chosen our new formats, built over 300 Locals and franchised a further
68 DMBs. A new field team is strengthening our franchise relationships. And we
are procuring new, cheaper self-service machines as well as developing our digital
Mails offer. Next steps include further franchising, trialling Parcelshop, rolling out
the next generation of automation across our network, and rolling out ‘Branch Hub’
for agents, although we are reviewing our plans in the light of the GLO judgement
as noted below, and may accelerate, delay or stop some workstreams.
3. The work needed to respond to the GLO judgement is consistent with our strategic
priorities and plans and will be integrated in to this plan. The key workstreams we
are now accelerating are: any necessary changes to contracts; improving our
relationship with agents; and strengthening our support systems (e.g. the agent
helpdesk) and loss prevention processes.
4. Our work on agent reward, opportunities through Payzone, and accelerating our
technology plans are ongoing and we propose to report back to Board in October.
5. We are projecting an EBITDAS contribution of £251m p.a. from 2020/21 from the
Retail Business Unit, significantly higher than our initial 3YP assessment of £127m.
Input Sought Input Received
1. The Board is asked to note the 2. Retail has worked closely with Ops
progress made and give feedback on and IT on delivery to date. This paper
plans for 2019/20 and beyond. has been reviewed by FS&T, Legal
and GE.
55 Update
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The Report
What was the Retail Strategy approved last year?
1. Our aim is to build a more sustainable and profitable Retail business for Post Office
and agents that will matter even more to customers in the future than it does
today. There are 3 key pillars to this work: new, customer-led segmented formats;
stronger franchise relationships; and best in class in our core markets through
digitisation and automation.
2. The Retail Strategy set out a clear case for change: while the Retail business has
consistently hit targets, our network has become increasingly fragile due to rising
retailer costs and reduced remuneration from Post Office which have made our
operating models increasingly hard to profit from for some retailers. We have also
seen fierce competition in our target retailers from the likes of Subway, Greggs
and Costa and rising customer expectations around convenience and digitalisation.
3. This challenge is evidenced by an increasingly low ‘conversion rate’ (currently
20%) for potential franchisees. Unless this improves we will struggle to maintain a
network of at least 11,500 ‘SGEI compliant’ branches without having to rely even
more on fixed pay Outreaches. The Retail Strategy flagged that we could have an
additional 840 Outreaches by 2021 (costing an additional c£21m p.a.), plus the
cost of managing churn, which is currently at 4% across the network as a whole.*
What progress and choices have we made in implementing the Retail Strategy and
what are the next steps?
4. We have made good progress in the last year, implementing our plans while also
amending these based on customer and agent feedback from trials. We believe our
approach and aims remain appropriate but will continue to update our
implementation plans to take account of the time, money and focus required to
address the issues raised by the GLO judgement. Any future activity noted below
(and at Appendix 3) is therefore subject to change - we will provide an update on
the latest position to Board.
formats
5. Our vision is of a larger network which is more convenient for customers and
delivers our social purpose. We are clear on our future network, informed by our
‘Network Blueprint’ and customer & agent research (see Appendix 2).
6. Our thinking has evolved since we first presented the Retail Strategy in 2018. We
are no longer pursuing standalone self-service kiosks (i.e. where there is not
already a Post Office). This has proven unattractive to agents due to the need to
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‘host’ self-service.? We have increased our network ambitions and want to increase
“SGEI compliant’ branches from c11,600 to c12,000 over the next 2-3 years.
7. We have developed the concept of ‘catalogue’ products in New Locals. All New
Locals offer mails, banking, bill pay and benefit payments. In addition the agent,
working with their area manager, will be able to add ‘catalogue’ products based on
local customer need and profitability. Area Managers will work in partnership with
agents, using a simple framework and data to review requests.*
8. Since acquiring PayZone, our newest format, in October 2018 we have focused on
integrating the two businesses, ensuring our combined networks are well-placed to
win new bill pay contracts: we have secured new and exclusive contracts with
Scottish Energy and Wessex Water, agreed access to Anglian Water and Thames
Water, and are in tenders with E.On and, crucially, British Gas.
9. We will return to Board with proposals for further growth options later in 2019,
having already completed an initial assessment which has identified the
opportunities. These including developing a slimmed-down banking offer, parcel
pick-up and drop-off, and developing Payzone’s technology to compete with
PayPoint’s new ‘One’ ePoS device.
10. We have concluded a comprehensive joint review with FS&T which has identified
how we can reduce compliance requirements on agents and the field team by
removing some products (Telco and Life Insurance) from c7,800 branches where
they are very rarely sold>. We will work to improve lead generation in branch and
focus FS in our full-range Plus model and on-line.
Strong Franchi
11.Low conversion rates (20%) and significant churn (4%p.a.), dissatisfaction from
Multiples and negative agent feedback proved we need to be a better franchise
partner, something which is now more important than ever:
e Engagement & communications: Our new ‘Branch Hub’ app is already
being used by over 1,000 branches, to manage IT incidents and avoid high
IT charges (a call to the Atos IT service desk costs us £9.60 and a
Computacenter engineer visit costs £92). Next steps are to roll-out digital
‘Branch Messaging’, coin ordering and MI in Q1 2019/20.
e Performance measures: Our performance measures span sales and
operational metrics, so that field teams will know where to focus their
efforts. We have also introduced a Branch Insight Tool to allow the field
team to address operational concerns when they visit a branch. Along with
Case Management data measuring the volume and type of calls for help into
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the Branch Support Centre, we can be much more targeted in field follow up
activity, e.g. extra training, relationship visit or an audit. Early intervention
and support is a priority area, particularly in light of the GLO judgment.
