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Post Office Limited — Strictly Confidential
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POST OFFICE LTD BOARD MEETING (Company Number 2154540)
Meeting to be held at 9.00 am on 25" September 2013
at 148 Old Street, London, EC1V 9HQ in the Board Room
Progress Report on Government Funding and Strategic
Plan
Cost Focus/ Value for Money
Supply Chain Strategy
IT Transformation/Procurement Sign Off
Report on Industrial Action
LUNCH
Chief Executive’s Report
Horizon update
Financial Performance Update (including FY Forecast)
Risk (update from ARC — session planned for Oct Board)
Minutes of Previous Meeting and matters arising
Committee Minutes for noting
Status report update
Items for Noting
e Significant Litigation Report
e Health and Safety Report
« = Sealings
e Updates to the Post Office Limited and Postal
Services Holding Company Articles of Association
Any other business
CLOSE
Sue Barton
Chris Day/Sue Barton
Sue Barton/Chris Day
Lesley Sewell/ Chris Day
Kevin Gilliland/Chris Day
Paula Vennells
Paula Vennells
Chris Day
Alasdair Marnoch
Alice Perkins
Alwen Lyons
Alice Perkins
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POST OFFICE LTD BOARD
Progress Report on Government Funding and Strategic Plan
Purpose
1.1. This paper provides the Board with a reminder of the background and an update
on the programme of work that is underway to secure agreement to the 2013/20
Post Office Strategic Plan and the associated Government Funding.
Background
2.1. On the 3rd May 2013, Post Office submitted its draft 2013/20 Strategic Plan and
associated funding request to BIS. The plan set our strategy to transform Post
Office into a commercially sustainable business through growth in our core
markets and the continued transformation of our retail network. For Government,
our commitment was that this could be done within the funding envelope that had
been set out in the 2012/15 Strategic Plan.
2.2. To deliver against this funding commitment, Post Office required BIS agreement
to one fundamental change; the network transformation programme would need
to move from being a fully voluntary to a fully mandated programme, i.e. our
scheduled modernise strategy. As we submitted the plan, we recognised that
securing this agreement would be a challenge. The change in approach would
generate ‘noise’ at a local and national level and this would be difficult for
Government; especially as we approached a general election. However, we
agreed it was Post Office’s responsibility to deliver a plan that achieved the
required outcome for the lowest funding ask — and submitted on this basis.
2.3. Over the past five months, the Strategic Plan and funding request has been
scrutinised by BIS and their independent advisors. The strategic direction, the
underlying assumptions and the associated financial projections have all been
ratified with one exception, i.e. network transformation. Until we have resolution
on this area, we will not secure agreement to either the full strategy or the
associated funding. This is therefore the main focus of our current activity.
2.4. Our engagement with BIS on the need to move the network transformation
programme to a mandated approach started on the 1° May with an initial meeting
with the Minister to discuss the Strategy. Over the course of this and
subsequent meetings with the Minister and the Secretary of State, we continued
to promote and push our strategy. In spite of all the evidence and work we put
into this activity, both in the pre-meets and the meetings, we failed to secure their
agreement to mandation.
2.5. It is in this context, that we have been asked by the Minister and the Secretary of
State to develop an approach to network transformation that can be supported by
Post Office, the NFSP and BIS. They recognise that doing this will require us to
improve the compensation offer to sub-postmasters and have committed that an
additional £200m can be made available to enable us to deliver on this
requirement. To access this funding we will need to demonstrate the NFSP are
on board with the approach and that we can deliver a transformed post office
network.
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2.6. The remainder of this paper sets out the work programme that is underway to
address the challenge we have been set by the Minister and the Secretary of
State. This is being done within a number of parameters that have been agreed
with the Board and set out in the agreed Strategy and Funding negotiating
mandate. The over-riding principle is that the alternative approach must deliver
the outcomes we need for Post Office. If this is not possible, then we will need to
revert back to our previous options and take on the associated political
challenges.
3. Engagement with the NFSP
3.1. In early June, the NFSP signed a confidentiality agreement with the Post Office.
This allowed us to provide them with a copy of the 2013/20 Strategic Plan and to
start to engage them in the strategic agenda. While initial discussions focused
on the broader strategy around income and costs, we very quickly moved on to
the subject of network transformation. The NFSP understood the rationale for
the scheduled modernise approach but made it clear that this was not something
it could support. At the highest level, the specific issues were:
. The NFSP would be unable to secure the agreement of their members to
a fully mandated programme and without this endorsement its position in
support of the programme would be weakened.
. The concept of any form of mandated programme without enhanced
compensation is not credible. Precedent has been set by previous
programmes and if enhanced terms are not a part of the proposal,
individual sub-postmasters will opt to ‘stay as they are’ believing that if
they maintain their position in critical mass, the Post Office will have to
back down at some stage and a better deal will be offered.
3.2. Over the past four months, we have therefore been working in partnership with
the NFSP to develop an approach that, through a combination of enhanced
compensation, semi-compulsion, and communications could deliver the required
business outcome and secure the support of all stakeholders. In the sections
below, we outline progress and current thinking.
3.3. Assuming a feasible approach emerges from these discussions, the intention
would be to encapsulate the commitments of both the Post Office and NFSP in a
Memorandum of Understanding. As part of this document, the NFSP are
seeking a long term commitment from the Post Office to the NFSP. This would a
contractually binding agreement that would have consequences if either party
failed on its commitments.
4. Enhanced compensation
4.1. The Board have provided a negotiating mandate that allowed the Strategy &
Funding team to work within the limit of £200m additional funding provided by
BIS and, if needed, an additional £80m of headroom from the Post Office
Strategic Plan, i.e. a total funding envelope of £280m.
4.2. Early in our engagement, the NFSP set out a funding package that sought
enhanced compensation across all areas of the programme. We estimated the
total cost of this ‘ask’ could be in excess of £350m. The objective in terms of the
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negotiation was therefore to bring the NFSP ‘ask’ within the boundary of our
mandate.
4.3. Significant progress has been achieved in this area with the table below
summarising the latest position:
Compensation option Latest negotiated position Associated
cost£m
Enhanced compensation I 26 months of compensation only applied I £123m
for exit to those who are yet to exit with
payment capped at £200k.
Enhanced compensation 12 months full pay to all converting £41m
for Locals conversion locals applied retrospectively
Protection of CTP to September 2016 £21m
Transformation related £3,000 for converting and community £18m
payments branches
Cost of CTP associated £30m
with slower conversion
Grand total £233m
4.4. As we have yet to finalise the detail of the implementation approach with the
NFSP, it is likely that these numbers will change. However, we are now
confident the agreement on the absolute funding will be well within the Board’s
negotiating mandate.
4.5. While the absolute value of the additional funding requirement is important, it is
not the only aspect of concern; equally important is the profile of that funding.
Specifically, we have been working to ensure that the funding:
. is profiled in a way that incentivises sub-postmasters to complete the
transformation process as quickly as is feasible;
. is aligned within our affordability limits considering the availability of both
Government funds and Post Office cash limits; and
. follows a trajectory that allows Post Office to deliver on its commitment to
a downward trend in Government funding.
4.6. As we develop and refine our implementation approach, we are considering the
extent to which we can utilise the profile of funding to incentivise the outcomes
that we need. Specifically, we are:
. continuing with the existing compensation approach for exit, i.e. exiting
sub-postmasters only receive their payment when the replacement
branch is open and trading. This ensures they are incentivised to work
with us to find replacement options and to support the transition.
° evaluating the extent to which enhanced compensation for conversion
can be profiled to incentivise volunteers to come forward early in the
process. For example, our enhanced compensation package for
converters to the Local model includes 12 months of full pay and
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protection of core tier payment through to September 2015. For a
volunteer in year one, we could offer that this payment as a single lump
sum whereas for later volunteers, it could be paid in instalments over the
programme.
° evaluating the extent to which enhanced payments for conversion can be
linked to the opening of the branch. The challenge here is that many sub-
postmasters may need the compensation payment to support the costs of
transforming the retail part of their store. This therefore needs to be
carefully managed or it could slow the process down.
° evaluating the extent to which transformation related payments could be
used to incentivise sub-postmasters to complete certain elements of the
process, e.g. provision of information to allow viability assessment or
application for community funding to enhance the customer offer in
community branches.
4.7. I While we are yet to finalise the details of the application of the above factors, our
current working assumptions combined with our implementation approach deliver
the total funding profile set out in the table below. This is incremental to the
Strategic Plan projections that were approved by the Board in May 2013.
£m _I 13/14 I 14/15 I 15/16 I 16/17 I 17/18 I 18/19 I 19/20 I Total
Additional
exceptional costs
(no impact on
P&L) 19 13 70 68 33 (e) ie) 203
Additional
on-going
operating costs
(impact on P&L) 2 1 5 7 5 5 5 30
Total 24 14 75 75 38 5 5 233
Cumulative total 35 110 I 185 I 223 I 229 I 233
(please see section 6.4 below for the comparison to the Strategic Plan)
4.8. We will continue to update this profile as we progress our thinking and
negotiations. Indications at this stage are that we can hold within the £200m of
additional funding which BIS can provide, with £185m of additional funding being
required through to the end of the proposed two year funding period, i.e.
2015/17.
4.9. We are currently evaluating the options around funding. While our funding
requirement is for £185m over the period, we could seek to secure the full £200m
available. In addition, BIS have indicated that a three year funding deal may be
possible if we can provide a compelling case. We believe that the three year
deal may be helpful in ensuring that the possibility, either perceived or real, of
political intervention post a 2015 election is limited. We are in the process of
assessing the risks and opportunities around funding options and will update the
Board when we have this concluded.
Revised implementation approach
5.1. _ Sitting alongside the enhanced funding approach that is set out above, we have
been developing a revised approach to implementation. While the discussions in
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this area with the NFSP have been long and protracted, they have brought a
level of detail and practicality that has been both challenging and helpful. If we
are to succeed with the transformation it is essential that we start from the
perspective of the individual sub-postmaster. Ultimately our challenge is to get
sub-postmasters to either convert to one of the new models or to leave our
business; something which to date, they have not been inclined to do.
5.2. Our revised implementation approach proposes to achieve conversion through a
combination of factors:
. Mandated exit for all non-viable post offices: while the NFSP are not
prepared to support a fully mandated programme, they will support an
approach that mandates exit for those that are not viable. They agree
that many sub-postmasters and their post offices are not suited to retail
and therefore are not capable of successfully operating the new model.
They are willing to support mandated exit for this community and believe
that 26 months compensation while less than that offered in previous
programmes is a fair offer. (agreed in principle with the NFSP)
. Controlled appeals process: our concern around the mandated exit
approach is that sub-postmasters would use the appeals process to
escape the exit process and to ultimately ‘stay as they are’. The NFSP
are prepared to sign up to an appeals process that limits this risk.
