POLB 17(3")
POLB 17/18 - 17/33
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POST OFFICE LIMITED
(Company no. 2154540)
(the ‘Company’)
Minutes of a meeting of the BOARD
held at 12.30pm on Tuesday 28" March 2017
Present:
Tim Parker
Richard Callard
Tim Franklin
Virginia Holmes
Carla Stent
Paula Vennells
Alisdair Cameron
In Attendance:
Victoria Moss
Jane MacLeod
Kevin Gilliland
Nick Kennett
Jonathan Hill
Gary Fitton
Martin Edwards
Rob Houghton
Christian Muir
Tom Wechsler
Natasha Wilson
Apologies for Absence:
at 20 Finsbury Street, London EC2Y 9AQ
Chairman (TP)
Non-Executive Director (RC)
Non-Executive Director (TF)
Non-Executive Director (VH)
Non-Executive Director (CS)
Group Chief Executive (CEO)
Chief Financial and Operations Officer (CFOO)
Deputy Company Secretary (DCoSec)
General Counsel (GC) (Minutes POLB 17/22, 17/23 and 17/24)
Chief Executive Retail (KG) (Minute POLB 17/27)
Chief Executive Financial Services and Telecommunications (NK)
(Minutes POLB 17/25, 17/26 and 17/30(part))
Head of Financial Services Risk and Regulation (JH) (Minute
POLB 17/25)
Managing Director, First Rate Exchange Services Limited (GF)
(Minute POLB 17/26 (part))
Group Strategy Director (ME) (Minutes POLB 17/22 to 17/25)
Group Chief Information Officer (RH) (Minute POLB 17/28)
POca Procurement Lead (CM) (Minute POLB 17/27)
Government and Payment Services Director (TW) (Minute POLB
17/27)
Reward, Pensions and Performance Director (NW) (Minute POLB
17/29 (part))
Ken McCall Senior Independent Director (KM)
Alwen Lyons Company Secretary (CoSec)
POLB 17/18 INTRODUCTION
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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.
The Board noted apologies from KM and CoSec.
POLB 17/19 MINUTES OF THE PREVIOUS BOARD MEETING INCLUDING
STATUS REPORT
(a)
(b)
ACTION: RC
(c)
The minutes of the Board meeting held on 31% January 2017
and the extraordinary meeting held on 8 March 2017 were
approved and the Chairman was authorised to sign them as a
true record.
Action POLB 17/09(k): in regard to the technology strategy
update and Fujitsu, RC reported that the Government had
a satisfactory relationship with Fujitsu and that he would
put RH in touch with the appropriate person in the Cabinet
Office.
The actions status report was noted as accurate.
POLB 17/20 CEO REPORT
(a)
(b)
(c)
(d)
The CEO introduced her report, focussing on the following key
points.
Financial Performance — Period 11
The CEO reported that the business was trading well to year
end and that the target for 2016/17 of an EBITDAS of (£10m)
would certainly be beaten. She was pleased to report this very
positive position, the first time in 15 years that the Post Office
would have an operating profit.
The CEO gave thanks and credit to all GE members for this
result but in particular commended the work of Martin Kirke
who had become HR Director late in the financial year but who
had delivered the necessary HR changes and set a high
standard with his own team.
Funding Agreements
The CEO stated that a full update would be provided under
agenda items four and five but summarised that while a final
position had yet to be reached, the team was working hard and
hoped to be in a good position by the end of May. She gave
thanks to RC and his team, particularly for the current good
position with the documentation.
Network Transformation
The CEO was pleased to report that with KG she had attended
the opening of the 7,000" branch. The branch at Wheatley in
Oxfordshire was a well performing branch, now in a good new
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location.
Banking Framework
The CEO confirmed that the budget figures for 2017/18
included a full fee for the banking framework. The framework
was growing year on year and Martin Kearsley, Banking
Services Director, had recently given an interview for BBC
radio. Increased media coverage of the banking framework
was anticipated. The House of Lords had recently been
extremely positive about the banking services provided by Post
Office and recommended that these services be proactively
promoted.