e¢ Agent pay & reward: Agents routinely identify reward as the single most
important aspect of the franchise relationship, and also generally cite Post
Office as insufficiently profitable. The fundamental review we have
conducted on agents’ reward has looked at how to create conditions for a
commercially sustainable retail proposition. This has identified:
i. Agent reward has reduced by c£90m since 2012 to c£350m now with
the same period seeing significant increases in retailer costs (e.g.
minimum wage has increased by 33%°). The change in agent reward
is is primarily through Network Transformation and the move from
fixed to variable pay;
ii, Reducing agent reward further would be hugely damaging. In fact we
need to make targeted investments to strengthen our proposition and
recognise rising retailer costs. We will do this for business banking in
2019/20, which will make a material difference to postmasters.
Smaller increases in Mailwork and data capture for Mortgages and
Personal Loans will also be implemented next year;
iii. Moving away from our ‘all inclusive’ support model for cash,
equipment, IT support etc will only be credible and sensible if we can
significantly improve the quality (as judged by agents) of our support.
iv. We have already made significant changes to agent reward in the last
18 months, cancelling a planned pay reduction (Simplification Phase
2) and increasing rates for banking, as well as improving the fixed
pay we give to postmasters who run Outreach services. We need to
do more and have nearly completed a thorough review of agent
reward. Some changes are already decided, notably the significant
increase in business banking we will implement later this year. Others
are more complex and need to be considered as part of a wider
discussion on our overall proposition.
v. Ultimately agent pay is just one aspect of the balance between direct
profit (from remuneration), indirect reward (from footfall and
associated retail sales) and simplicity (i.e. usability and complexity of
our offer) which every potential agent will assess when considering
the Post Office value proposition. We plan to bring a discussion on
agent pay to the Board for discussion in October.
e Recruitment, on-boarding and training: We need to simplify the whole
process, from the initial website information to the business plan and
document upload process. Quick wins include replacing the formal interview
with a digital assessment, simplifying the business plan and introducing pre-
qualification questions so only credible applicants will apply. We are
reviewing our training support (including on-boarding training) and will be
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using Branch Hub to make induction easier through simple on-line training
guides and videos.
e Field team capability: We have developed a new team structure which
creates a local leadership model and provides support to improve capability
for all agents (not just the largest c3,000 as currently). We are also
developing the capability of our field teams to make changes faster, working
with retail experts Egremont on a ‘hot housing’ approach in which our field
teams work with branches to test changes at speed and roll-out those that
work at pace. Our pilot with branches has been very well-received by
postmasters and colleagues. We are looking at options to expand this
approach to Area team level so it could be replicated across the network.
e We will also continue to simplify front and back office processes, such as
simplifying the process for balancing ATMs and counting cash deposits.
12.Automation: We will deliver simpler, cheaper automation for agents in our two
core products of Mails and Banking, running ‘Design Contests’ between potential
suppliers to select new machines for both. This reduces the normal procurement
timeline from 12-18 months to 3-6, meaning we should be able to select a design
and complete the business case for investment in Q3 2019/20.
13.For Mails, automating is a key dependency for transitioning some of our small
Mains to New Locals, and for mitigating rising staff costs in Plus. In Banking, we
are working to separate in-branch customer journeys between retail/counter and
business deposit/automated as well as working with Banks to host their own
equipment (integrated into Horizon) and investing in Telecash Recycling (TCR)
units to automate deposits and withdrawals. Both Mails and Cash automation
should allow us to effectively offer extended hours for full shop opening hours.
14. Digitisation in Mails: We have moved our focus away from developing an App,
towards developing a digital platform that will enable customers to start key
journeys online before completing in branch, bringing us in line with other parcel
operators. Release 1 of the digital platform should be available later in the year
and will enable customers to send items to the UK and internationally.
What work is underway to address the GLO judgement findings across our network?
15.The recent GLO judgement has underlined the need to improve the way we work
with agents and we are currently reviewing all aspects of our relationship with
franchisees to prioritise this work. This work is fast-moving and we will provide an
update on the latest position at Board.
16.As well as responding directly to the issues raised by the GLO Judgement, we are
also reviewing all aspects of our Retail plan and deciding where we should delay,
accelerate or stop to manage stakeholder ‘noise’. Again, we will report the latest
position to Board in March.
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17.We need to accelerate our transformation of customer/agent-facing and ‘back-end’
technology to make these easier to use. This will help not just our value
proposition but also our central costs - a simpler system would reduce IT costs as
well as associated support costs, allowing us to reinvest this money in supporting
our network. We plan to bring forward a joint discussion with IT on this in October.
What are the latest commercial projections for the Retail business?
18.Assuming plans remain unchanged, the Retail Business Unit is projected to over-
deliver on our contribution. We are now projecting a Retail BU contribution of
£251m p/a by 2021, and £255m for 2023, far higher than both our initial 3YP
assessment of £127m and our 2018 reassessment which saw EBITDAS slipping to
£120m in a ‘do nothing’ scenario.
19.There are three key drivers of this improved profitability:
e Banking Framework 2, which provides an extra £101m p.a. from 2020;
¢ accelerated DMB activity, which delivers an extra £11m p.a. by 2022; and
e clarity on the P&L benefits of new formats and better franchising support.