Specific criteria will be agreed along with a process of evaluation that
controls the level of appeals that are possible. (agreed in principle with
the NFSP)
. Enhanced compensation for Locals conversion: the NFSP believe
that the enhanced compensation offer that we are proposing to offer to
Locals will incentivise those that are viable and credible retailers to
convert. However, we remain concerned around the extent to which
there is inertia within the sub-postmaster community. At this stage we
are exploring the extent to which profiling of compensation payments and
messaging can address this concern. (agreed in principle with the NFSP
but with clear understanding that we have concerns around the extent to
which this can deliver the outcome we need — will be revisited)
. Special conference support for the revised implementation
approach: while the NFSP gave their support to the current network
transformation programme initially, this support evaporated over time.
While it is impossible to ensure that every single NFSP member is on
message, we can take steps to improve sustain their commitment.
Ensuring that the NFSP take this proposal to a special conference and
secure a ‘yes’ vote is one component of our approach to address this
area. Additional areas are covered below in memorandum of
understanding. (agreed in principle with the NFSP)
° Implicit cliff: as we worked through the detail of the explicit cliff (see
details below) with the NFSP it became clear that this would become a
barrier to securing a ‘yes’ vote at special conference. In that context, we
are developing an approach that is based on an implied cliff. Through the
communications material that is used to both announce the revised
approach and the supporting questions and answers, we believe that
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compelling messages could be delivered. However for these to be
credible BIS, NFSP and Post Office will need to stand shoulder to
shoulder in their delivery. A paper on the implicit cliff is provided in the
Board iPad reading room. (agreed in principle with the NFSP)
. Explicit cliff: Should the implicit cliff and the revised approach prove
insufficient to get the transformation that we need, we want to ensure we
have the option to introduce a visible cliff post-election in 2015. Our key
requirements to secure this are twofold. Our requirement of the NFSP is
it will not seek to re-open the deal, either by mounting a campaign or
asking for a better deal. Our requirement from BIS is that the funding
deal gives sufficient protection that a new Government cannot re-open
the discussion. This has been discussed with BIS along with the extent
to which a three year deal is possible/ could support this agenda. (not yet
agreed either with NFSP or BIS)
5.3. I While agreement on the above factors will structure an approach that underpins
the implementation approach of the transformation programme, it is essential that
we put in place measures that lock the NFSP and BIS into standing shoulder to
shoulder with us from announcement through the implementation process. This
is the focus of the above elements of our work programme:
. Memorandum of understanding with the NFSP: the second element
of our approach to sustain the NFSP commitment to the programme is
the development of a memorandum of understanding. Through this
document we will seek to formally contract their commitment to the
agreed approach, communications messaging, and any specific
supporting activities that we expect them to perform. For the NFSP to
commit to the document, they have made it clear that this will need to
contain a long term commitment to the future of the NFSP; this must
include a mechanism that secures their membership into the future. The
detail of this is yet to be worked through. As we work through this
process with the NFSP we will seek to link the performance of their
activities to funding. (the need for an MOU has been agreed in principle,
however the detail is yet to be worked through)
. Joined up communications across BIS, NFSP and Post Office: from
the outset we have been clear that for Post Office to commit to this way
forward, BIS and the NFSP must stand shoulder to shoulder with us. We
must have joined up communications that are aligned and there must be
a single message. If the implied cliff approach set out above is to be
believable and compelling, we must take a firm position jointly, without
this our ability to convince sub-postmasters to take action will be
significantly weakened. (in principle agreement with NFSP and BIS)
° Restructured programme team and resource: the final element of our
approach is related to the Network Transformation Programme and the
associated team. As we redesign the implementation approach, we are
reviewing the implementation approach across the entire end to end
process. Combining the learning from the past year with the current
thinking is allowing us to think differently around how we structure our
resource and also utilise the expertise of third parties where possible to
share both workload and risk. This is an internal activity which is being
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managed within the governance of the Post Office. (No need for
agreement with NFSP. Work currently underway internally on this area).
. Significantly changing how we secure replacement operators:
Finding suitable retailers to take on 2000+ Post Office locals is crucial to
the success of the revised approach. Over the last few years, we have
secured around 400 new locals from new operators, but less than 10% of
these have been through moving the post office into one of our national
multiple partner stores. We think there is a significant opportunity to
increase this to 20-30% if we advertise opportunities in large batches and
change the nature of our engagement. We will attempt to create
competitive interest in the branches from multiples — and create tailored
‘deals’ where a major partner signs a contract to take, say, 100-200 locals
into their nearby stores. This involves raising the strategic interaction we
have with our partners as well as creating a process that is better
balanced between independent and multiple partner needs. A linked but
slightly different approach should be possible with the tighter-knit symbol
groups (e.g. Spar) where the symbol group is able to pre-select their
suitable independent members and persuade them to sign contracts to
take on locals. (No need for agreement with NFSP. Not tested with
multiple partners. Process changes under discussion with Legal).
5.4. A more detailed paper on the implementation approach is contained within the
Board iPad reading room.
6. Delivering the required business outcome
6.1. While progress is being made in the development of this revised approach, we
have been absolutely clear that for this to be an acceptable way forward, it must
deliver the required business outcome. In the presentation to the Minister and
the Secretary of State, we presented an implementation approach that assumed:
. Mandate for exit with compensation of 24 months
. Enhanced compensation of 12 months full pay for Locals conversion
. No enhanced compensation for Mains conversion
° No transformation payments
. Explicit cliff
6.2. The forecast outcome of this scenario was represented by the yellow line on the
chart below.
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Iustratwe conversion path under aches 2013/142019720,# of
ILLUSTRATIVE
°
Apeu2013 ‘priv ‘Aprivts ‘Aprilt6 ‘Apriv7 Aprits Aprivts ‘aprv20
6.3. As we considered a scenario with an implicit cliff that only became explicit in
September 2015, the Board were clear that this would only be acceptable if this
alternative approach delivered the same outcome. This has been top of mind as
we have conducted the negotiations and worked through our detailed
implementation approach. The updated chart below presents our latest thinking
on the rate of transformation that the implied cliff approach could deliver.
with implied cliff versus other tran
# of signed contracts
9,000 8,300
8,300
8,000 8,300
i399
7,000 4) — scneduied approach
@ — sem.serecvesan ct
6,000 @ Ser Sees wn np worse
— sem:-schedulec wan inplotift-Bestcase
shed O ~~ Fury voluntary
4,000 eT srnn nin nese cope 2829920997285
3,000
2,000
1,000
Aprit3 Aprit4 Apr/t5: Apri16 Aprit7, Aprit8 Apr/19
A A
Announcing programme Announcing Cliff
change (Oct, 2013) (Sep 2015)
6.4. At this stage, we believe that the implied cliff approach, while still delivering the
full transformation of the network will do so at a slower pace. Our assessment is
that by the time we are able to introduce the explicit cliff in September 2015, the
scale of the gap in profit before subsidy terms, i.e. EBITDAS, from the Strategic
Plan could be in the order of £5m in 2015/16 and £30m cumulatively over the
period through to 2019/20.
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£m I 13/14 I 14/15 I 15/16 I 16/47 I 17/18 I 18/19 I 19/20
Strategic Plan EBITDAS -98 -63 0 53 92 105 415
Revised Strategy EBITDAS -100 ~62 5 46 87 100 110
Gap to be mitigated 2 1 5 7 5 5 5
6.5. I Our current view is that this gap is of a magnitude which could be mitigated. This
would allow us to continue to deliver against our Strategic goal of achieving
breakeven in 2015/16. It is important to note this is based on us achieving the
mid-point of the range set out in the chart above.
7. Next steps
7.1.
7.2.
7.3.
To drive our programme of activity forward, we are currently maintaining a five
month project plan for the Strategic Plan and Funding work. To date this has
largely focused on representing the Post Office's requirements. However as we
approach what will hopefully be the final stages of this process, we are now
developing a single integrated plan across all three organisations, ie. Post
Office, NFSP and BIS. This will be especially important to manage the
choreography over the coming weeks. The key dates as currently understood
are:
. Mid to end September: in principle agreement with the NFSP on financial
aspects of the deal along with an outline memorandum of understanding.
On the 25" September, we have a full day session with the NFSP to work
through the remaining elements of the deal. The intention is to use this
meeting to draw things to as close to a conclusion as is possible.
. Early to mid-October: over this period the NFSP have NC & EC meetings
to secure approval. The EC meeting has been scheduled for the 14"
October. Paula Vennells has been invited to attend.
. End October to early-November: the NFSP were targeting early
November for the special conference. We have urged them to consider
moving this to October; they are receptive to this and are exploring
options.
We have had discussions with BIS around this timetable and they are
comfortable with the outline approach, however, they need to consider the
choreography of internal and external communications for the Minister. They will
their plans this week and provide details to feed into the development of the
integrated five month plan.
A copy of our draft five month plan which includes a more detailed five week
activity plan has been included in the Board iPad reading room.
8. Communications
8.1.
Given the criticality of communications to the successful conclusion of the
Strategic Plan and Funding process and the subsequent implementation of the
network transformation approach, this has been front of mind throughout our
work. Early versions of our communications plan including stakeholder
engagement and messaging were developed for the meetings we had with the
Minister back in May. The communications team have continued to develop and
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evolve these documents as we progress our thinking. They are the guardians of
the message and provide the team with the challenge needed to ensure that our
approach is simple enough to be understood but compelling enough to
encourage action.
provided in the Board iPad reading room.
9.
9.1.
Horizon scanning/ risk assessment
A copy of the communications overview document has been
Horizon scanning has and will continue to be a critical element of this programme
of activity. In the table below we present the high level risks around securing
agreement to the revised network transformation approach and associated
funding.
rregamme Risk and management Response
Cannot develop an ‘implicit’
cliff option that delivers the
outcome we need: there In th I need t
remains a risk that we will not be 9 back to Government with a
able to develop a scenario that Bran B. vi wi
delivers the business outcome .
that we need without either an
explicit cliff or a fully compulsory Initially, we could try and get BIS
programme. to intervene with the NFSP to
bring them to the table and
Likelihood: Medium secure agreement if that was the
Impact: High 'ssue.
Cannot secure support of the
NESP. while diseubtions with I Ifbringing the NFSP to the table
the NFESP are progressing well is not an option then we would
there are still a significant orginal strategy. We weculd
number of risks in this area. The :
NFSP may not be able to secure I Propose to offer some enhanced
agreement at either their EC or compensation to smooth the way
Securing Special conference with sub-postmasters and help to.
agreement to reduce the level of ‘noise’
the Strategy Likelihood: Medium associated with the programme.
Plan and ore
associated Impact: High While scheduled modernise with
funding request
Cannot secure the support of
BIS: We are managing the BIS
relationship closely and if we find
a solution that brings the NFSP-
with us then we will have the
support of BIS and the Minister.
