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POLB 15(6"")
POLB 15/101 — 15/109
POST OFFICE LIMITED
(Company no. 2154540)
(the ‘Company’)
Minutes of a Board meeting held at 9.30am on 28 October 2015
at 20 Finsbury Street, London EC2Y 9AQ
Present:
Tim Parker Chairman
Paula Vennelis Chief Executive
Richard Callard Non-Executive Director
Tim Franklin Non-Executive Director
Virginia Holmes Non-Executive Director
Alisdair Cameron Chief Financial Officer
In Attendance:
Alwen Lyons Company Secretary
Martin George Commercial Director (Minute 15/103)
Mark Siviter Head of Mails (Minute 15/103)
Martin Edwards Head of Strategy & Corporate Planning (Minute15/103 & 15/107)
Kevin Gilliland Network & Sales Director (Minute 15/107)
POLB 15/101 INTRODUCTION
(a) A quorum being present, the Chairman opened the meeting.
POLB 15/102 CEO’S REPORT
(a) The CEO introduced her report and focused on the following key
areas:
(b) Project Hawk was now complete and the CEO thanked the Board
for its support in delivering the Post Office Management Services
(POMS) insurance business.
(c) The Crown P&L run rate, on the agreed accounting treatment, had
reached breakeven at the end of the half year and was forecasting
to achieve a full breakeven run rate by the end of the financial year.
(a) There had been a number of Distributed Denial of Service (DDoS:
attacks on the Post Office website, with 3 in the last 6 weeks. The
CEO assured the Board that the response to these attacks was
being managed effectively and all major suppliers had been alerted
to ensure they also had robust plans in place. Deloitte had been
engaged to carry out are review of cyber security.
ACTION: The CFO would ensure that the business received assurance
CFO statements from all major suppliers, for which it acted as a
portal, that they had robust DDoS plans in place.
POL Board minutes, 28 October 2015. 1
ACTION:
Neil Hayward
ACTION:
Martin George
ACTION:
CFO
POLB 15/103
POL Board minutes, 28 October 2015. 2
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(e) The CFO gave an update on the ClO and Head of Sales
recruitment. A preferred candidate had been identified for the CIO
role and a decision would be made within the next week.
The Group People Director was asked to circulate a note on
the Head of Sales recruitment.
(f) The Board discussed Christmas plans and the CEO explained the
constraints on the marketing budget which had led to a more
targeted approach.
The Board asked for a comparison between the overall
marketing spend of the Business’ and its competitors.
(g) The CEO was asked if the business had contingency in place for
losing the Transformation Director. It was acknowledged that since
joining the Business David Hussey had recruited a strong team, but
would be significant loss if he left. Business Transformation was the
main topic on the Board agenda in November.
(h) The Board discussed the Fujitsu (FJ) contract extension and the
tisk in the pian to move to a new IT provider.
The Board asked for a detailed update on FJ and the Front
Office procurement at the next Board meeting.
{i} I Having taken all of the discussion issues into account, the Board
noted the CEO’s report.
MAILS
(a) The Chairman welcomed Martin George, Commercial Director,
Mark Siviter, Head of Mails, and Martin Edwards, Head of Strategy
& Corporate Planning to the meeting.
(b) The Board discussed the Mails performance and the drivers for
growth in the market. It was acknowledged that the relationship
with Royal Mail Group (RMG) had improved but that Post Office
remained in a relatively weak bargaining position for both product
decisions and contract renegotiation. The Board were concerned
that there was no compulsion on RMG to negotiate.
(c) Mark Siviter explained the PwC review underway to analyse
compliance to the existing RMG contract. This would highlight any
areas of risk, which could be rectified, and areas which might give
the Post Office leverage in the negotiations.
(d) The Board asked that the Executive consider the mails proposition
from the perspective of the sub-postmaster and what work a branch
would want to provide including collection and delivery from
multiple carriers. It was recognised that the proposed acquisition of
a parcels integrator could help to introduce new carriers, but that
more work was needed to understand if the Business had the
capability to monetise such an acquisition. The importance of the
role of the regulator was noted.
ACTION:
Martin George
POLB 15/104
ACTION:
CEO
ACTION:
CFO
ACTION:
CFO
POLB 15/105
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A full assessment on the Mails Acquisition and a further
update on RMG negotiation would be presented to the Board
in January.
(e) Having taken ail of the discussion issues into account, the Board
noted the Mails Strategy update.
(f) Martin Edwards, Martin George and Mark Siviter left the meeting.
FINANCIAL PERFORMANCE INCLUDING POMS
(a) The CFO introduced the Interim Report and Condensed Financial
Statements. He recognised the good year on year progress
highlighted in the Interim Report, but stressed the challenges that
the Business faced in the second half of the year. The Board
agreed that the report was too optimistic and needed to highlight
the challenges to growing the revenue line.
It was agreed that the CEO would redraft the Interim Report for
review by the Chairman, to reflect the challenges in the
second half of the year.
(b) The CFO reported an incorrect provision in the accounts for
Network Transformation (NT) and that a reconciliation exercise was
underway to establish the correct position. The Board asked why
this error had not been identified by the NT internal audit, carried
out 2 years ago. The Board stressed the seriousness of the error
and the need for consequences for the people involved.