20.There are also wider benefits to the changes we are making, such as reduced
operational costs. As we create a more attractive and better supported proposition,
churn will reduce. For example, retaining 50 existing Locals which would otherwise
have churned means 25 fewer loss-making Outreach branches and 25 fewer
temporary operators. This would reduce capex by £0.3m and improve trading
profit by £1.2m p.a., as well as reducing the field and head office resource which
we could reinvest in better supporting our agents.
21.Furthermore, refining our loss prevention strategy should improve losses:
achieving the 10% reduction in losses we have targeted would improve profit by
£0.6m p.a., albeit new risks as a result of the GLO judgment may now be
introduced and this is therefore an area under close review. These actions will
mitigate some or all of the £12m ‘Network Risk’ identified in Appendix 5 (which
consists of two ‘waterfall’ charts which set out our P&L forecast for the Retail
Business unit) below. Furthermore, a larger more accessible and sustainable
network will be more attractive to our all of our clients across mails, banking,
payments and travel, which should help us to win and retain contracts.
22.Excluding the commercial benefits from BF2 and PZ acquisition, the underlying
performance improves £10m with programme benefits of £26m mitigating network
risk and inflationary pressures. Much of the activity we are planning in relation to
our network is about making it more profitable for agents (e.g. through Branch
Hub) and to retain its relevance for customers (e.g. through Parcelshop as a new
format). The P&L benefit of these initiatives is relatively small but we see them
collectively as an integral part of ensuring we have a sustainably profitable
network for both agents and Post Office which will be more convenient for our
customers than it is today.
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Appendix
1. Retail network ‘plan on a page’ 2019/20
Post Office formats
Progress and next steps in building our future network
High-level overview of an agent’s profit from running a Post Office
Profit & Loss projections for Retail, 2018/19-23/24
2.
3.
4.
5.
1. Retail network ‘plan on a page’ 2019/20 (as of 18.03.19)
Bec 2 oeacons boxe
toca 4 Sober to AR coron
Deets ras
Beetle
Senate Athos wok
ve A soerehiouendancvomensetnes
emer Support) Repti J tere
ew nsoneacy erm le No as
acannon ~ ito cesT
fe mince & MSS
Now Ataanhaovie
Ponsa
2. Post Office formats’
CUSTOMERS WILL IN
Ra § ES
LY START THEIR JOURNEY DIGITALLY.
THOME OR ON THEIR MC
Tancet®
Aorta 4,800 10.500 1,000 12.500
customer i ; so
Sessons 4,800 3,000 i 500 - 1,500 50-78 ___ {aim to double by 2020)
‘Aomnrs) “Profit from PO: £5 .5k:£25k I =Profit from PO: £4.5k£14k + Profit from PO: £0.6 “Agent Commission: £9.2%
REWARD -Proft rom retll mac: E6-£25K _-Profit rom etal nel: £8-£13K “Profttrom etal x-sell:0.4% I Should increase as we win
Pa) + Total profit: £_ of + Total profit: £44.5k- £32 + Total profit: £14 ‘more bill pay clents
Wietoma does everything!” Meets all of my day-toway “SE.Saev and convenient 0 1 never realised {ould pay
ucts Ineluding identity Services, «Fuk renge of anking (cash aod rewwrns & digital malls Eee ons coneevons.
Insurance) avaiable
+ Automated for ransections! and II + Post Office POS will be.
simple products supported! adjacent to retaiar EPOS (ith
highly trainec stat for more printer anc sate
+ Back office anc training
requirements well be simple,
“Wiluse retail EPCS ana
+ Easy to setup in branch,
simple to operate
renaming + Retailer EPOS, with minimal
complex products. ~ Branches with over 3k ner eros wis minimal I” payzone operating model
MOOR fctnent poatonstore euetomer sessions pavand atime Bost Otc cap ee Ar emo hoes Bost
‘ombiaats replaced by high mails demand vil be fod ad ‘ Office cap ox.
I latiomaton supportedwin auomadon, ‘ailer card payment 1 Wiluse retaiier cash
7 Numbers per format represent the ideal future ‘Network Blueprint’. Agents reward assumes viable retail offer.
Strictly Confidential
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3. Progress and next steps in building our future network
Area: Progress / Next steps*:
¢ 68 franchised in 2018/19.
e 74 to be franchised in 2019/20, reducing total by 61% over 24 months
DMB to 100.
¢ Trialling a ‘fixed contract solution / temp managed’ in 5 branches in Q2
19/20 to determine whether it is suitable for wider use.
¢ 338 NNLs and 135 NT conversions in 18/19.
New
Network e Plan for a minimum of 220 more NNLs in 19/20.
Locations ° Average NNL weekly customer sessions are 400, which is above the
150 threshold for sustainability.
Hard to e Number reduced from 473 to 410 over 18/19, and all ‘personal
hardship’ (PMs with severe illness) cases resolved.
Place ¢ Identify permanent solution for remaining branches in 19/20.
* The New Local Model will allow Post Office and agents to benefit
commercially from transitioning from a Main.
e 15 Multiples branches to migrate from Main to Local in Q1-Q3 19/20
New Locals with existing SSKs (McColls and Blakemore, 1st and 3rd largest Mults,
total over 700 branches)
e Once viability and case studies established, we will roll-out 50 in Q4
19/20 with new self-service kiosks.
« Format developed for trial in Q2 19/20 (total 300 in year), dependent
on the Horizon Integration Hub’ (HIH).
ParcelShop
re Integrated Payzone and Post Office to help us win bill pay contracts.
Payzone e Identified Payzone sites suitable for Locals or Parcelshops.
NB: With the exception of ‘New Locals’, which depends on a voluntary change by the
agent, none of the plans confirmed above require a change to agent contract.