Likelihood: Low
Impact: High
However, if we cannot deliver the
support of the NFSP and need to
resort back to either the explicit
cliff or fully mandated it is not
clear if we will get their
agreement to progress. The
likelihood of securing agreement
in this scenario will diminish the
closer we get to an election date.
some enhanced compensation
would be our preferred option, we
may need to concede toa
mandated exit with explicit cliff
post May 2015.
We would hope that having
invested significant effort with the
NFSP and trying to arrive ata
mutually acceptable way forward,
Government may be willing to
accept this as the only way
forward to secure the future of
the Post Office.
The counter factual would play
an important part in this process.
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Likelihood: Medium to High
Impact: High
9.2. A copy of our working risk assessment document for revised network
transformation approach has been included in the Board iPad reading room.
Conclusions
10.1. We are making good progress in our discussions with the NFSP and believe it is
possible to develop a solution that delivers the transformation of our network
within the funding envelope that is being made available from BIS.
10.2. The key uncertainty is whether the mutually acceptable solution will deliver the
network transformation at the pace we require to sustain our business. The
Commercial and Financial Services teams have confirmed that the slower pace
of transformation will not affect their income projections. The key issue is
therefore one of cost.
10.3. Our assessment is that the slower pace could create an EBITDAS gap of £5m in
the 2015/16 financial year and would cumulatively reduce EBITDAS by £30m
through to 2020. Our aim is to develop cost mitigation strategies to address this
gap, so protecting our strategic goal of breakeven in 2015/16. Sensitivity and
risk analysis is currently underway on this issue. This is evaluating the
implication of different outcome scenarios in terms of the pace of transformation
that is delivered and the ability to mitigate those implications.
10.4. Over the coming three weeks, we will conclude our discussions with the NFSP,
the development of our alternative implementation approach, and the
assessment of the implications of this approach on our Strategic Plan financials
and the associated targets around signature and openings. If these all indicate a
viable solution, we will develop a heads of agreement with the NFSP and
progress forward with our timeline. The details of this will be shared with the
Board to ensure the necessary authorisation is in place before any commitment
is made and the NFSP progress through their approval process.
10.5. While resolution of this will be a positive step forward, it is important that the
Board note that the network transformation programme will continue to be
complex and challenging. Our intention is to on the successful conclusion of a
deal, to undertake a detailed and comprehensive programme review and
planning exercise. This will look at every aspect of the programme, its structure,
resource profile and skillset. Getting this right will be critical to ensuring that the
programme delivers the outcomes we need as a business. The key stages in
this process are set out in our draft five month plan.
10.6. We ask the Board to note the progress that is being made and to endorse the
work plan that is underway. The team continue to operate within the Strategy
and Funding mandate agreed by the Board. At this stage we believe it is still
possible that the alternative approach with the implicit cliff could deliver the
outcome we require, however, there is still work to do to confirm this position. If
this proves not to be the case, we will immediately notify the Board.
Sue Barton
25" September 2013
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POST OFFICE LTD BOARD
Cost Management Update September 2013
1. Purpose
1.1. The purpose of this paper is to provide the Board with an overview of the approach to
and governance of cost reduction, delivery of current and future year cost reductions
and future areas of opportunity.
2. Background
2.1. The total cost base of the Post Office is c£1.0bn. A high-level breakdown of POL’s
overall cost base is shown below:
FY13/14 Cost base £m Q1 Forecast FY13/14
Agents pay is Other operational & head office:
being addressed Central 26
through Network Bonuses (excluding Crowns) 13
Transformation Commercial 15
Marketing 8
Communications 4
Finance 24
Financial Services 10
10
Legal & Security 10
Network 44
Crowns 146
Telephony managed service 19
Strategy & other managed services _6
335
Our approach to these costs is detailed
Supply Chain in this paper
£97m T
Projects LIT run-costs ‘Supply Chain costs will
£30m £84m be managed through
operational efficiency and
Projects are IT run-costs are demand suppression /
challenged and addressed by IT I_I management. Please
approved on a Transformation see accompanying paper.
bottom-up basis Please see
accompanying paper
2.2. The strategic plan demands a 25% reduction in central costs by 2020 plus savings in
operational support costs and reductions due to existing programmes, namely Crown
and Network Transformation, with the majority of the reductions being made in years
FY14/15 and FY15/16.
2.3. The main subject of this paper is cost management within the ‘Other operational and
head office’ area, with the accompanying papers ‘Supply Chain Net Cost Management
Programme and Future Roadmap’ and ‘IT Strategy Update September 2013’ specifically
addressing cost management in the Supply Chain and IT areas.
2.4. The Post Office has a coherent approach to cost management which aims to meet its
the short, medium and long term targets across its business. This approach comprises
of three types of activity:
* Tactical cost reductions in staff and non-staff costs to meet and exceed the in-year
cost target.
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e Improved efficiency within the existing operating model which impacts this year
and next.
«¢ Strategic initiatives which involve different ways of operating (eg outsourcing, or
new ways of aligning goals with service providers) and often have significant cross-
business implications. These initiatives will drive cost efficiency beyond FY14/15.
2.5. Previous Board papers have described the overall framework of these in detail. In
addition, it has been recognised that specific, focussed governance is needed in order
to ensure the business delivers its cost management objectives.
2.6. This governance consists of a Cost Management Steering Group with responsibility for
moving strategic cost initiatives forward and comprised of Executive Committee
members, and a cost management working group, led by Finance, consisting of an
empowered representative from each Directorate. This working group has responsibility
for:
e Holding the business to account on delivery of its commitments
e Monitoring activity to ensure it is on track
¢ Resolving cross-functional blockages
e Challenging the business for new cost efficiencies to fill the forward pipeline.
It provides weekly updates and a monthly report to the Executive Committee and,
together with the Steering Group, will inform quarterly cost updates to the Board.
3. Current cost reduction agenda
3.1 Cost management outturn in FY12/13
As part of the FY12/13 budget process, the Executive Committee targeted £20m of
tactical cost reduction for the year:
« A non-staff cost challenge of £15m was included in the budget, and was
overachieved with the final outturn being £3.9m under budget.
« A staff cost challenge of £5m was targeted, although not included in the budget.
This was also overachieved with outturn being £11.5m less than budget; although
c£4m of this was due to lower than budgeted LTIP payments.
3.2 Cost management targets incorporated into FY13/14 budget
For FY 13/14, the Executive Committee adopted a rigorous approach to the budget, with
each Directorate required to justify its projected spend for the year. As the budgets for
both staff and non-staff costs have been set at a similar level to last year’s outturn, the
savings achieved in FY12/13 have been maintained in the current year.
As in FY12/13, the budget process included a cost reduction exercise, leading to a
tactical cost reduction target for the current year of c£15m:
e In staff costs, an additional challenge of £4.7m emerged due to increased costs,
mainly separation & strengthening (£6m) and additional pension charges (£5m),
together with other smaller impacts (£8.7m), partially offset by savings from the
Crown Transformation Programme (£15m).
e In addition, there is a non-staff cost challenge of £7m to offset expected increases,
mainly the management charge for the new telephony supplier.
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e Separate to the savings under the Network Transformation Programme, a rate
saving (mainly DVLA) has been built into the agents’ pay budget which will give a full
year saving of £3m against last year.
Across the board, these savings are currently on track, despite staff and non-staff costs
being slightly over budget at Period 5 (as the causes of the adverse variances are not
related to the cost reduction initiatives).
On top of the £15m cost challenge, “One-off” project expenditure has also been reduced
from a peak of £53.4m in 2012/13 to £35m in 2013/14 (budget), with the most recent FY
estimate being £33m.
3.3 Other Operational and Head Office costs FY13/14 and FY14/15
When the FY13/14 budget was set, £3m of the staff cost challenge was held centrally
whilst work was carried out to detail precisely how it would be achieved. The Strategic
Plan indicated that a further £40m of cost reductions were required in 2014/15. To
address these, the cost management working group allocated cost reduction targets to
each of the directorates. Proposals were submitted in early September.
The aggregate of the proposals (staff and non-staff savings) suggests that the targeted
£3m reduction for FY13/14, and the £40m for FY14/15 are achievable, although some of
the reduction in FY13/14 will come from non-staff rather than staff costs. It should be
noted the proposals are in the process of being pressure tested for feasibility and
overlaps, and contain tactical cost savings from Supply Chain. However, there are also a
number of proposals that it is too early to put a value on (typically those with cross-
business impacts) and which will be worked up over the coming weeks.
Aggregate 2013/14 I 2014/15 I Comment
reductions
The number of heads involved means that some
kind of compulsory reductions would be needed. Of
Proposed staff cost £2m £24m the FY14/15 total, £15m is delivered by the Crown
reductions Transformation Programme “CTP”. Outside of CTP,
the proposals mean a reduction of c200 FTE, with
an average cost per FTE of £45k
The majority of savings are within directorate rather
£2m £16m__I than cross business. Of the FY14/15 total, £2m is
delivered by the Crown Transformation Programme.
Proposed non-staff
cost reductions
Total proposed
is £4m £40m
reductions
Target £3m £40m Equates to a c11% year on year cost saving
Better/(worse) than £1m .
Target
These savings will be incorporated into the upcoming Quarter 2 forecast for FY13/14 and
into the budgets for FY14/15.
The table below segments the proposals by type. For FY13/14, they are broadly split
50:50 between Tactical and Improved operating efficiency. In FY14/15, £17m of the
Strategic savings are delivered by the Crown Transformation Programme, leaving only
£1m identified at this stage as coming from other Strategic initiatives. However, this
relative lack of Strategic cost reduction ideas suggests there are opportunities still to be
found. This will be a focus of the Cost Management Steering Group over the coming
weeks.
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2013/14 I 2014/15 I Comment
Tactical proposals for staff and non-staff costs to meet
Tactical £2m £11m_ I the 2013/14 target (eg reconfigure / reallocate work to
avoid the need to fill vacancies).
Longer term efficiencies through reorganisations,
pooling of work and reassessing existing business
Improved requirements. The lead times to implement these
operating £2m £11m I mean that they tend to have a limited impact in
efficiency 2013/14, but have a full year effect in 2014/15. The
working group will focus on how these can be pulled
forward to maximise the 2013/14 impact.
These are the types of initiative that will drive cost
efficiency beyond FY 14/15. In FY15/16 a further £40m
of cost reductions will be required. Of the FY14/15
Strategic - £18m total, £17m is delivered by CTP. Whilst some other
ideas of this type have been proposed, they are at an
early stage. The focus of the working group is to drive
their development and to generate more
An important factor is the confidence we have of delivery and each of the proposals has
been designated as High, Medium or Low as a broad indication of confidence. This
measure takes into account how far the initiative has progressed, the difficulty of
implementation, and the certainty around the value of the associated cost reduction.