BBC Tender
The CEO reported on progress with the BBC TV Licence
tender, confirming that the final stage had been reached with
the only other bidder being PayPoint, which currently held the
contract. There was a potential issue with transition costs
which could be around £3.5m if there were content changes.
The CEO continued that the contract was considered to be
worthwhile even at a breakeven or small profit position. The
scope for working the contract to become more profitable once
won was marginal but the key consideration was how the
contract would drive footfall.
The Board noted that for both the BBC tender and for POCA
the main benefit was footfall and questioned whether there
should be a reduction in what agents were paid for high footfall
activities. The CEO confirmed that the current proposal was
for between 7 and 12 pence per transaction, a reduction from
14 pence. There was potential to drop the per transaction
payment to between 6 and 12 pence but currently in multiples
PayPoint was paying between 14 and 16 pence so a drop
down to 6 pence, for example, would be very unpopular and
challenging to implement and manage.
The Board agreed that robust discussion would be
necessary around what agents were paid, how to structure
agents pay with high footfall activities and the benefit to
the network.
The CEO confirmed that the tender would be submitted before
the end of the week with a final decision expected in May
2017. The Board expressed its support for the BBC TV
Licence tender submission and noted that success with the
tender would assist with funding conversations with the
Government.
Supply Chain
The CEO confirmed that the restructure of Supply Chain had
progressed well and was now entering its final phase. She
commended the CFOO and his team for the success of the
project. The Board acknowledged that the programme had
been well executed and was encouraged by this demonstration
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of the business’ ability to undertake such a project which would
have enormous benefits. The CFOO reported some initial
problems in London East for which a remedial plan was in
place but that otherwise all was running well.
Pensions
Regarding the closure of the deferred pension scheme, the
CEO wished to formally thank VH for her assistance and to
comment on the great work by NW and her team. The CFOO
also thanked RC who had assisted with the engagement with
HM Treasury.
Industrial Relations
Regarding industrial relations, the CEO confirmed that there
were no particular risks or concerns to report at the present
time. Dave Ward had requested a meeting with the CEO with
a view to ending the dispute and while PV was happy to have
that meeting she had been clear that Post Office had no
intention of a change in approach.
The Chairman stated that with Post Office in sight of reaching
a position of profitability, there was a challenge to how the
importance of that might be communicated to staff. Staff
needed to be aligned to the idea that profitability was key not
for its own sake but for necessary future reinvestment. The
CEO confirmed that staff understood that reaching a position
of profit was simply a point in the journey and while that point
should be celebrated this would be balanced with an
acknowledgement of the challenges remaining ahead.
Mails
The CEO confirmed that further to the discussion at the
previous meeting with KG and Mark Siviter, Managing Director
Mails and Retail, they were now aligned on the matter of net
discount.
Project Sparrow
The CEO confirmed that JM would provide an update on
Project Sparrow when she attended for a later item on the
agenda.
The Chairman thanked the CEO for her report. The Board
noted the report from the CEO.
POLB 17/21 FINANCIAL REPORT
(a)
(b)
The CFOO presented the financial performance report for
period 11 2016/17 and confirmed that financial performance
had improved in the last few months with all forecasts now
suggesting breakeven by the end of 2016/17 on a like for like
basis. The profit share true up with Bank of Ireland had been
received in period 11.
The CFOO continued that accounting for the closure of the DB
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pension scheme had been discussed by the Audit, Risk and
Compliance Committee on 28 March 2017. It had been
agreed that this must not be taken below the line and that the
supply chain benefits P&L should be stripped out. This was
subject to audit but it was expected that the proposed
approach would be accepted.
The CFOO reported that all branches had hit targets, the
organisation’s cashflow was fine and close to forecast. It had
been a poor year for mortgages with the propositions built on
being price led which had not proved successful. Owen
Woodley, Managing Director Post Office Money, had been
reworking the online journey for mortgages which was seeing
some success. New mortgage propositions would be
launched in the near future.
The Chairman requested an additional KPI for the future,
with full year forecast to be added alongside full year
target.