*Next steps for 2019/20 current being reviewed and therefore subject to change.
4. High-level overview of an agent’s profit from running a Post Office
Post Office Post Office Agent's profit “gents profit Total agent
All figures are £k p/a from retail profit from
Teeersy ome from Post sales(e.g. running a
P. groceries) _ post office
Medium
600 ¢/s 14 9 5 9 14
Local 7
arge
1000 c/s 24 14 10 16 26
Small
7 1a0dw/e 50 44 6 16 22
Main
Large 140 115 25 18 43
3000 c/s
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5. Profit & Loss projections for Retail, 2018/19-23/24 (as of 18.03.19)
Figure 1: Fully-costed ‘waterfall’ showing Retail BU’s P&L forecast with key drivers:
ualised iy
300 hop Em
EBITDAS, rated Locals £1
(ém)
250
Trading Dedine Banking Framework 2
in POCA offset by 4 8
200
150 so
oO mm a
i090 + £19m DMB further
s through
fixed
is
50 cost base oeclcer
> €2m ND a -
Incrementat
reduction in Agents neem
Fix
°
189 Trading Network ish Inflation Programmes Payrome «BF Strategy 20/21. Annualised Strategy 73/28
toiatives Inkatives
Figure 2: EBITDAS improvement in the Retail BU from network-only initiatives
Trading > ze
offset by Senki
+ Field Restructure £21
160 Gey + Parcel Shop £20
wees + Automated Locals £1
RE
140 SO
120
Shops £2ra
100 f
(23m total)
e
+ £2m ND driving a red
Agents Fixed Pay
20
20
20
Network Risk Inflation Programmes Strategy «EGITDAS ~—Annualised ~—EGITDAS.
initigtives 20/21 Strat 23/34
Initianves
iy Confidential
BSI
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IRRELEVANT
Board In
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22.Governance: PO and Bol will agree enhanced governance arrangements covering, inter alia,
clearer roles and responsibilities, more agile decision-making, annual performance reviews,
Group to Group engagement, assurances around a better balanced book etc.
Current Accounts
23.As previously advised, BoI has been seeking to exit our existing current account product for
some time - primarily because the increased costs of regulation have made the product
commercially unsustainable for them. Because of their time pressures in this regard, we have
been negotiating on current accounts separately to the rest of the deal.
24. The existing proposition is not fit for purpose for our customers and therefore we have been
supportive of withdrawal in principle - however, only on the basis that we get released from
exclusivity on any type of current account proposition contemporaneously.
25. Bol finally agreed to that pre-condition on 7th March and therefore we are now starting a
phased withdrawal of the existing product. Critically, though, we now have the opportunity
to explore a new partnership in SME transactional banking, which will likely be used to
strengthen a wider Post Office SME proposition - an opportunity the business is starting to
think through.
The latest position on Credit Cards and our negotiations with Capital One
26. By way of reminder, Bol initiated a sale process for its whole book, branded AA, NI and Post
Office. Following a competitive tender process, three offers were received: full offers (i.e.
both front and back book) from NewDay and Jaja, and a front book offer for the Post Office
only from CapOne.
27.PO and Bol must come to a joint agreement on the right way forward for the credit cards
business; neither party has the ability to proceed with the new agreements independently.
PO have been supported with specialist credit cards advice and assurance from First
Annapolis throughout this process.
28. Bol’s preferred bidder is JaJa, who will take on all the existing back books, as well as the AA
and NI front books. Bol is likely to make a loss on the back book sale (and there is unlikely
to be any premium); however, Bol will pay us £1-£1.2m for being out of the credit card
market (to September/October 2019).
29.PO has negotiated the opportunity to partner with CapOne, a market-leading provider.
CapOne’s offer is the most compelling, with a higher net payout, faster launch and lower
execution risk - with an overarching aim to drive sustainable and profitable growth. CapOne
is also the best strategic fit for Post Office based on key capabilities, cultural alignment and
go-to-market strategy.
30.A new agreement with CapOne means leaving behind the low engagement, back-book credit
card customers, who will transition to JaJa and ultimately be re-branded to JaJa over time.
o Whilst the back book has obviously been acquired under the Post Office brand, these
customers are not particularly loyal or engaged. And whilst JaJa is not the best future
partner, we are comfortable transitioning the back book to them (please refer to Appendix
I for more detail)
31. We took our preferred approach to the Board sub-committee in February; they were broadly
supportive of the direction of travel and our emerging recommendation, subject to
completing actions around GE engagement and providing clarity on the outstanding
commercial points, which we have set out below.
Key commercial items and remuneration with CapOne
32. PO will benefit from an upfront commission per account, ranging from £25-80 per card sale
(higher payments for more valuable near-prime customers). This accelerates our returns as
the programme scales up. The commissions per product can flex over time, to ensure
incentives remain aligned for both parties - with PO earning 50-70% of the product lifetime
expected value.
33. CapOne has shared the product lifetime expected value for the initial product set, relative to
the £25-80 upfront commission payments, which range from 50-67% against those. This
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sets a benchmark for future products and provides comfort that we can launch competitive
credit cards at attractive commission levels, which fall within the 50-70% range. PO will have
the right to audit the product lifetime expected value calculations of CapOne, including its
cost of capital.
34. We have defined two core sets of strategic product features (standard card, travel card with
0% FX) that CapOne is required to operate within, unless agreed otherwise.
35.CapOne will have the right to test and optimise pricing, underwriting and minor card features
on its own volition outside the strategic product features; it is this optimisation that helps
drive value for both PO and CapOne.