(c) The CFO explained that a new Financial Controller was now in
place and he was accountable for ail the financial reporting.
The CFO noted that a report was due to the November ARC on
the internal financial controls, following his comments in May.
The Board asked the CFO to ensure that the error did not
impact the results or the cash position.
(d) Having taken all of the discussion issues into account, the Board
noted the performance in the year to date against plan.
MINUTES OF THE PREVIOUS BOARD AND COMMITTEE MEETINGS
AND STATUS REPORT
(a) Minutes
The minutes of the meeting of the Board held on 22 September
2015 were approved as accurate records and the Chairman was
authorised to sign them.
(b) Status Report
The Status Report, showing matters outstanding from previous
Board meetings, was noted.
ACTION:
Neil Hayward
POLB 15/106
POLB 15/107
ACTION:
Martin Edwards
ACTION:
Martin Edwards
ACTION:
Martin Edwards/
Richard Callard
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The New Starter Attrition update was noted and a further
update requested for the March Board.
ITEMS FOR NOTING
(a) The Board noted the Report on Sealings and resolved that the
affixing of the Common Seal of the Company to the documents set
out against items numbered 1346 to 1361 inclusive in the seal
register was hereby confirmed
(b) The Board noted the resignation of Alisdair Cameron from the Post
Office Management Services Limited (POMS) Board and the
appointment of Rob Clarkson to the POMS board, both with effect
from 30" October 2015.
PUBLIC CONSULTATION ON OUR SOCIAL PURPOSE
(a) The Chairman welcomed Martin Edwards, Strategy Director, and
Kevin Gilliland, Network & Sales Director, to the meeting.
(b) Martin Edwards explained the purpose for the BIS public
consultation on the Post Office due to take place in December
2015, and its relevance to the European Commission and state aid.
The Board asked Martin Edwards to circulate the current
Accenture market report on European Postal administrations.
(c) The Board discussed the products included in the Services of
General Economic Interest (SGE!) definition and how they could
best be delivered to small communities. Kevin Gilliland explained
SGEI provision as protecting customers by providing convenient
access to distress purchases, including cash; utility payment and
postal services.
(d) The economics of providing services through a village shop with a
retail offer, a village Post Office with no retail offer, a Mobile Post
Office and an ATM were considered. The Board noted the
additional social value provided by a Post Office hosted in a
genuine retail hub, and agreed that this should be the preferred
operating model in rural areas where it is a viable option.
The Board asked for an analysis of ATM economics including
the cost of servicing and holding the cash.
(e) {t was agreed that, whilst a subsidy existed for the uneconomic
branches, having a minimum network target of 11500 was
advantageous for the Business. It showed a commitment to
retaining branches. However more flexibility to relocate some
branches to new locations would enable the Post Office to align
with the retail hub of a community.
The Board asked the Executive to work with Richard Callard’s
team at ShEx to optimise the questions in the public
consultation as set out in the paper. But to also test public
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opinion on:
e SGEI products, including the importance of posting and
collecting of parcels;
e the alternative branch operating models to support the
delivery of these services;
* the importance of the Post Office for small and medium
sized enterprises,
(f) Kevin Gilliland and Martin Edwards left the meeting.
POLB 15/108 ANY OTHER BUSINESS
{a) The Notes Circulation Scheme was discussed. After due
consideration of all the circumstances and on being satisfied that it
is for the benefit of the Company and in the interests of the
Company for the purpose of carrying on its business to enter into a
loan agreement between the Company and The Royal Bank of
Scotland plc (the Agreement) in respect of facilities of up to
i. £400,000,000, comprising an intra-day facility;
ii. £350,000,000, comprising an overnight NRF facility; and
iti. £1,000,000, comprising a collateral facility
from The Royal Bank of Scotland plc (the Bank) in the form now
produced, and incorporating the Bank's LIBOR Loan Terms, it WAS
RESOLVED that Paula Vennells (CEO), Alisdair Cameron (CFO)
and/or Alwen Lyons (Company Secretary) (or any combination of
them as required) be authorised to sign on behalf of the Company
the Agreement and any other documents required by the Bank in
connection with the Agreement.
(b) The Board discussed the proposed delegated authorities and
debated whether the authorities had been set at the right level.
ACTION: The Chairman asked for General Counsel to provide further
General Counsel/ information on the number of contracts being signed at the
Chairman levels proposed and any benchmark data available from other
organisations, especially ShEx Businesses.
(c) The Board agreed that until the new Chairman of the Audit and
Risk Committee (ARC) was in place that the Board Chairman
would attend the ARC and take on the role as interim Chairman of
ARC.
(d) The Chairman announced that the CEO had been offered a Non-
Executive Director role on the Board of Wm Morrison Supermarkets
ple.. The appointment had been discussed and agreed at the
Nomination Committee. The Board joined the Chairman in
congratulating the CEO.
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POLB 15/109 DATE OF THE NEXT MEETING
(a) It was noted that the next meeting of the Board would be on 25
November 2015.
Tim Parker
POL Board minutes, 28 October 2015 6