The CFOO continued that three products which had performed
consistently behind in 2016/17 were lottery, POca and
telecoms. There was very little to be done about lottery as
Camelot was aggressively driving sales online. POca was a
product in decline and more detail was presented later on the
agenda.
Regarding telecoms, the CFOO reported that Ofcom had given
a ruling on BT, enforcing a price reduction. Post Office
currently priced 10 per cent below BT on home phone which
was the most profitable product for telecoms. Strategic
choices would be presented in the summer.
RC commented that HM Treasury was likely to question why
Post Office did not sell its telecoms business and care was
needed around communication of the preferred position. While
he supported proper exploration of all options he emphasised
the need to consider the government position.
CS stated that she had raised some concerns around the
acquisition of New Call, approved by the Board by
correspondence on 22 March 2017. Her concern had been
primarily around whether it was a strategic move but she had
reached a position of comfort after receiving further
information. The Board had agreed that the acquisition added
value and made the telecoms business more saleable.
Regarding the presentation of the financial report, the CFOO
confirmed to the Chairman that for most of the year results
were against budget but for periods 11 and 12 that shifted to
against forecast as end of year approached. The Chairman
requested that a comparison against prior year be added.
The Board noted the financial performance report for period 11
2016/17.
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POLB 17/22 2017/18 PLAN, FUNDING AND CASTLE UPDATE (INCLUDING
2017/18 INCENTIVES)
(a)
(b)
(c)
(d)
(e)
(f)
The GC and ME joined the meeting.
The CFOO introduced the paper which followed the Board’s
approval in January 2017 of an EBITDAS target of £28m for
2017/18. Following review and decision by the Remuneration
Committee, STIP targets were now submitted to the Board for
approval together with the below the line spend plan. The
paper also provided an update on Project Castle and the
potential implications for the 2017/18 Plan. The CFOO
reminded the Board that its approval of the 2017/18 Plan was
required to allow BEIS to release the £140m of network
subsidy and investment funding due in April 2017. If funding
was very different from what was expected there might be a
need to amend the Plan.
The CFOO explained that the organisation's change activities
were not progressing as quickly as had been anticipated.
Some of this delay was resource related, some concerned IT
and some was the unintended consequences of establishing
programmatic discipline. A ‘drains up’ review would be carried
out to enable some re-planning. Whilst acknowledging these
challenges, the Chairman stated that the overall shape of the
Plan remained and he emphasised the need to get ahead of
core contract costs faster than revenue contracts, until there
was an improvement in financial services performance.
The CFOO continued that the elements of the Plan which were
easiest to stop were those elements which were needed for
growth and why a fully funded Plan would take the Post Office
to a position of sustainability. The Board emphasised that the
Shareholder needed to decide whether it wished the Post
Office to grow or shrink and consequently whether the strategy
should be for long term growth or short term affordability. It
was also noted that a sharp decline in the business after three
or four years was inevitable without adequate investment. RC
confirmed that those messages were being communicated and
emphasised to government. Cross governmental buy in was
required, ME confirmed that a meeting with the Secretary of
State would take place later that day.
Asked about the levers to keep revenues level, the CFOO
commended the mails team for its outstanding job in keeping
mails performance flat. While the financial services core
business was currently not growing, the banking framework
had made a significant difference. The major commercial
opportunity over time was in identity services.
The Chairman emphasised the need to monetise the value of
the Post Office brand, for example with Bank of Ireland. He
commented that it was challenging to understand how
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telecoms revenue could be increased.
The Chairman sought clarification over why net income was
provided as the profit figure. The CFOO explained that some
business areas had cost of sales, while some did not, this
meant that it was not possible to compare at a gross sales
level. For mails rather than having a cost of sales, the
payments to agents were operating costs.
The Chairman questioned whether in Post Office's move
towards more of a position of franchise manager there was an
argument to say that each trading activity was a_ profit
contributor rather than a fixed overhead. This approach might
question the level of Postmaster share of value. CS also
asked what value was attributed to ancillary sales. The CEO
welcomed the Chairman’s challenges and ME committed to
return to the Board in May or June 2017 with trading
activity data for discussion.