36.CapOne will deliver marketing and pay for the associated headcount cost for two years post
launch - thereafter we have the option to continue this support, though CapOne can bill us
for the cost after that point. PO and CapOne each has a £1m annual marketing commitment
for the first two and a half years.
37.A joint Management Committee (MC) will oversee the programme, with an emphasis on
transparency and strong MI.
Termination and exit
38. We are finalising the termination rights and exit provisions; the position is summarised below
and our advisors (First Annapolis) have confirmed that these terms are in line with standard
industry practices.
39, The initial contract term is for five years, with either party having the right to give notice to
purchase after three and a half years.
40.PO will be unrestricted from discussions with potential new partners, and exclusivity falls
away upon notice of purchase by PO (or its partner) to CapOne.
41. PO’s new partner could purchase the portfolio upon expiry, or PO could exit and start a new
partnership - in which case CapOne would retain the back-book.
42. PO's purchase option is tied to a specific pricing mechanism, based primarily on fair market
value but with certain protections for CapOne, given that lifetime value commission to PO is
paid entirely up-front. PO is not obligated to pay or buy anything, but has an option to
convey purchase at a designated price to a new partner.
43.Standard termination rights exist, though each party also has a right of termination on
change of control of the other party. CapOne also has the right to terminate the agreement
where it undergoes a change of control.
44. As CapOne is paying us upfront for the product lifetime expected value, in the event of exit
notice, new account commissions will tail off in the final year of the contract. We are exploring
accounting treatment options to smooth commissions over the full term of the contract.
Customer servicing and data
45.CapOne offshores its customer servicing, but with the ability for customers to transfer to a
UK agent, and has recently re-shored handling of vulnerable customers.
46.CapOne do hold their own data outside the EEA - in the US via their corporate parent and
with their offshored servicing centres in India and the Philippines. Working with our Data
Protection team, it is clear that this is their data and that this is acceptable to PO.
47.CapOne has agreed not to hold any PO data outside the EEA (e.g. if we send them a
marketing target list for a campaign).
48. We have agreed to work together to identify ways to leverage transactional data - in reality,
we will most likely need to rely on PSD2 as the easiest route to do this. CapOne’s APIs are
under development and will be fully compliant in September (our target launch date).
Requlatory relationship and LEO interdependencies
49. There is no binding obligation on PO (or a subsidiary) to become regulated; CapOne therefore
has to continue acting as a principal.
50. However, we have put in the intention that PO will apply for regulated status by two years
after commencement. PO will be able to notify CapOne if we change plans in relation to this.
92 of 19
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Items we still need to agree
51. The final termination and exit valuation provisions.
52. The final approach for managing compliance within the Appointed Representative regime.
Next steps and latest timelines
53. Contract to be agreed by the working teams by end of w/c 18" March; socialisation with key
stakeholders in w/c 25 March.
54. Aiming to be ready for signing by w/c 1* April, with likely actual signing timing to be during
that week, coinciding with Bol’s deal with JaJa, and the contract amendment between Bol
and PO releasing PO from credit card exclusivity.
55. Bol was seeking to finalise its transaction with JaJa & Centerbridge (JaJa’s private equity
backers) by mid-February, ahead of its full year-results announcement on 25'" February.
This has been delayed, mainly linked to JaJa/ Centerbridge nervousness around a no-deal
Brexit. Bol remains confident based on recent discussions that Centerbridge is comfortable
to move forward.
Key risks and mitigants
56. The main risk on credit cards is the likelihood of Bol’s with JaJa falling through; should this
occur, then Bol is unlikely to release us from exclusivity, which in turn would not allow us to
contract with CapOne. Although the likelihood is small, the mitigants PO can put in place are
limited; we are however keeping NewDay engaged as a potential fall-back option.
57. Other key risks for PO are :-
o JaJja reputational risk as PO customers migrate to JaJa: the provisions in our variation
agreement with Bol include a robust set of customer communication principles that all
parties must adhere to, in particular during the overlap period where two PO-branded
credit cards are in the market (only the new CapOne cards being available to purchase)
o jaja migration/operational risk: whilst this is strictly a Bol risk, it could have an impact.
on PO should the migration not go smoothly. We have ensured we have a ‘clean team’
approach, with red flag reporting, which will enable PO to get comfortable with the
migration plan without taking on its responsibility
58. The consumer credit cycle is in a very benign phase, and could turn as the result of normal
economic cyclicality and/or due to the impacts of Brexit. In addition, regulation in recent
years has decreased the returns of credit cards (e.g. interchange, persistent debt). With the
flexible commissions based on product lifetime expected value, PO will be exposed to such
changes. However, inflexible commissions under such a scenario would lead to misalignment
with a credit card partner, and a situation where they would stop or materially restrict writing
new cards. Hence we believe this is an appropriate outcome for PO as it aligns incentives.
Next steps
59.On the core Bol negotiations, we do not require anything further to sign the non-legally
binding HOTs.
60, We met with UKGI on the 26" of February to have a detailed run-through of the then draft
of the HoTs and were able to get them comfortable on all the material points.
61. Bol delivered signed copies of the HOTs on 22" March.
62.PO and Bol are working on a joint project to get us from HoTs to the amended agreements
by 31% May 2019. This covers the items in the HoTs, less material items that need updating,
and other items that are impacted by the changes driven by the HoTs. This project will
include work streams such as legal drafting, other key commercial items, business plan,
governance and communications; it will be governed by a joint ‘steering’ committee.
63.PO will continue to be advised through to contract signature by Fenchurch and will be
supported in the legal drafting by Linklaters (who drafted the original FSJVA).