The expectation is that ratings will improve as more work is done to understand the
opportunity, its implications, implementation plans and as it moves into delivery. Driving
and challenging this work will be the main focus of the cost management working group.
Confidence 2013/14 2014/15 _I Comment
For the most part, these are Tactical initiatives, but
High £3m £24m the FY14/15 includes £17m of Crown Transformation
Programme benefits
Improved operating efficiency proposals fall mostly in
Medium £0.5m £14m__I this category, but approximately 15% are in the Low
category
Low £0.5m £2m —_I Strategic proposals currently fall into this category
4. Enablers
4.1. The approach described requires a significant decrease in headcount. Therefore we will
need to concurrently conduct a people strand of the cost reduction programme to
ensure that mechanisms for realising the identified savings are in place when required.
This may include freezing recruitment, a reduction/embargo on contractor use, VR, etc.
4.2. However, the scale of the change is such that compulsory redundancies will be required
and, given the lead-time involved in this, it is recommended that preparatory work on
this strand is initiated immediately.
4.3. There are other potential one-off implementation costs associated with some of the
proposals. These programmes will be challenged to ensure they make appropriate
financial returns and will form part of the upcoming trade off process for project
expenditure for FY14/15.
4.4. The success of removing costs and ensuring the business is run on the most efficient
basis will require a consistent, cost-conscious mind-set across the entire organisation,
role-modelled by Executive Committee and promoted through the appropriate use of
targets and performance management. The existing framework and measures will be
reviewed to ensure that the necessary focus is applied. A programme of internal
communications will also be established.
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5. Strategic cost reduction beyond 2014
5.1. It is recognised that there are limited opportunities to effect further significant
improvements to the existing operating model. This means that, to meet our Strategic
Plan targets in FY15/16 (requiring a further £40m of cost reductions) and beyond, a new
approach to the way we operate is needed. The new Target Operating Model provides
this by focussing the organisation on what we need to excel at in order to give our
customers what they want when they want it, and on what services we need to do that.
5.2. Implementing the new Target Operating Model will drive us into transformational
change, whether it is:
« Radically simplifying the customer journey (eg credit card approvals)
e Outsourcing back office Finance and HR activities
e Redesigning how branch and customer communications are produced and
distributed
* Developing win-win solutions with our business partners (eg Fujitsu, Bank of Ireland,
Subpostmasters)
¢ Implementing best in class management of our contracts and relationships with
suppliers and Government.
5.3. We already have some of this type of transformational programme underway (NTP,
CTP and IT). Work has been started to define the structure of the organisation under
the Target Operating Model; understand the possibilities of outsourcing/offshoring; and
to develop ways of sharing resource, risk and reward with partners (e.g. NTP,
Franchising).
5.
cS
. The bulk of opportunities are expected to come from the “Service Delivery” element of
the Target Operating Model, but we will not restrict ourselves to this. Further work is
required to produce coherent change plans and we will return to the board next quarter
with these, together with deadlines, milestones, enablers and the constraints that need
to be overcome (eg compulsory job losses, unions, resistance to change) for each
strand. We will consider working with external parties on a ‘gain share’ basis where we
believe that this will increase the likelihood of delivery or reduce timescales.
5.5. The cross-business and often fundamental nature of this work means that it is difficult to
do, and strong governance is key to its success. This governance is the main focus of
the Cost Management Steering Group, which it will provide through regular deep dives,
challenge and holding account on commitments. In turn, it will report weekly and
monthly to the Executive Committee and quarterly to the Board.
6. Conclusion
6.1. The Cost Management programme continues to deliver against its current year and next
year targets. However, the longer-term opportunities from improving the existing
operating model are limited and as a business we need to identify and implement
strategic cost initiatives if we are to realise our future growth and profitability goals. The
new Target Operating Model provides us with a framework to work within to achi eve this
by focusing the organisation on what we need to deliver and how we need to deliver it to
give our customers what they want when they want it.
6.2. The responses to the cost challenge demonstrate that there is an emerging mentality of
“cost efficiency” across the business and embedding this as part of the business culture
is an important on-going task for the leadership of the business.
Chris Day
18 September 2013
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POST OFFICE LTD BOARD
Supply Chain Net Cost Management Programme and Future Roadmap
1. Purpose
1.1. This paper sets out:
e The tactical cost-saving activities Supply Chain propose to implement in the
coming 12-24 months.
¢ The findings of an independent strategic review of Supply Chain, which
assessed the feasibility of two key areas; outsourcing and turning Supply
Chain into a market pillar.
¢ The next steps for developing a roadmap to:
a) fundamentally change future demand for Supply Chain services and
b) reduce the cost to the business.
1.2. The Board is asked to note the conclusions and endorse the recommendations.
2. Background
2.1. Supply Chain’s primary purpose is to provide a managed service to the Post Office
network. This comprises the following services: cash demand estimating and
management of cash and secure stock; secure delivery and collection of note and
coin; replenishment of the Post Office ATM estate; delivery and collection of
foreign currency; and secure and transitional stock distribution, including postage
stamps, DVLA tax discs and POca cards.
2.2. There are three key products (POca, Business Banking deposits and ATMs) that
require significant amounts of cash to be delivered to and collected from our
branch network. Many other products require a secure means of delivering stock
to the branch network (e.g. postage stamps, car tax discs, blank postal orders).
The 13-20 Strategic Plan assumes that Post Office will continue to provide cash
dependent products and reflects the expected decline in the POca product.
2.3. Supply Chain’s direct costs, including the Equipment Team, Property and IT costs,
are forecast to be ~£97m (~£55m are staff costs) in 2013/14. Direct costs are
partially offset by revenue generated from providing cash collection and processing
services for external clients. Forecast revenue in 13/14 is ~£29m, of which
~£13m comes from Royal Mail.
3. Cost Management Overview
3.1. Supply Chain has been making on-going cost reductions for several years (Supply
Chain costs were ~£145m in 2003), without which the current cost of the operation
would be substantially higher.
3.2. However, in 2010/11 the Supply Chain team recognised that the opportunity for
further significant cost reduction would become limited, as to serve 11,500 post
offices across the UK in both urban and rural locations requires a core
infrastructure.
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3.3. Therefore, to maximise efficiencies and minimise the net cost of the operation,
Supply Chain now also provides cash collection and processing services to
external businesses.
3.4. In 2013/14, Supply Chain external revenue is forecast to be ~£16m reaching
~£31m pa by 2017. There is an additional ~£13m of revenue from Royal Mail, but
this is forecast to reduce by ~£7m pa in 2015.
3.5. Supply Chain has traditionally focussed on the retail sector for external business
and is now looking to expand into the ATM cash replenishment market to support
this increase. Supply Chain is currently in discussions with two Independent ATM
providers, which could lead to a potential £5m pa in new revenue.
3.6. A programme of tactical cost reduction remains in progress (which is further
enhanced by increasing external business), details of which are Appendix A, but
significant rationalisation is no longer feasible within the constraints of the current
operation. Over the course of the strategic plan, tactical initiatives are expected to
maintain costs at the current level and improve the overall net cost by growing
external revenue within the current operating model.
3.7. However, given the magnitude of the Supply Chain costs, the risks to POca and
Business banking products and the expected decline in Supply Chain income from
Royal Mail, the quantum of net cost remains an area of challenge and options for a
more fundamental change in the operations are being actively considered. To this
end, an internal review of Supply Chain was recently conducted (the key
conclusion are in Appendix B), followed up by an external review by an
independent consultancy, Elix-IRR. The conclusions of the reviews are highlighted
in the next section.
4. Independent Strategic Review
4.1. When ExCo and the Board were presented with the Strategic Plan, the
assumptions around Supply Chain were challenged. While the internal review had
concluded that outsourcing would be a more expensive option, to be entirely
objective, it was felt that an independent external review was necessary. In that
context, we recently engaged an independent consultancy (Elix-IRR) to conduct an
assessment of Supply Chain. We specifically asked them to consider two strategic
options:
e Market growth — to assess the attractiveness of the Supply Chain market for
Post Office so we could consider whether we should be turning Supply Chain
into a market pillar and increasing our focus on generating income in this
market; and
e Outsource service provision — to assess the feasibility and attractiveness of
sourcing our supply chain services from a third party provider.
4.2. This review has now concluded and a copy of the Elix-IRR full report is provided in
the Board Pad reading room and a summary of the conclusions are in Appendix C.
4.3. The key takeaway from this assessment is that Supply Chain, as currently
structured and taking account of current branch demand, is not suited to
either outsourcing or positioning as a market pillar. However, this does not
preclude a future outsourcing of a simpler / more generic enterprise.
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4.4. The outputs of the Elix-IRR review have been debated by ExCo with the following
conclusions:
e Supply Chain as a market pillar: Elix-IRR concluded that the external
market was not attractive and Supply Chain would struggle to take substantive
market share. The question ExCo considered was - could Supply Chain
provide a route to addressing some of the current short term income
challenges and beyond? ExCo concluded that the findings of Elix-IRR
were correct and that this was not something Post Office should explore.
The investment and strategic implications of making a move into the external
market does not align with our business strategy.
ExCo conclusion: Supply Chain’s primary objective should continue to be
the provision of service to the Post Office network with external income only
being pursued where it helps to mitigate the costs of that activity by utilising
existing capacity within the operational network, pending a more structural
solution to cost reduction.
¢ Supply Chain as an outsourced service: Elix-IRR had concluded that
outsourcing of Supply Chain as currently structured was unattractive as it
would increase the cost of the service to the business. While this is true, as
we reviewed this conclusion, we recognised that this did not consider one of
the fundamental challenges for Post Office, i.e. whether demand can be
managed in such a way as to enable a future outsourcing.
A fundamentally different business model, which will drive down demand for
Supply Chain services, has potential of reducing the cost-base and ultimately
move us to a position where outsourcing becomes a commercially viable
option.
ExCo conclusion: Strategy, Finance & Supply Chain teams should be
tasked to explore the possibility of (a) accelerating / increasing ‘tactical’
demand reduction beyond that contained in the current Strategic Plan, and (b)
deriving a ‘strategic solution of an alternative operating / business charging
model designed to reduce branch demand and give rise to a lower-cost (or
possibly outsourced) Supply Chain model for Post Office Ltd. This will include
the consideration of subpostmaster self-funding options. The conclusions of
this analysis should be presented to ExCo and this Board for review and
approval.
5. Key risks / horizon scanning
5.1. There are many factors that could affect our Supply Chain strategy; these are
highlighted below:
e Loss of POca: This would have a significant impact on the net cost of the
Supply Chain operation. The POca contract generates around £59m’ of net
income per annum. The impact of losing the POca contract would be further
compounded by an increase in the operational demand in the network, as it
would drive up the number of branches who have cash surpluses and
therefore the need for additional collections. The counterfactual that was
developed as part of the Strategic Plan used this information to highlight to
' Net income value stated is after supplier and ATM interchange costs
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BIS the importance of securing an extension of the current contract. The
Government Services team are progressing the contract extension strategy
with DWP. In addition, Finance and Strategy are exploring the value of a
project that develops a view of the action plan that would be needed to
restructure our business to prepare for a future without POca, which will
include considering the impact of other cash heavy products, i.e. Business
Banking deposits and ATMs.