The Chairman further questioned whether an assessment had
been made around the value of each locality of having a Post
Office versus not having one. He also wanted assurance that
opportunities for better value from those with whom there were
existing arrangements were not overlooked. It was important
to have the right network structure and the right economics for
each Postmaster.
ME explained that granularity was required at a local level.
Currently data was available for types of branches rather than
on a branch by branch basis. The CEO noted the large
amount of data available but that there was a need for a quality
piece of work to digest and consider this data. As had been
the approach with Project Peregrine, she proposed that
Macquarie be invited to complete this work to consider
locality plans, related remuneration, valuation of the Post
Office franchise and an understanding of the footfall
equation.
The Chairman advised the need for greater consideration of
income cost.
The CFOO confirmed the plans for 37 directly managed
branches (DMBs) to be franchised out in 2017/18. This was
an internal planning figure used for costings and if a deal was
established with Ryman this number would change.
In relation to the growth fund, the CFOO reminded the Board
of the discussions in January 2017 and confirmed that
marketing money had not been spent well. If the franchising of
the DMBs was pushed to 38 this would give £10m which might
be needed for matters such as POca rather than for
investment in growth.
One area of growth was the insurance business delivered
through the subsidiary company Post Office Management
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Services Limited (POMS). POMS had intended to exercise in
2017 the option for early buy out of Junction, POMS’ main
general insurance supplier, but this had been postponed,
largely due to an issue with renewals. Once this buy out was
completed, now expected in 2018, this would move POMS
further up the supply chain with a move into underwriting
providing more flexibility. The CEO committed to provide
the Board with a further update on this long term intention
for POMS.
The CFOO informed the Board that NK, as CEO of POMS, and
the Chairman of POMS, Steve Ashton, had raised concerns
that the marketing provision by Post Office to POMS through
the Master Services Agreement had not been reaching the
required standard. It was hoped that actions now put in place
would bring improvements.
VH raised a concern that Post Office remained slightly behind
marketplace changes. She recognised that the financial
services market was moving quickly, particularly Fintech, but
market insight needed to be improved.
Following robust discussion and consideration of the paper,
the Board:
1. approved the financial and operating plans for 2017/18,
confirming the proposed STIP targets; and
2. noted the uncertainties of funding and the potential
implications for the plan, requesting a final review and
assessment when funding details were available.
POLB 17/23 APPROVAL OF FUNDING AGREEMENTS
(a)
(b)
(c)
ME introduced the paper which set out the current position with
the funding documentation to give effect to the approval from
BEIS of funding totalling £110m, comprising the network
subsidy funding for 2018/19 and 2019/20 as well as the
extension of the £950m ‘working capital’ facility through to
March 2021. It was expected that these documents would be
signed before 31 March 2017 which would assist the Board in
satisfying the rolling 12 month look forward test for going
concern for the purpose of the audited accounts and the view
on the financial certainly of Post Office.
ME reminded the Board of the telephone call on 8 March 2017
regarding the funding agreements. He thanked RC for his
hard work and for the work of his team on the working capital
and subsidy matters which had resulted in the current position
of being ready to sign. ME continued that the requirements
were mostly the same but additional flexibility now recognised
funding uncertainty.
Regarding the existing requirement for a minimum number of
branches, this now became a shareholder expectation, for a
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minimum of 11,500, set out in a letter to the Chairman, rather
than a contractual requirement.
JM confirmed that the requirement for an update on
mutualisation plans had been reworded.
VH sought assurance that the resource was available to
deliver the strategic plans. ME confirmed that the challenge
would be significant if big changes were required but that
directional output from HM Treasury in April 2017 would assist
with this.
Regarding the matter of Post Office being a going concern, CS
confirmed this had been discussed in detail at the 28 March
2017 meeting of the Audit, Risk and Compliance Committee.
She explained that the key was network funding and working
capital of which there was sufficient, together with sufficient
cash levels and therefore enough headroom. The CFOO
continued that as more clarity emerged on investment funding
there might be a need to reconsider the investment strategy.
RC confirmed the Government's agreement to sign the funding
documentation subject to minor final amendments. He
committed to email the Board to confirm when signing
had taken place. The Chairman thanked RC for his
contributions.