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Appendix
Appendix I: Back book transition to JajJa
Whilst not the best future partner for Post Office, we are comfortable transitioning the back-
book to JaJa for the following reasons:
1.
Post Office will have sign-off on PO-related customer communications through the card
re-issuance
Jaja is replicating the TSYS-driven operating model used by Bol, so migration is a clean
TSYS to TSYS ‘lift and place’, which is simpler and to an extent reduces risk
Bol will receive FCA/PRA regulatory approval to transfer the customer assets to JaJa, via
an asset sale. They will assign/novate the cardholder agreements to the purchaser. If
consent of cardholders is needed for the assignment or novation, BOI will hold the
relevant agreements on trust for the purchaser until that consent is obtained (NB: no
Part VII transfer required as no deposits included)
Jaja will contract with TMS, TSYS’s in-house servicing operation, to provide all customer
servicing — TMS is a proven and highly scaled operation
Bol remains obligated to operate the programme through to migration, providing Post
Office with all of the protections in the FSJVA
Bol will have signed-off on JaJa as both the back-book and front-book including extensive
due diligence on JaJa, and will be required to gain FCA sign-off for the migration approach
(and to pass Bol’s internal governance required to request that)
JajJa is new, but the management team is deeply experienced with a track-record of
execution and innovation, and is well funded via PE firm Centerbridge
As PO's brand will be on the back book cards at migration, there is a potential reputational
risk — however, PO will have the right to send in an independent ‘clean team’ to review
Bol’s migration approach
Credit card migrations, while a material and complex undertaking, are a well-trodden
path in the UK
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BOARD DECISION PA
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BOARD DECISION PAPER
IRRELEVANT
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POST OFFICE LIMITED PAGE 1 OF 12
BOARD DECISION PAPER
Branch Hub
Author: Andrew Garner Sponsor: Alisdair Cameron Meeting date: 25" March 2019
Executive Summary
Context
The Branch Hub is focused around providing additional help and simplifying support for
our branches. This will enable the Franchisee to be more responsible for all aspects of
their operation with reduced central support. Branch Hub is a self-serve portal branch
operators and business owners use to access support through their own device. The
self-serve functionality aims to reduce the circa 600 roles which support the franchising
organisation (£30m per annum), particularly the 250 back office staff overhead dealing
with branch enquiry activity across 75,000 contacts per month.
This paper is to update the Board on the Branch Hub product roadmap/development
and how it enables the digitisation of the end to end Agent Lifecycle by 2022.
Questions addressed in this report
1. What is the opportunity and why now?
2. What benefits are to be achieved?
3. What investment is required?
Conclusion
1. Moving to self-serve meets the joint Post Office Ltd and branch operator’s desire for
simplified operational support. With simplified cash, coin, stock ordering, and online
help, it removes the need to contact NBSC over time and reduces branch operating
costs. 10k branches will be able to access Branch Hub by June 2019 with new
features being released monthly during FY 19-20 through agile methodology. This is
to the users own device; a new device will be at zero cost to Post Office.
2. Branch Hub is to enable £1.4m gross benefits in FY 19-20 across NBSC and Atos
Manila service desks and £1.9m from FY 20-21 onwards with significant potential to
go further. Simplifying the retailer proposition is another key driver, bring Post
Office into line with other concession models, e.g. Paypoint.
3. Forecasted investment is £9.7m from April 2018 to March 2020. £4.9m investment
in FY 18-19 which enables £1.9m annual cost savings into perpetuity. The forecasted
£4.8m for FY 19-20 will be requested in quarterly business cases and evaluated by
IC prior to further funds being approved.
Strictly Confide
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Input Sought Input Received
1. The Board is asked to provide approval 2. Approved by Investment Committee
of up to £4.8m investment and £0.5m on 11 March 2019.
maintenance costs during FY 19-20 (to
be drawdown on a 1/4rly basis subject
to financial hurdle rates and
performance KPIs being achieved).
Strictly Confidential
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The Report
What is the need or opportunity and why now?
1. Day to day back office processes experienced by a Postmaster need simplifying. The
immediate priorities for Post Office is to a) automate engagement where beneficial
to the user through digital self-service, b) improve direct relationships through the
Retail Field teams and c) provide a more effective two way communication channel
with the branches.
2. Work is already underway in support of an improved Franchise Proposition including
the Retail Strategy, Agent On-boarding project, Process and Contact Centre project,
Data Centre of Excellence and back office organisational reviews.
3. FY 2019-20 is fundamental to our success in attracting a healthy pipeline of new
Postmasters and Retail partners, improving application conversion and reducing
churn of successful Post Offices. The Branch Hub self-service portal delivers a digital
experience for users which should be a standard offering of a modern day retailer,
helps drive business performance and operational efficiencies fundamental to our
Post Offices’ success.
4. The raising and tracking of branch IT tickets has been in pilot since December 2019.
It has delivered tangible benefits and this opportunity needs to be exploited. 1,125
branches are live equating to circa 20% counter positions. Currently 60% of
incidents raised and 90% of web chats per month are being closed therefore avoiding
Atos Service Desk and Computacenter engineer costs. Branch Hub is to enable
£0.7m IT cost savings per annum (only £0.2m included in the Appendix 1 (Financial
Summary), £0.5m within the IT Transformation business case)
5. In parallel F&O and CIO business units have budgeted £0.7m and £0.7m cost savings
respectively in FY 2019-20, in part realised by 20% reduction in NBSC contact centre
calls and removal of the Atos Manila IT service desk. These savings have been
identified via i) product and process how to guides available online, ii) cash ordering
online, negating the need to contact the Bristol cash centre, iii) IT incident tickets
resolved via online chat and iv) the automation of stamps orders to reduce the
reliance on Swindon stores. As such, Branch Hub facilitates initiatives across Retail,
Supply Chain and our Operations functions, enabling a leaner back office over time.