¢ Industrial relations: the current industrial relations activity may extend into
the Supply Chain. This would affect our ability to deliver both cash and secure
stock to the network. The Network and Supply Chain team have developed
contingency plans to address this scenario and include:
co Pre-funding the network with large amounts of cash and secure stock
© Temporary agreement with a 3" party provider G4S or Loomis
o Agents self-funding
ExCo has debated the extent to which escalation of activity could
present an opportunity to secure fundamental changes to the staffing
model for Supply Chain operation and this will be evaluated urgently as
part of the next package of work activities.
6. Next Steps leading to a Future Roadmap
6.1. Taking account of the Elix-IRR report (and ExCo outputs) and the key risks &
outlooks, the internal team will now focus on developing alternative Supply Chain
solutions which could be profoundly different to the status quo. The key driver is to
address the level of demand for Supply Chain services, which will enable
significant cost reduction and may lead to a commercially sustainable option to
outsource.
6.2. The internal team has identified several areas which could fundamentally change
demand for Supply Chain. These areas are briefly described below:
e Cash and secure stock products, which will encompass:
o re-engineering products that reduce the need for Supply Chain to source
cash and secure stock, including how we could digitise printed stock;
o assessing the risk of losing the POca and how it affects what we do with
Business Banking deposits and ATMs;
o reviewing product pricing strategy, taking account of requirements for
supply chain support.
e Moving subpostmasters (with a particular focus on Locals) to self-financing the
cash required to fund the branch.
e Moving to a model where subpostmasters pay for the cost of the supply chain
service.
¢ Assessing how other major networks (e.g. PayPoint) utilise supply chain
services.
¢ Investigating commercially sustainable sourcing options (including assessing
the conditions that could be suited to outsourcing) taking account of:
© the interplay with the risks and opportunities presented through industrial
relations;
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co levels of staff pay - Elix-IRR reported that Post Office labour costs within
Supply Chain are (on average) 16% higher than the market.
6.3. The internal team, comprising Supply Chain, Strategy, Finance and Network will
vigorously, robustly and objectively assess the feasibility of how Post Office could
introduce the above changes. The assessment will look at:
e what steps the business would need to take to move to a new model;
e¢ how long it would take;
e how much it would it cost;
e dependencies, risk and issues.
6.4. Additionally (and in the context of the strategic plan) the internal team will review
Supply Chain’s existing roadmap of cost activities, with a view to:
e identifying additional cost-reduction activities - this will focus on both staff and
non-staff costs (including property, vehicles and equipment);
¢ accelerating, where possible, any of the cost-saving activities already
identified by Supply Chain.
6.5. The internal team will present an update to ExCo and this Board in January 2014.
7. Conclusions
7.1. Supply Chain has successfully taken cost out of its operation over the past 10
years. Going forward, cost reduction continues to be a high priority and, in the
short-term, Supply Chain’s primary objective should continue to be the provision of
service to the Post Office network, with external income only being pursued where
it helps to mitigate the costs of that activity by utilising surplus capacity within the
operational network.
7.2. Given the existing levels of demand, taking further significant cost out of Supply
Chain without tackling network demand is now limited. We therefore need to
develop a fundamentally different approach that will drive down branch demand
and give the business the platform for moving to a lower-cost model and potentially
lead to a more commercially viable route to outsourcing. An internal team has
been put in place to action this.
7.3. ExCo will continue to review progress and assess if a change in strategic direction
is needed/has value. The next review will take place by January 2014.
8. Recommendations
8.1. The Board is asked to note the conclusions of this paper and support the
recommended strategic approach.
Chris Day, Sue Barton & Kevin Gilliland
25 September 2013
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Appendix A — Supply Chain Cost-Saving Activities
Totals
Achieved already (may Achieved inthe Rolling Benefit In plan to be
To Do
Activity include roll on) last 5 Years to end of Plan delivered
Single Person: Specific SPVs Rising from £6.3m in
implemented as part of the Staff 08/09 1 £33.1m £53.8m
plan so far- 180 08/09 to £8.3m in 19/20
Swindon Stock Centre Rising from £1.5m p.a.
Reduction: 50 headcount Start torn to £1.9m p.a. £4.6m £12.2m
Single Person Logistics Rising from £0.5m p.a.
(Trunking): 15 to date Staff I 11/12 I in 44/12 to £0.6m p.a. Eom BAO
Single Person: 2 person .
vehicle conversion already Staff 11/12 reo See 00 £1.4m £5.6m
implemented = 20 .
ATM insourcing from SSG pe 12/13 I £0.7m p.a. from 12/13 £0.7m £4.6m
Single Person: 30 headcount £1.4mp.a
reduced through the Staff 14/15 +1 pia. £6.6m
from 14/15
conversion plan
Online Ordering: realises an
£0.4m p.a.
estimated 12 Headcount (in Staff 14/15 £2.5m
. from 14/15
feasibility; needs validating).
Single Person Logistics £0.4m p.a. in 14/15 and
(Trunking): 20 more max (10 I Staff 14/15 I £0.7m p.a. in following £3.9m
next year, 10 year after) years.
Cash Centre Reduction: 20 £0.6m p.a.
headcount reduction etait bide from 14/15 esem
Fleet and Maintenance Non- £2.0m p.a.
Service Provision Contract Staff 145 from 14/15 #10,0m
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Appendix B - Key findings from the internal review
While the net cost of Supply Chain has reduced significantly in recent years, both ExCo and the
Board have challenged the cost of this service to the business. At a forecast net cost of £66m
in 2013/14, this remains a significant proportion of our cost base. In that context, we conducted
an internal review of the Supply Chain operation and cost base. This review concluded:
e There was limited opportunity to further reduce the cost of service supply to the
network for the current size / demand of the network: analysis showed that the main
cost driver for the Supply Chain operation is number of branches to be served. While the
network remains static in size or indeed grows, further cost savings will be limited.
* The main efficiency opportunities therefore relate to changing the demand within the
network: as demand/ service levels are managed from within the Supply Chain operation,
there is opportunity to deliver efficiency savings in this area. Moving some branches to less
frequent higher value cash deliveries opens up the opportunity to reduce costs. While
interest rates remain low, early analysis indicates this could be an option for around 6,000
branches.
e Outsourcing Supply Chain, given the current demand and set-up, is not a cost-
effective option: as Supply Chain provides services to third parties and this is won
competitively, we do have insight to market rates. Using these rates and applying to the
internal service, we were able to estimate the likely cost of an outsourced service. The
internal analysis highlighted that an external service model could be more expensive. When
this was considered alongside the likely industrial relations impact and the potential for
creating a powerful Supplier duopoly, it was ruled out as a viable strategic option.
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Appendix C - High-level summary findings of the Elix-IRR Report
We recently engaged an independent consultancy (Elix-IRR) to conduct an assessment of
Supply Chain. We specifically asked them to consider two strategic options:
¢ Market growth — to assess the attractiveness of the Supply Chain market for Post Office so
we could consider whether we should be turning Supply Chain into a market pillar and
increasing our focus on generating income in this market; and
¢ Outsource service provision — to assess the feasibility and attractiveness of sourcing our
supply chain services from a third party provider.
a) The Supply Chain market is not an attractive opportunity for Post Office
e With the exception of the ATM (market), the indications are that the industry is in
slow decline with an industry average pre-tax profit of ~8%.
e While Post Office is a known and trusted brand and Supply Chain benefits from loyal,
satisfied customers, there is low potential for differentiation and the current value
proposition is not unique.
e Supply Chain’s labour costs are ~16% higher than compared to the main players
(G4S and Loomis) and the Operation, in its current form, is not geared up to compete
at scale — without significant investment.
« The Supply Chain operation, specifically the cash management elements are
‘impressive’ and while revenue growth will be possible, it will be challenging to build
significant market share
b) Qutsourcing Supply Chain in its current form would not be attractive
e Outsourcing Supply Chain, in its current form, could increase Post Office’s costs by
as much as £25m per annum.
e There is no clear vendor business case to take on the scope of Supply Chain in its
current form as even with a 15% discount applied; arithmetic payback (not NPV
based) would take 4-7 years.
e There are currently only two organisations that could consider this outsourcing
contract, G4S and Loomis and this raises Competition Commission concerns (in the
case of G4S). However this risk may be lowered in a scenario where Supply Chain
is a smaller operation.
e A decision to outsource would present a significant risk of industrial action from the
CWU.
Supply Chain Net Cost C Day, S Barton, K Gilliland Page 8 of 8
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POST OFFICE LTD BOARD
Service Integrator/Service Desk
Contract Award
1. Purpose
1.1 This paper provides the Board with an update on the procurement for a Service
Integrator/ Service Desk (SISD) provider.
1.2 The Board is asked to note that the Executive Committee has approved the
award of the SISD contract to ATOS IT Services Ltd.
1.3. The Board is asked to authorise the Chief Finance Officer to sign the SISD
contract.
2. Background
241 The Board has previously approved the IT Transformation Programme, which
included the re-procurement of the IT supply chain to meet the demands of our
business strategy, Royal Mail Group Separation activities and to ensure
continuity of services from end of life IT contracts.
2.2 In July, the Board was updated on our progress to procure a Service Integrator.
The procurement activity for this component of our new IT supply chain has now
completed and following a robust and rigorous selection and evaluation process
we are now recommending signing the contract.
2.3 The SISD is a key part of transforming our IT. It will enable the realisation of the
benefits which include an annual reduction of £26m in IT operating costs once all
services have transitioned into the new supply chain.
3. Activities/Current Situation
3.1 The path to SISD selection has been run in accordance with Public Procurement
law, overseen by our sourcing and legal experts.
3.2 Three suppliers were selected to participate in the procurement, ATOS,
Capgemini, and CGI; all three submitted bids in response to our invitation to
submit final tender.
3.3 In August the bids were evaluated against pre agreed cost and quality criteria,
with scores moderated to ensure consistency. The subsequent supplier
recommendation is based on a ‘Most Economically Advantageous Tender’
(MEAT) basis. MEAT is a value for money calculation based upon the
evaluated/moderated quality score divided by cost.
3.4 ATOS was evaluated as providing the MEAT response, and following
clarifications has been awarded preferred bidder status; all bidders were advised
on 13 September on the outcomes of the evaluation. On 23 September a legally
required 10 day stand still period completes, during which time all bidders and
the market have the opportunity to review and challenge the outcome of the
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evaluation. Following this we are able, subject to this Board’s approval, to sign
the contract.