The Board:
1. noted the timetable for agreeing the Funding Documents;
2. approved the terms of, and the transactions contemplated
by, the following draft documents:
i. Funding Agreement between the Secretary of State
and Post Office Limited contemplating a total of
£110m network subsidy payments for 2018/19 and
2019/20 (the ‘Funding Agreement’);
ii. Entrustment Letter being a letter from the Secretary of
State for the Department of Business, Energy and
Industrial Strategy addressed to Paula Vennells as
Chief Executive Officer of Post Office Limited and
headed ‘Entrustment of Post Office Limited with the
Delivery of Certain Public Services’ (the ‘Entrustment
Letter’); and
ili. the Deed of Amendment relating to the Post Office
Limited £950m Credit Facility Agreement between
Post Office Limited and the Secretary of State for the
Department of Business, Energy and_ Industrial
Strategy;
(together: the ‘ Funding Documents’)
3. noted the terms of the “Chairman’s” letter being a letter
from Mark Russell, Chief Executive of UK Government
Investments addressed to Tim Parker as Chairman of the
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Board of Post Office Limited;
resolved to execute and perform each of the Funding
Documents;
6. authorised any director or Authorised Signatory to execute
each of the Funding Documents on behalf of Post Office
Limited; and
7. authorised any director, Authorised Signatory or the
Company Secretary to sign and/or dispatch all documents
and notices to be signed and/or dispatched by it under or
in connection with each of the Funding Documents.
POLB 17/24 SPARROW UPDATE
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(f)
The GC provided a verbal update on Sparrow.
The GC explained that a group litigation order in January 2017
had begun the process with the order being signed in the week
beginning 20 March 2017. An increase in noise from
Postmasters was anticipated, together with the possibility of
some adverse press. The action was progressing with the six
month period for Postmasters to join ending in June 2017. The
legal team was in the process of retrieving the files for the 81
individuals already confirmed, 197 had replied to date.
At the case management conferences in October 2017 the
court would determine how to go forward but it was expected
to be late 2018 before anything was confirmed. Cases would
be tested on particular themes and if enough Postmasters’
claims were similar they would be grouped together. Many
were around the nature of the contracts between Post Office
and Postmasters. Claims were yet to be quantified but as
Postmasters joined they were being told that should the matter
go to court and any award be given against Post Office, the
first £21m would go to pay legal costs and other expenses.
This large expectation of claims value was highly inflated and
what was legally enforceable would be much lower.
The GC confirmed that she was pleased with current progress
with the group litigation and welcomed the court process. She
confirmed that a QC and a junior were working on the matter
and looking at risk. The argument of implied contracts and a
duty of good faith was not expected to be successful.
The Board noted the verbal update on Sparrow and thanked
the GC.
The GC left the meeting.
POLB 17/25 FS GROWTH AND UDATE ON PEREGRINE
(a)
NK and JH joined the meeting.
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NK introduced the paper which provided the Board with an
update on the Post Office Money strategy, including the
incubator activities and proposed approach.
New Normal
NK reported that the ‘new normal’ customer positioning was in
use for mortgages and for some of the insurance products
delivered by Post Office Management Services Limited
(POMS).
Peregrine
NK confirmed that Peregrine negotiations had begun slowly
but that recently Bank of Ireland (Bol) had come to recognise
the importance of Post Office to its business and subsequently
wished to explore how to build the mutual business. Bol was
keen for Post Office to commit to investment in digital and
therefore the commercials for building digital capability for both
the savings and investments products were being explored.
NK_ identified two potential challenges in the ongoing
negotiations with Bol. The first being Gordon Gourlay’s, Post
Office’s key contact with Bol, expected absences in the near
future and the second being the recently announced retirement
of Richie Boucher, Bol Group CEO, before the end of the year.
Richie Boucher had been a long term supporter of Bol’s
relationship with Post Office.
Falcon
In relation to Project Falcon, NK confirmed that the world of
fintech was moving extremely fast. His team was taking a
strategic check of all different models and options and it had
been confirmed that Post Office building its own solution was
not feasible. A number of fintech providers had been engaged
with in the assessment of the range of solutions and options to
deliver the ‘Strong Integrator’ model.