What do we propose to do?
6. The vision for Branch Hub is to provide a flexible and scalable digital platform which
enables regular releases of customer value features at a low cost of change.
7. The intention is to deploy to 10,000 branches by July 2019 and deliver the high
benefit features (customer value and cost reduction) within the next 6 months to
August 2019, subject to achieving the development plan in Appendix 3.
8. Early user adoption of digital services is fundamental to the reduction of Postmaster
operating costs and Post Office realising the sustainable benefit streams. Only high
adoption and consumption of Branch Hub services will allow the termination of the
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legacy processes and systems. Therefore, our approach is focused on developing the
key features that branches are asking for, putting the users’ needs first by;
i. The Postmaster driving the prioritisation of features to be released.
ii. The Postmaster inputting into the user journeys with the software designers.
iii. The development team acting on feedback during the build and test phases.
9. Following the branch IT ticket pilot referred to in point 3, the next features include;
i. Easy access to simple product/process information to remove the
inconvenience of calling the NBSC.
ii. Two way messaging service to improve the effectiveness of communications
direct with branches and through Retail Field teams.
iii. Automation of Agent on-boarding and contract management to reduce branch
opening lead times and simplify lifecycle support model.
iv. Online ordering of coin, cash and stamp stock to remove long call wait times
and reduce contact centre call volumes/operating costs.
v. Near real time trading MI to provide improved insight into branch operating
costs and optimise sales performance.
vi. Online mandatory training modules to provide flexibility to the user and
reduce traditional training costs.
10.The software development is being delivered through agile methodology. Post Office
provides the product owner and technical assurance roles predominantly through
permanent resources. The software development and testing teams are provided by
two Fujitsu offshore agile scrum teams.
11.All new features will be piloted with small user groups to gather feedback and confirm
value is being delivered before releasing to the existing 1,000 Branch Hub users.
NFSP, Branch User Forum and Multiples are part of the pilot groups.
12.We intend to formally launch Branch Hub at the NFSP conference in April 2019 and
raise further awareness at the Retail conference in May 2019.
13.Acting on customer feedback we intend to accelerate the roll out Branch Hub to all
10,000 users by June 2019.
14.The current approach is to deploy to the user’s own device. However we are
surveying the existing 1,000 users to confirm the convenience and operability of
using a personal device which will inform our future strategy. Fujitsu and
Computacenter have both provided managed device proposals (including
deployment, support and 3G/4G connectivity costs) which we expect to be a viable
_ option for branches as a subscription charge.
12. The total forecasted investment is £9.7m from April 2018 to March 2020.
13.The £4.9m investment in FY 18-19 is targeted to deliver £0.7m cost savings in FY
19-20 and £1.9m per annum from FY 20-21 onwards (Option 1 in Table 1).
14.Option 2 and 3 (Table 1) are stretch benefit scenarios;
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i. Option 2 is dependent on securing the final 15% of users by providing a self-
funded device,
ii. Option 3 is dependent on £0.5m per annum from the new features currently
qualified from the £1.3m April - June 19 development (Agent On-Boarding
training modules and a Postmaster Fit and proper declaration).
Table 1 - Stretch benefit scenarios
=m FY 19-20 I FY 20-21
Option 1 0.7 1.9
Accelerated deployment, 50% reduction in NBSC calls, 8.5k users .
Option 2 0.9 24
Accelerated deployment, 50% reduction in NBSC calls, 10k users (i; .
Option 3 1.0 2.9
Current additional initiatives qualified for Q1 19-20 development (i) .
15.Table 2 provides a breakdown of Option 1 benefits by feature.
Table 2 - Option 1 Breakdown of benefits
FY 18-19
Feature Description of Benefit I I investment_£m I Annual Benefit_£m
Near real time Mails Decommission of Ingleby website 03
Sales MI
Branch Messaginy i
Bing Reduction in Fujitsu Memoview costs Original 29 o1
(Memoview) business case
Raising & tracking IT - ;
branch incident Reduction in Atos Service Desk calls 02
Online NBsc Reduction in NBSC calls & FTE Current 03
Product Articles (1) ;
Or ncNese business case
Reduction in NBSC calls & FTE & 2.0 04
Product Articles (2)
Oe fe additional 6
rdering oF Coin Reduction in Cash Centre calls & FTE sprints 07
and Cash
Benefits to be delivered from FY 18-19 development
16.FY 19-20 forecasted investment is £4.8m; £0.6m support and maintenance. The
benefits are being qualified and will be evaluated through quarterly agile business
cases. This will control the further drawdown of funds following strict governance to
ensure benefits are in line with hurdle rates. The development teams can be stood
down if an acceptable return on investment is not available.
17.The FY 19-20 forecast includes a £1.6m provision for NBSC redundancy costs.
18.The annual operating costs are £0.6m - This includes £0.5m cloud platform support
and £0.1m NBSC resource costs to support web chat.
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19.New features benefits are being qualified; these include but not limited to i)
stamp/marketing stock ordering, ii) Parcel Shop), iii) online ordering of currency, iv)
‘Payzone portal’, v) Fit and proper declaration and vi) additional Agent On-Boarding
features (see Appendix 3).