3.5 Due to the indicative size (56m) and strategic impact of the award, approval
from the IT Transformation Programme Board, Sourcing Council and Executive
Committee has been given prior to this request to the Board.
4. Service Scope
44 We are seeking the Board’s approval to sign the SISD contract to ATOS IT
Services UK Limited.
4.2 Services will include:
e Implementation of a single Service Desk and transition of our incumbent IT
supplier Service Desk capabilities.
e Establishing a Service Integrator to provide operational management of the
new towers based IT supply chain and management of our incumbent IT
suppliers as they transition into this model.
« Delivery and management of IT change originated by the Post Office.
e Transition of existing Service Management and Change colleagues from Post
Office into ATOS under TUPE arrangements.
« Managing on behalf of the Post Office the implementation and successful
delivery of the new IT supply chain.
* Delivering governance to ensure Post Office constrains internal IT costs in
line with policy and drives value and efficiencies out of the IT supply chain.
5. Commercial Impact/Costs
5.1 The SISD is the first component of the strategic IT supply chain eco-system.
The cost of this eco-system has been benchmarked and modelled against
external and market standards. This benchmark, undertaken with the support of
a specialist third party, Information Services Group (ISG), determined the
potential benefit opportunity for Post Office and modelled the impact on our IT
costs. The identified benefit from delivering the new supply chain (across the
SISD and the towers) is £26m per annum once all services have transitioned.
5.2. The expected benefits and costs for this are embedded in the IT Strategic plan.
Comparing this plan with the 2012/13 costs as a baseline delivers the following
benefits.
2014-15 I 2015-16 I 2016-17 I 2017-18 I 2018-19 I 2019-20
Reduction in
OPEX (£m) 9 14 13 27 26 26
5.3. The costs for delivering the SISD services are in line with our benchmark
expectations.
5.4 The Initial term of the contract is 4 years, with an option to extend for 2 years at
the Post Office’s discretion.
5.5 The committed value (excluding VAT) of the award over the initial 4 year term is
£40.6m. There is no RPI increase allowed against these costs.
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5.6 In addition, there are a number of consumption based volume charges for
delivery of change activity. Using the current Post Office change volumes this
represents an additional £16.4m over the same term. This approach enables the
Post Office to benefit from targeting efficiencies that improve process and reduce
volumes in the IT supply chain.
5.7 In order to implement the SISD services, Post Office is committed to pay £8.8m
to ATOS and will also incur £6.6m of costs which will cover our own internal
team, staff transfer (TUPE) and our contractual obligations to incumbent
suppliers. These costs are exclusive of VAT and have been agreed by the
Investment Committee, in line with our Strategic Investment Plan.
5.8 The contract is subject to benchmarking, with an automatic reduction in charges
if they are not aligned to the upper quartile benchmark. If Post Office is
benefiting from lower charges than the market benchmark then the SISD has no
entitlement to increase their charges.
5.9 Subject to Board approval the contract is to be signed on 27th Sept 2013.
6. Key Risks/Mitigation
6.1 The success of an SISD has a critical dependency upon contractual engagement
with Post Office’s incumbent suppliers and future Towers providers. Where
contractual interoperability cannot be achieved with a supplier, the benefits from
the model will be diminished. Signing the Transitional Support Services
agreement with Fujitsu will significantly address this risk.
6.2 Post Office will need to provide the internal resource capability to govern the
relationship and, in parallel, implement the business changes required. An
Implementation Team is being mobilised and over the next 6 months we will
begin to move to our retained organisation structure. As a result of transferring
work to the SISD, around 80 colleagues are expected to move under TUPE
arrangements to ATOS following the completion of due diligence. The
efficiencies from this are incorporated in the benefits described in 5.1 above.
6.3 The cost of IT is driven by both the cost of supply and by the level of demand; to
deliver the greatest efficiency both need to be actively managed. The SISD
plays a key role in managing the cost of supply, but we need complementary
engagement in the business to assess how demand for IT services is generated
and managed. The IT Operating Model recognises the significance of this and
incorporates capability to work with the business to develop and manage
demand.
7. Long term considerations — horizon scan
7.1. The new IT Operating Model balances the responsibilities between the Post
Office and the SISD, with Post Office retaining the commercial relationships with
our supplier base while the SISD takes accountability for delivery.
7.2. A level of flexibility has been built into the SISD contract. However, future
changes to the Post Office’s operating model, such as further business process
outsourcing, will generate an operational and financial impact that will need to be
assessed as the scale of the SISD contract has been based on current volumes.
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8. Communications Impact
8.1. There is a requirement to communicate this award across internal and external
channels, across the current supply chain and with the Unions. A
communications plan is in place and we have expertise in the programme,
reporting into the Communications function.
8.2. We have actively engaged with the Unions regarding the transfer of
responsibilities and colleague impact. Following contract award we will be
entering into a formal consultation period with both the CWU and CMA.
9. Conclusion
9.1. I The procurement of our SISD partner is the first step in delivering our strategic IT
supply chain which will allow us to deliver a reduced cost base in line with our
strategic plan, whilst improving our customer and colleague experience.
9.2. I The benchmarking we have completed has demonstrated that we can reduce our
cost base and ensures that we can further benchmark our costs against the
market over the life of the contract.
9.3. In tandem we will be implementing our retained organisation which will drive out
efficiencies and increase our capability.
10. Recommendations
10.1. The Board is asked to authorise the SISD contract with ATOS IT Services UK
Limited to be signed by the Chief Finance Officer.
Lesley Sewell
18 September 2013
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POST OFFICE LTD Board
IT Strategy Update September 2013
1. Purpose
1.1. The purpose of this paper is to update the Board on progress against our key initiatives
within the 2020 IT Strategy demonstrating why it represents value for money and
achieves our run-cost reduction targets.
1.2. The Board is asked to note this paper.
2. Background
2.1. There are a number of key change programmes delivering the 2020 IT Strategy,
providing the building blocks for supporting our overall business strategy. Good
progress is being made, and a number of key decision points have been met, or are
imminent. Significant benefits are embedded in the Strategic plan, aligned to deliver
our value for money agenda, realised through successful delivery of initiatives across:
Independence and Separation
IT Transformation (IT Operating Model and Supply Chain procurement)
Transitional Support Services with Fujitsu
Horizon Intellectual Property Rights (IPR)
Point of Service strategy
3. Current Situation
3.1. Independence and Separation
e Post Office continues to work closely with Royal Mail to deliver Separation in-line
with the existing Master Services Agreement (MSA).
¢ Following recent discussions with Royal Mail, both businesses have agreed to
review the time line for Separation and explore opportunities that deliver mutual
benefit. This will be done in keeping with our aspiration to significantly reduce the
cost base over the medium term. From a Post Office perspective, this gives us
more time to assess the opportunities, benefits and risks of transferring services.
e Regardless of the outcome of the review, the IT Supply Chain remains a
prerequisite to complete separation. The Board will be provided with a
comprehensive update once the review is complete. We expect to have a view of
this by mid-October.
3.2. IT Transformation
e The approach and strategy for delivering the IT Transformation has previously been
approved by the Board.
e The IT cost base can be varied by managing the cost of supply and simplifying the
IT contract framework. The new IT contract framework allows us to leverage
economies of scale within the IT landscape and improve our ability to secure future
benefits as we procure or re-procure IT services.
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e IT Transformation delivers a new IT supply chain together with a new IT Operating
model which is optimised to manage the supply chain, enhance IT capability and
maturity, and deliver sustainable cost efficiencies.
e The Board were updated in July on our plans to select and award a Service
Integrator (SI). A separate paper accompanies this to provide an update on the
outcome of the evaluation and selection process, and a request to approve the
signature of the contract.
e Weare making progress on procuring the new supply chain and, in addition to the
SI which has been submitted for authorisation, we are expecting to seek authority to
sign contracts for:
Data Centre in November 2013
End User Computing in March 2014
Application and Infrastructure in August 2014
IT Network in September 2014.
e000
¢ The financial benefits from implementation of the IT Transformation are included in
the Strategic plan. Benefits are targeted to achieve industry benchmarks, and
contracts are structured to maintain alignment over time. The benchmark has been
established through working with external specialists and has identified a circa 25%
reduction in the run rate cost of IT by 2017/18. Across the term of the plan to 2020
this equates to £93m and annualised benefits of circa £26m against current spend.
¢ Arreview of the business case for delivering IT Transformation has been undertaken
to take into consideration learning from progress to date, the impact of our Point of
Service strategy and the award of the Transitional Support Services (TSS)
agreement. The review has validated the approved strategy and approach.
3.3. Transitional Support Services (TSS)
¢ The TSS was approved by the Post Office Board on 19" July 2013 and following
final negotiations, Fujitsu signed the TSS on 11" September 2013. Post Office will
subsequently sign prior to 30" September.
e This major contract amendment extends the existing HNGx Agreement’ with Fujitsu
by 2-years from 1* April 2015 up to 31% March 2017 and provides a number of
benefits. The benefits include:
o Securing core Horizon services until 31st March 2017;
o Reducing scope by 27% but maintaining the unit pricing points, ensuring
overall run costs have reduced proportionally;
o Supporting transition to the Towers model by introducing new obligations
which enable Post Office’s Service Integrator to manage the TSS;
o Introducing additional partial termination rights and enhanced exit terms to
support transition.
e The TSS is dependent upon Post Office and Fujitsu completing the Belfast Refresh
project by 31st March 2015. This programme was approved at POLIC on 14th
August 2013. The project is running to plan and there are no material risks to the
completion date.
‘ The HNGx Agreement, originally signed on 28" July 1999 provides Horizon Online services to all Post
Office counters in all branches. The agreement has been amended and extended during the term.
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3.4. Point of Service (POS) Strategy
« POS will define Post Office’s future Point of Service (including branch counter)
experience and capabilities.
¢ The existing POS system, Horizon, is not aligned with our long-term business
strategy in its current form. The POS initiative will either replace or evolve this
system to better fit our IT and business strategies.
e Intellectual Property Rights (IPR) for the Horizon system is required to support the
procurement of the Point of Service (POS) tower. Negotiations are on-going with
Fujitsu to secure these rights.
¢ We intend to start the procurement by issuing an OJEU notice in October 2013.
¢ We expect to seek approval to award the contract in December 2014.
4. Commercial Impact/Costs
4.1. The benefits case for IT Transformation has been re-assessed since the 2013/20
Strategic Plan was developed. The impact of this assessment on the plan is included in
the table below (figure 1).
IT&C run costs
100
em 80
60 Do Nothing: Projecting forward what would happen if we do nothing / procure on the same basis. We are
tunable to maintain the cost savings that we realised in 201 1-2013, because these are one-off & tactical
40 I ———— Original Strategy Pian: Tactical benefits realised AND future Tower benefits realised.
——— Revised Pian: Revised Pian, shows even greater benefits that we initially anticipated.