There had been a good level of interest from those firms with
whom there had been engagement, with particular enthusiasm
for the brand and the scale which Post Office could bring. Due
diligence was being completed and NK would return to the
Board with a concept for consideration, this was likely to
be in May or June 2017.
NK continued that in considering the funding and partnership
structure, preparatory work had begun to establish a subsidiary
firm structure. He explained that in order to deliver the Post
Office Money strategy, it was likely that regulatory permissions
as a principal firm would be needed from the FCA and this
would be better positioned via a regulated subsidiary, as with
POMS, than for Post Office to become a regulated principal
firm.
POMS
In response to a question from the Board, NK confirmed the
current figure for general insurance policies as 1.2 million, 50
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per cent of which were travel policies. NK confirmed that
POMS had a long term option to move into underwriting
(although not for the car product) which its FCA licence
allowed on a profit share basis. Before this would be possible,
there needed to be completion of the project to buy out
Junction, POMS’ main general insurance supplier, and the
Post Office Board would need to approve the increase in risk
appetite.
As part of the long term financial services strategy, this
potential future move into underwriting activities would be
brought to the Board away day for further discussion and
update.
Mortgages
NK confirmed that figures on mortgages had improved, with
February 2017 being the best performing month in the financial
year. However, February's numbers were still less than those
seen 18 months previously and remained less than the level
required. NK assured the Board that improvement was
anticipated with the launch of the new product structures and
with a focus on specific customer segments.
The Board noted the progress with the Post Office Money
strategy and:
1. confirmed a mandate on the business to engage fintechs
on development opportunities, including potential
investments/acquisitions and alternative funding models
for the Strong Integrator platform; and
2. in anticipation of working with fintechs and others to
deliver the Strong Integrator model, agreed that
management should initiate the work to establish an
enabling subsidiary,
ME and JH left the meeting.
FRES BUSINESS UPDATE AND STRATEGIC OVERVIEW
(a)
(b)
(c)
NK introduced the FRES business update and strategic
overview, explaining that GF, Managing Director of FRES for
around three years, would be joining the meeting to present
this item. NK reminded the Board that Post Office had a long
standing relationship with FRES, which was a 50/50 Joint
Venture with Bank of Ireland (Bol). However, the arrangement
was proving to be more beneficial for Bol.
The Chairman noted that FRES was a market leading business
but stressed that if it was not making money for Post Office
then the Board would need to consider what action it should
take as one of the parent companies.
GF joined the meeting.
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The Chairman welcomed GF to the meeting and noted
apologies from Gordon Gourlay, FRES CEO.
GF explained that his presentation would provide an update
and review of FRES performance together with a strategic
overview. Foreign exchange was what Post Office was known
for after mails and he reminded the Board that trading had
begun in the 1990s with the arrangement formalised with FRES
in 2002 under a Joint Venture Agreement (JVA).
In its first 15 years of operation, FRES had generated profits of
£1.2bn and established a 24 per cent market share. The
business had expanded to travel money online, the travel
money card and international payments. FRES owned its
value chain, starting with the wholesale business and the
acquisition of the American Express wholesale currency
business was due to complete in April 2017.
GF gave the Board a demonstration of the new multi-currency
travel money card, which could hold 13 different currencies on
a single contactless card. The launch of this new card built on
the investment in digital information. There were new banking
and settlement arrangements for all currencies. The website
had been built and was run in house and had migrated one
million customers. Real time identification had been enabled,
ahead of the fourth money laundering directive.
Customers were able to top up their travel money cards via an
app and this functionality had seen customers spend three
times as much, since they were able to top up their cards whilst
abroad, this changed the strategy. Customers with the multi-
currency card were able to benefit from or to lose money, at a
retail rate, on moving funds to different currencies within their
wallet. There were very low levels of fraud on the travel money
cards and commission was included in the margin.
Referring to the market and competition slide, GF confirmed
that the main competitors to FRES on the high street were the
major supermarkets. Then Travelex had around 20 per cent of
the market share, but in the UK it lost money due to the nature
of its business model. Travelex was followed by Moneycorp
and then Marks and Spencer (provided by HSBC).