20.There is an opportunity to charge a monthly Branch Hub subscription fee per user
however this is conditional on high user adoption and Postmaster/Retail Partner
feedback confirming they are realising actual operational cost savings. A £3 per
month charge would deliver £0.4m income per year however this is not included in
the benefits (PayPoint charge an incremental £5 per month for users to access
ordering and news management tools through a mobile app).
OS
Risks & ¢
ge
15.The critical risks and mitigations are as follows;
Risk Description Impact Mitigation Severity I Likelihood
We are unable to Customer and I Features requested from customer feedback are
achieve high adoption _ financial prioritised in first releases. Continuous improvement
and utilisation of 10k benefits are__I actioned quickly through regular customer feedback
users by Sept 2019 delayed
Brand awareness & communication plan driven by
Owner ~ Andy Garner Retail Field teams, Branch User Forum and NFSP
forums.
Branch Hub to be established as the only channel to
access the back office services to enable legacy
processes to be withdrawn
‘An additional £1.6m I Features Branch Hub to work closely with Network Operations
redundancy provision delivering and IT Transformation (digitisation of IT incident
will be incurred asa benefits may _I calls) teams to assess the net impact NBSC FTE.
cost of realising the need to be de-
benefits scoped due to I Qualify the opportunities to redeploy existing agents
change spend I 0n e.g. Branch Hub web chat or reduced IT Service
Owner ~ Kim Abbotts —_jimitations Management teams.
We are unable to Customer A dedicated Solution Architect is recruited and high
deliver a'simple to adoption of level solution design options to be completed in
use’ and secure Branch Hub I February 2019. Solution to be live by May 19.
Single Sign On and therefore
solution for users to benefits are Accenture (and other 3°° party supplier if required) to
access Branch Hub materially prioritise the development. Accenture on board.
on a daily basis impacted
Owner - Andy Garner
Appendix
2
3
4
. Financial Summary
. Examples of user experience screenshots
. Branch Hub Product Roadmap
. Market Analysis
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1. Financial Summary
suniecosts Sunk coste
(Pit Vews) (in Yaar)
2oi7/i8 2020/21 024
a 7 a aig] si a 7 a
Ql q a 5 764 ol ql a
q q Q cA q q q q
q q p q q q q q
4387 076
Impact on EBTTDAS
‘Net Income q q q q q 7
Direct Product Coste a q q Q q q
Cost Savings a @) 734 125 1,962
Recurring Costs 0 33) (639) (eit eo)
‘Total Biipact on EBTDAS o (353) 6. 4315. 378 4,398
Other esshiteme (ie es a a a ol a
proft/ (loss) on sale of assets)
Total Pol Cashfow 4305 370
Note:-
The recurring cost savings does not include the following additional annual benefits
Branch Hub is enabling through front end self-serve development. Atos IT Service costs
savings are included in IT Transformation business case and Agent On-Boarding and Fit
and Proper are still being locked down.
Closure of the Atos Manila IT Service Desk £0.5m
. Agent On-Boarding training modules migrated from Successfactors £0.3m
iii. On-line Fit Proper declaration of a Postmaster or company director £0.2m
ictly Confidential
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. User Experience designs
1. User ‘home page’ - Design is owned by and features configured by each user
- Mobile Ready Your latest mestages
Sealey messages >
Top stiles for you
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2. Branch Hub Message ‘in box’ - Memoviews and Compliance messages
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3. Branch Hub Product Roadmap
110,000
Number of adopted users
8
Branch Hub
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10 BE qualified
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2
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4. Market Analysis
14.We engaged various retailers and corporates through our Retail team to understand
best practice of our competitors and which self-service models have been successful
in delivering benefit to their franchisees and staff members.
15.The majority of our Retail partners support deploying Branch Hub self-serve to their
own devices and are unwilling to allow staff to use their own devices during core
opening hours. Feedback direct from Postmasters, Branch User Forum and NFSP
confirms the majority of users are comfortable using their own device. However, to
achieve close to 100% adoption and optimise benefits, we will need to provide a new
managed device option to be chargeable to the user.
16.The key findings are;
PayPoint - PayPoint One provides a core Point of Sale service for £30 per
month. In addition they provide a mobile app to a user’s own device for
real time sales MI and stock management. This is £5 per month and has
had low adoption due to poor user experience and limited functionality.
Centrica - Centrica provides managed devices to support their engineers
out in the field resolve customer issues and reduce service desk calls. 13k
devices deployed over 6 months.
Co-op & WHSmith - Co-op provide an in branch HR system to colleagues
through SharePoint on its back office PCs. They have a policy of not
deploying applications to personal devices to ensure time in branch is
focused around serving customers. Similarly WHSmith do not enable
personal devices with access to support services. These are largely
managed centrally through a branch PC intranet site.
EE - EE has deployed tablets to their advisors in branch to optimise their
consumer experience. It provides access to real time sales dashboard,
check 3G/4G coverage and stock levels at point of sale. Own devices were
not chosen due to security challenges around processing customer data;
EE wanted to retain control of the device.
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POST OFFICE LIMITED
BOARD MEETING
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IRRELEVANT
ss)
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BOARD
PAGE 1 OF 2
Strictly Confidential
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Post Office Limited Board Meetings
Strictly Confidential
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eC
IRRELEVANT
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Board "
Brand/ Marketing (requested by Board at Jan 19
meeting at some point over next 12 months)
(placeholder) lOwen Woodley/ Emma Springham
Postmaster Litigation lane MacLeod Noting & Input iof 6of_—_—30) 30,30} 3030
IRRELEVANT