‘Baseline’: Using the actual 2012/13 costs, we have used this number as the baseline
against which we are tracking benefits
20
20112 201213201414 201A = OISHIG «O17. 2017/18 = orate §=— 2019/20
Figure1
4.2. The revised plan delivers greater savings over the life of the strategy. This is a result of
detailed analysis which demonstrates that Post Office can make use of more “off the
shelf’ products rather than implementing bespoke solutions.
4.3. Due to difficulties in exiting certain contracts, there is an anticipated increase above the
Strategic Plan of £3m in FY 2014/15. We have put a plan in place to bring our run costs
back into line with the original Strategic Plan, within the financial year.
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5. Long term considerations — horizon scan
5.1.
5.2.
5.3.
The IT Strategy has been developed to support the overall business strategy and it is
regularly reviewed to ensure it remains aligned. Any updates to the business strategy
need to be impact assessed and reflected in the IT strategy.
Achieving alignment with benchmarks requires Post Office to exploit ‘off the shelf’
capability and avoid bespoke solutions. Strong internal governance is required to
challenge and ensure we do not deviate from this.
The cost of IT is driven both by the cost of supply and by the level of demand; to deliver
the greatest efficiency both need to be actively managed. The new IT Operating Model
plays a key role in managing the cost of supply, but we need complementary
engagement in the business to assess how demand for IT services is generated and
managed. The IT Operating Model recognises the significance of this and incorporates
capability to work with the business to develop and manage demand.
6. Communications Impact
6.1.
6.2.
6.3.
6.4.
The IT organisation has been fully engaged with the communications team when both
planning and executing the IT Strategy. Key IT transformation milestones have been
announced to IT and Change staff at a number of dedicated meetings, with follow up
FAQs issued to reiterate key information or address specific concerns.
Regular engagement with Union leads reinforces the collaborative nature of the change
process and allows for input into areas where people are most likely to be impacted.
As initiatives within the strategy develop specific communications activity plans for use
both internally within Post Office, as well as to Unions and the wider market will be
developed.
Specific communications activity planning for the SISD contract is being finalised, in
anticipation of the authority to sign the contract. This level of activity planning is being
applied to all key programme milestones; including the IT Operating Model and TSS
signature, amongst others.
7. Recommendations
7.1.
The Board is asked to note the update and actions set out above.
Lesley Sewell & Sue Barton
18 September 2013
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POST OFFICE LTD BOARD
Chief Executive’s Report
1. Mails
As the Performance Report sets out, mails income is still performing below target, by
around £10m over the year to date (not including retail and lottery). However, over the
past fortnight we have taken some significant steps forward in our action plan to recover
the parcels volumes that were lost as a result of the April tariff change. Firstly, on 2
September we launched a month-long price discount of up to 20% on certain formats
through our Drop & Go service, supported by online advertising to target high volume
senders who use eBay and Amazon. In the first week of the discount we achieved a 31%
increase in Drop & Go sign-ups alongside a clear improvement in parcels volumes: 1°
Class Labels were only down by 1% compared with the same week a year ago, having
suffered a 19% decline over the year to date, and 2” Class Labels were up by 6%
following a flat performance over the year to date.
Following the roll-out of the Drop & Go service to the entire network at the end of July and
the launch of this promotion at the start of September, we now have over 8,000 customers
signed-up to the service, 2,000 of which have joined in the last two weeks.
The second major strand of activity has been our work with Royal Mail (RM) to introduce a
large, shoebox sized format that will enable more items to be classed as ‘small parcels’.
The change was announced on 16 September, and following a month-long consultation
(required by Ofcom) will be introduced in branches later in October. Our expectation is
that this will enable us to recover around 50% of the volumes lost since April (225,000
parcels per week), and together with the Drop & Go campaign should mitigate the income
losses by around £4.3m over the remainder of the financial year. (The additional
dangerous good income for domestic parcels should offset the remaining mails shortfall,
generating around £7.8m by year end.)
Further progress has been made with RM in lining up retailers to use our new click and
collect service. Negotiations have been finalised with MetaPack (a widely used delivery
management intermediary) to create a platform that will enable their clients to link up with
the service with minimal further integration work. Over the course of September and
October we will be ‘onboarding’ a number of medium sized retailers (such as Paperchase,
Wiggle and Pro-direct Soccer), in time for Christmas orders. RM has also secured
provisional agreements with some larger retailers such as Amazon, Marks & Spencer and
Asos to start using the service from the first quarter of 2014. Finally, we have achieved a
strong improvement in our returns business with volumes up 17% year on year over the
last 5 weeks, through a combination of increased awareness of our longer opening hours,
a halo effect from the high profile click and collect announcements and good sales work
by RM. On 16 September we delivered a joint pitch with RM for Ebay returns, which if
successful would deliver a further significant increase in volumes.
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2. Financial services (FS)
The new FS sales model and supervisory structure is on track for implementation from 1
October, in time to support the ramp-up of income targets over the remainder of this
financial year and beyond. There are now 282 Financial Specialists deployed across the
network, 40 of which have passed a rigorous assessment process to become Mortgage
Specialists. Recruitment is underway for a further 60 Mortgage Specialists from outside of
the business, which should be completed by the end of October. The Area FS Managers
recruitment is also nearing completion, with 22 in post by the end of this month and the
remainder in place by the end of October. We have launched a pilot for dedicated
Financial Specialists in eight agency branches - an important initiative in exploring the
scope to grow FS sales outside of the Crowns.
The current account pilot is continuing with 1,256 applications to date and 625 accounts
opened (as at 13 September). The number of applicants failing to meet the identity and
anti-money laundering requirements has been higher than expected, although the rates
are now improving following work with the Bank of Ireland to change the account opening
procedures. Additional coaching is being provided to staff in the branches within the pilot
area to test the full potential of the proposition for increasing cross sales. Following the
launch of the industry wide 7 day accounting switching service on 16 September, we are
also conducting a second wave of marketing activity and have received further positive
media coverage (including in the Mail on Sunday) drawing attention to our competitive
overdraft and fair and transparent fee structure.
A separate noting paper is provided outlining our Payment Services Provider strategy to
support SMEs, due to be launched on 1 October. We are also on track to launch a new
pre-paid debit card before Christmas, having worked with FRES (our supplier) to mitigate
the impact of their card issuer (Clydesdale) withdrawing provision due to a change in
strategic direction. Finally, on 16 September we re-launched our online credit card
application portal, which significantly streamlines the process for customers based on
market leading approaches, helping to strengthen our credibility as a serious FS provider.
3. Government services
We have continued to engage DWP with the aim of securing an extension to the POca
contract beyond 2015. In particular, we have shared with them the outputs from our
customer research which shows that a significant proportion of customers are heavily
dependent on the use of cash to manage their budgets effectively. This research and
DWP’s own analysis have shown that complete closure in 2015 is not feasible as even the
most aggressive migration plan would leave 1 million customers on POca by this date. On
the back of this joint working, DWP are now re-working their migration plan with a 2017
end date and are contemplating the need for a new ‘safety net’ product beyond that date
for customers who cannot be migrated (particularly pensioners). While there are
undoubtedly risks, at this stage we therefore believe that the POca volumes and financials
included in the strategic plan remain a credible base case scenario.
The new Universal Credit Programme Director in DWP, Howard Shiplee, visited the model
office on 7 August to view our capabilities first hand. Feedback confirmed that he was
interested in using our online and face-to-face identity verification capabilities and this will
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be further supported by the recent National Audit Office report which highlighted the
significant fraud risks associated with Universal Credit.
On 30 August we signed the first call off under the Identity Assurance framework contract.
Of an initial market of 8 providers, only 5 have signed the call off meaning that this
contract is now worth approximately £2.5m over 18 months (the majority of which falls in
2014/15). The Government Digital Service (which is co-ordinating the process across
departments) is planning to run a second procurement for the continuation of the service
beyond 2015, with a forecast market of 75 million separate identities by 2017. This will
include business identities, which are expected to require face-to-face verification where
we have a clear advantage over our competitors.
On 1 September HM Passport Office (HMPO) signed a new 7 year contract with Post
Office using the DVLA Front Office Counter Services framework contract. In the first
instance this will allow the continuation of the existing check and send service, although it
also provides the flexibility to move to a digital based service creating additional income
opportunities. We hosted a visit from the CEO of HMPO (Paul Pugh) on 13 September to
demonstrate how a digital customer journey for passport applications might work in
practice. He was clearly enthused about the potential, and we were informed that he
briefed his Minister (Mark Harper) about the visit the same day.
4. Home services
The migration of our telecoms services from BT Wholesale to Fujitsu took place over the
weekend of 30 August to 2 September. The migration of data relating to our 470,000
existing customers was completed successfully, but there have been very long waiting
times to get through to the call centre since the migration. This has been driven by
increased demand for the enhanced services that became available, call handling times
being longer than forecast and some specific technical issues which have now being
resolved. We have been working urgently with Fujitsu and its partners to put in place
measures to address the situation by increasing call centre capacity and managing
demand more effectively. We will provide an update on the latest situation at the Board
meeting.
We have now entered into exclusive negotiations with Fujitsu and EE for the provision of
mobile phone services. The market research broadly validates the customer numbers
contained in our strategic plan and that average revenue per user looks strong. Work is
also progressing on our plans to enter the energy market. We have completed the first
phase of market engagement and have received proposals from four potential partners.
Our plan is to short-list two suppliers in October and launch the service in early 2014/15.
5. Network Transformation
The programme is on track to achieve the Q2 target of 1,853 contracts signed, with 1,804
achieved by 13 September. However, delivery of the year-end target of 3,000 remains
challenging and there has been some slow down, particularly in the independent sector.
Feedback from the field teams suggests that agents are stalling in the hope of a better
deal, in light of recent communications from the NFSP around the future strategy and the
possibility of increased levels of compensation. However, we have a strong pipeline of
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branches leaving the network, and a significant part of the effort in the second half of the
year will be to convert the interest we have so far secured for these branches into
contracts for the new operators.
Last week marked the delivery of the 1000" branch opening, an achievement
commemorated by a visit by Jo Swinson to a recently converted Main branch in
Uddingston, Glasgow. We are increasing the weekly branch opening beat rate from
around 20 in July and August to an average of around 30 from late September and
through October, supported by the opening of more of the multiple branches that were
signed last year. However, we are not yet seeing an acceleration in the average time
taken to convert each branch: there is a fairly consistent pattern where half of branches
open within 5 months or so of signature, while the other half extends over a much longer
timeframe. As a result the programme is currently behind target with 1,038 branches
completed as of 13 September, creating a significant risk to our ambition of 1,950 branch
openings by year end.
We have therefore reviewed every branch in the whole NT process to focus effort from all
teams on those branches that want to sign and open within the financial year. In addition,
we are proceeding with the pilot of using our own contractors to undertake branch works
to speed up the implementation process. The initial focus is on 80 branches and feedback
from the field so far has been that many sub-postmasters are keen. While we need to
learn the lessons from the pilot, we have started preparing the public procurement
exercise so we are ready move away next year from the default position that agents
appoint their own builders.