Referring to the key strengths slide, GF confirmed that the
material point of canibalisation with the travel money cards had
yet to be reached. It was acknowledged that over time the
expected increased use of the cards would reduce foreign
exchange footfall in branch. Currently, the same day ‘click and
collect’ in branch was proving popular.
The future developments for FRES included further digitisation
and GF confirmed IT development was carried out in house
with outsourcing of offshore capability to HCL. GF confirmed
the need for FRES to have Post Office's continued support to
manage the network transformation impact on foreign
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exchange sales.
The Chairman commended GF on FRES' performance but
expressed the Board’s concern over the low level of value
share for Post Office, particularly since Post Office owned the
brand. The CFOO added that it might be necessary for GF to
run the business for more profit in the short term if it proved
difficult to amend the JVA.
The Board noted the update provided on FRES.
NK and GF left the meeting.
KG, CM and TW joined the meeting.
KG introduced the paper which set out the current position with
the procurement to select new POca suppliers and the current
contingency recommendation to indefinitely extend the current
contract and negotiate commercial terms under that contract.
KG continued that the existing contract Post Office had with
suppliers to provide POca was due to expire in April 2017 and
no bank had expressed interest in becoming a supplier. JP
Morgan (JPM) had obligations under the existing contract but
did not wish to continue with the contract.
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The Chairman noted the detailed negotiations and advised that
KG and his team should be as firm as possible in pushing the
Post Office's favoured position as negotiations continued. He
questioned whether the amount paid to Postmasters could be
reduced.
KG advised there were a number of levers, for example, ATM
functionality. Post Office was working with banks to push
forward the option for customers to have basic bank accounts,
rather than POca, reducing cost to both Post Office and the
Department for Work and Pensions (DWP). KG continued that
there was a need to take into consideration that if Libor
increased, rates could increase again. Postmasters needed to
be given an incentive to move from POca to basic accounts
and as with bill payment accounts, for example, footfall was the
main driver.
The Board asked about the role of digital wallet developments
and TW confirmed that HPE was keen to work in this space.
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While the impact on branch footfall would need to be
addressed, the DWP’s aim was to migrate all POca customers
to bank accounts. The team to take this forward was being
stood up to engage in strategic conversations with the DWP. It
was explained that the technical solution which involved
holding deposits of other people’s money had genuine
complexities and there was also regulation and cash
management to consider. CM added that while digital wallet
could work well for transactional customers, it worked less well
for pensioners, which highlighted the need for a blend of
products to replace POca.
The Board noted the update on POca and delegated authority
to the Group CEO to give notice to extend the current POca
contract with HP Enterprise Services indefinitely.
KG, CM and TW left the meeting.
IT NETWORKS PROGAMME UPDATE
(a)
(b)
(c)
(d)
(e)
RH joined the meeting.
RH introduced the paper which provided an update on the IT
networks programme and asked the Board to approve the
changes to cost and savings as agreed at the ESG or Group
Executive. He explained that Board submission was required
as the scoping change fell outside the ten per cent tolerance
level. He confirmed that there was no viable alternative to the
proposal presented.
The Board approved the changes to the IT transformation
programme’s changes to cost and savings as agreed at ESG
or Group Executive, to bring the total investment spend to
£31.9m with annual operational cost savings of between
around £2.3m to £2.9m.
RH left the meeting.
The Board was pleased to note its confidence in RH and the
great progress being made with the IT transformation
programme.
BOARD COMMITTEE CHAIR VERBAL UPDATES
(a)
(b)
Audit, Risk and Compliance Committee (ARC)
It was noted that all Board members other that VH had been at
the ARC, and were therefore aware of the matters discussed. It
was agreed that CS would brief VH separately.
It was agreed that going forwards VH should be provided
with the ARC papers for her information.
Remuneration Committee
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In KM’s absence, NW joined the meeting to provide an update
on remuneration.
NW reported good progress with the executive remuneration
strategy which KM had submitted to Margot James, Under
Secretary of State for Business, Energy and Industrial Strategy.
She thanked RC for his assistance and he confirmed that the
remuneration arrangements for 2016/17 had been signed off.
The design principles for 2017/18 were in final stage and
now required Remuneration Committee approval. Since
the next meeting of the Committee was scheduled for May,
the Board agreed that this approval could be sought be
correspondence.
NW left the meeting.
POLB 17/30 CONTRACT APPROVALS
(a)
(b)
ACTION: Martin
Kirke
(c)
(d)
(e)
Fleet
The CFOO introduced the paper regarding vehicle
management contracts, which explained the proposal to move
from a suite of ten legacy contracts to two new contracts.
These new contracts would provide end to end vehicle
management, one for commercial vehicles and one for cars.
He explained that the new arrangement, bringing cost
reductions and flexibility on volumes, was expected to be very
beneficial.
VH commented that the majority of private companies no
longer provided cars as a perk and questioned the retention of
this benefit. The Board agreed that the HR Director would
be asked to review the inclusion of cars as a benefit as
part of the overall review of the remuneration strategy.
The Board delegated authority to the CEO and the CFOO to
contract with BT Fleet and Inchcape for all services (excluding
fuel) associated with the provision and running of the
commercial and company car fleets respectively for five years
with the option of two one year extensions on the terms set out.
Multi-Currency Travel Money Card
Taken after minute POLB 17/25 while NK was present.
NK introduced the paper which explained that following the
launch of the Travel Money Card in May 2011, an enhanced
Multi-Currency Card had been prepared for launch. First Rate
Exchange Services Limited would continue to be the
programme manager with the new card but would replace
Clydesdale Bank as card issuer.
NK continued that while the maximum liabilities in the updated
contract were unchanged from the existing contract, they
exceeded the management delegation level of £5m. The
maximum exposure was for third party intellectual property
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rights indemnity which was capped at £20m.
The Board approved the level of liability for the new Travel
Money Multi-Currency Card contract and authorised the
execution of the contract.
POLB 17/31 RATIFICATIONS OF DECISIONS MADE BY CORRESPONDENCE
(a)
The Board ratified the decision it had made by email
correspondence on 22 March 2017, in accordance with Article
92 of the Company's Articles of Association, to:
1. note the reduced NPV in the proposed New Call customer
acquisition;
resolve that the proposed acquisition be approved; and
delegate authority to the CEO and/or CFOO to execute.
POLB 17/32 ITEMS FOR NOTING
(a)
(b)
(c)
(d)
(e)
ACTION: GC
(f)
(g)
Committee Terms of Reference Reviews
The Board noted that the Nominations, Remuneration and
Audit, Risk and Compliance Committees had reviewed their
performances against their respective Terms of Reference. No
gaps had been identified and no changes were currently
proposed.
Register of Sealings
The Directors resolved that the affixing of the Common Seal of
the Company to documents numbered 1483 to 1501 inclusive
in the seal register was confirmed.
Health and Safet
The Board noted the safety and wellbeing performance, risks
and mitigating activity within the Health and Safety report.
CS confirmed that the Health and Safety report had been
discussed at the Audit, Risk and Compliance Committee
(ARC). The ARC had noted that health and safety was well
controlled and managed but had asked for the submission of
benchmarking data for some areas such as robberies.
The Chairman requested that Directors be provided with a
short briefing paper to clarity their personal liabilities in all
areas.
Meeting Dates and Forward Agenda for May 2017
The Board noted the future meeting dates and proposed Board
forward agenda.
The Chairman asked for the timing of the meetings of the
Board and its Remuneration and Nominations Committees
on 24 May 2017 to be amended. The committees to be
held between 9.00am and 10.20am to allow for the Board to
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begin at 10.30 for a finish by 4.00pm.
Proposed Board and Committee Dates for 2018
(h) The Board noted the proposed meeting dates for the Board
and its committees in 2018.
(i) Directors were asked to contact CoSec if any dates were
not convenient and for CoSec to amend dates as
necessary.
ANY OTHER BUSINESS
(a) There being no further business the Chairman closed the
meeting at 3.50pm.
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