6. Crown Transformation Programme (CTP)
Current projections indicate a net shortfall of around £3m against the target to reduce the
Crown losses to £23m by the year end, largely as a result of the adverse mails income
detailed in the performance report. Work is underway to mitigate this shortfall, including
through the additional actions highlighted in the mails section above.
In addition to the five pilot branches that were modernised last year (Nottingham,
Peterborough, Chester, New Malden and Birmingham), a further five have been
transformed over the summer (Milton Keynes, Houndsditch, Derby, Sheffield and
Wandsworth). Our target is to have 45 branches completed by Christmas and 117 by the
end of 2013/14, with the remainder of the 292 retained branch network scheduled for
modernisation next year. Members of staff are being consulted on the proposed re-
designs ahead of each conversion.
We are currently working with a pool of 35 branches that have the potential to franchise
this financial year, subject to the successful completion of the application and public
consultation process. Around 20 of these branches are expected to be delivered through
an overarching franchising agreement with WH Smith which we are close to finalising (this
will also include 82 Mains conversions).
We recently commenced a 45-day collective consultation process on our proposed new
voluntary redundancy scheme, which is a key element of our planned staff savings. More
broadly, as part of a renewed drive to engage staff and promote a deeper understanding
of our transformation activities ‘super-briefers’ have been deployed again across the
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Crown network over the last month and a new staff magazine has been launched. A
separate update on the industrial relations situation will be provided at the Board meeting.
7. Marketing and multi-channel
The first phase of the econometric evaluation of the brand orientated campaigns has now
been completed. This demonstrated that the £12.9m spent during the first 6 months of the
campaign (from October to March) generated additional income of £9.6m within 2012/13,
with the expectation of greater cumulative effects in this financial year and beyond
(although this is partly predicated on our ability to afford continued investment in
marketing). This positive evaluation adds to the good initial movement of brand metrics,
the increase in mortgage spontaneous awareness from 0 to 6% and the above average
rates of consumer awareness and key message take out from the campaigns.
The travel essentials brand campaign is still live and therefore has not yet been fully
evaluated but the short-term indicators are positive. While the package holiday market is
down 5 % year on year, for the first time in a number of years we are outperforming this
indicator with our travel money transactions flat. Travel money overall is 100% of target
over the year to date and 4% up year on year; travel insurance is 123% of target and up
6% year on year; and Passport Check and Send is 108% of target and also up 6% year
on year.
Progress with the multi-channel programme is continuing. The procurement process for
the Common Digital Platform commenced last week, and once completed will provide an
integrated solution to manage all of the requirements for online customer servicing across
the business. The mobile-optimised version of the current Post Office website is expected
to be launched on 25 October. Following engagement across the network we will be
commencing pilots before the end of the year to test how a multi-channel customer
experience can be successfully managed within different branch types, including the use
of online appointment booking and meeter/greeters with mobile technology.
8. Public purpose engagement exercise
On 30 August we started the public engagement and research exercise to test the public
purpose statements produced by the Stakeholder Forum, to inform the final
recommendations to the Board. The process is being run in two stages. The initial four
week stage will gather opinions on the public purpose through a combination of focus
groups and written questionnaires, with over 500 responses received by 18 September.
We have taken additional steps to ensure a good response rate from our own staff,
following the CWU and Unite’s late decision to withdraw from the process. This qualitative
input will then feed into a second stage targeting a statistically representative sample of
members of the public. The evidence from the exercise will be presented to the
Stakeholder Forum in December.
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9. Sub-postmaster engagement survey
«Further to the discussion at the June Board on improving sub-postmaster engagement, we
will be launching the new sub-postmaster survey on 30 September. The questionnaire
has been constructed through workshops and meetings with stakeholders across the
business and interviews with a selection of sub-postmasters. The NFSP have also been
consulted on the process. The survey will be issued to all independent sub-postmasters.
We will be adopting a different approach with our multiple partners, conducting focus
groups with key business contacts. The high level results will be ready by mid-November,
and at that point the ExCo will discuss the key insights and our response.
10. Project Robin
e Following the two month consultation over the summer with employees in both Post Office
and RM on the proposed changes to the pension scheme, on 6 September RM
announced that it would be improving its offer by enabling promotions and increments
within defined pay grade groupings to flow through into pensionable pay. If we were to
replicate these changes for our staff it would bring forward the point at which the scheme
surplus is exhausted by around two years (from 2021 to 2019). The issue was discussed
with the Pensions sub-committee on 10 September, who agreed that on the basis that
these financial impacts are manageable, the CFO should have the mandate to offer
similar changes if deemed necessary to manage the industrial relations situation
effectively. The CFO will provide an update on the latest situation at the Board meeting.
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POST OFFICE LTD BOARD
PROJECT SPARROW
1. Purpose
1.1 Update the Board on progress against the list of actions included in the Horizon
Update paper sent to the board on 27" July 2013.
2. Background
In the update paper we said that we would aim to have completed the following by the
end of August 2013:-
2.1 finalised the terms of reference for the process of mediation and resolution in
relation to the existing cases and also identified a mediator, so we are ready to
commence the process;
2.2 agreed the process for filtering any ‘new historical’ cases that emerge;
2.3 started engagement with key individual MPs on how we will be taking forward
their cases;
24 completed the second sift of past prosecuted cases;
25 developed an initial position on the pros and cons of continuing to bring
prosecutions ourselves;
2.6 identified ‘quick wins’ in relation to process improvements for sub-postmaster
training and support, and started mapping the approach for longer-term
improvements; and
2.7 established the terms of reference for the Branch User Forum.
All of the above actions are complete (details below) other than 2.5 which is in progress
with a full review to be completed by the end of October.
3. Current Activities already underway
3.1 The Initial Mediation scheme was launched on 27" August and so far Second
Sight have received 23 case submissions, 20 of these were reviewed formally on
11" September by the Working Group (Post Office, SS and JFSA) to establish
how many were eligible to progress through the process. Of the 20 cases
received one was a serving subpostmaster who had not exhausted Post Office’s
internal processes and was therefore not eligible for the scheme at this stage.
The other 19 are eligible and will be advised that they can enter the next stage of
the process which is to enlist the help of an advisor to present their case with a
view to mediation.
3.2 The Initial Mediation scheme is designed to run until 31° March 2014, after that
date it will be necessary to decide whether to keep this process in place, to
discontinue it or to replace it with another process which permits independent
oversight.
3.3. A briefing day for the Panel Advisors was held on 5" September. 25 advisors
attended, a mix of lawyers and forensic accountants. The briefing was well
received and about a third of the attendees indicated on the day that they would
be signing up to become a panel advisor; the others wanted to reflect on the
requirements of the role and whether they wanted to sign up. The Panel Advisor
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agreement for the advisors have been sent to the attendees of the briefing day.
The list of Panel Advisors will be finalised on receipt of the signed agreement
and communicated to the Sub postmasters who have submitted their case to the
Scheme - they can choose one of these advisors or they are free to select
another professional firm.
3.4 We have appointed the Centre for Effective Dispute Resolution to provide a
panel of mediators for the Scheme and they are also going to provide
administrative support; a representative also attended the training session.
3.5 One of our public commitments was to appoint an independent Chair for the
working party, a candidate brief and job description has been prepared. Paula
Vennells and Alasdair Marnoch are to meet with a candidate on 24" September.
3.6 Alice Perkins met with James Arbuthnot on 11" September that meeting went
well, he was happy with our plans and said that given the progress that had been
made he would recommend to the MPs that a meeting in October would not be
required and that it should be postponed until the New Year.
4. Ways of Working/ Second Site
44 Angela Van Den Bogerd has pulled together a team of four experienced Network
people to work alongside Second Sight to investigate the cases that are
submitted to the Scheme.
4.2. A meeting has been held to establish how the two teams will work together to
ensure an effective and efficient flow of information between the parties with a
view to concluding the facts of the cases expediently. The findings of the case
will then be presented to the Subpostmasters and their advisor for their
consideration as to whether they want the case to progress to mediation.
This team has also established a process to investigate live cases that have/are
emerging from serving Subpostmasters. This approach will run in parallel with
the Second Sight approach. Lessons learned from these cases will feed into the
process improvement work.
4.3 A monthly cap on the Second Sight fees has been agreed and they have also
agreed in principle, that provided the Post Office team is operating effectively,
that they will hand over the investigation on a date to be agreed. It will be key to
keep James Arbuthnot, MPs and the JFSA aligned in order to achieve this.
5. MP Engagement
5.1 All the MPs who have expressed an interest in this issue were contacted on 27"
August (launch of the Mediation scheme) and our communications team have
offered to meet and discuss the scheme and individual cases, no one has taken
this offer up so far.
6. Criminal Case Review
6.1 Our external firm of solicitors who prosecute our cases have completed three sift
reviews, have discontinued 4 cases and under their continuing obligation of
disclosure have notified the defendants’ legal representatives of the Second
Sight report in 9 cases.
6.2 A meeting with Brian Altman QC was held on 9th September; his role is to
oversee the review of our criminal cases. He had received the protocol that our
external solicitors had developed and are using to inform their review process
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and he also looked at a sample of reviews that had been completed in a number
of cases. He agreed with the approach taken by our external lawyers and
confirmed that the protocol was well thought through being correctly applied in
the cases he reviewed. After discussion he also understood the logic of 1
January 2010 being the start date for the review on the basis that this was
implementation date for Horizon NG and that the branches had been audited on
transition.
6.3 Brian Altman was also asked to advise on Post Office / external solicitors on its
continued disclosure obligation with particular reference to concluded cases and
on the basis that new facts which emerge on a regular basis. He gave initial
advice and emphasised the importance of ensuring that this information is
collated and communicated to our external firm on a regular basis.
6.4 The Terms of reference for his review will be agreed and will include an opinion
on the Post Office’s position as a public prosecutor and its prosecutions policy.
6.5 Meeting in Scotland with the Procurator Fiscal and our external lawyers to deal
with their concerns re the impact of the SS report on prosecution evidence —
satisfactorily resolved and new ways of working to be developed which will in any
event be more effective.
7. Improvement Process
7.1 Defining the “As is” process work is on track to be completed by 30” Sept. From
the 80 gaps/issues recorded so far there are common themes emerging:
Training; Comms; Processes; Products; Horizon; Support; Ownership; Systems;
Ownership and Leadership.
7.2. There are 26 quick wins that have been identified and whilst these are low level
issues fixing these will have a positive impact on in-branch users and will reduce
effort/duplication with the support/central functions. The relevant business
owners have taken ownership of these quick wins and started to
deploy/implement from 9th Sept onwards.
7.3 Stakeholder input/engagement continues with the project on track to complete
the recommended future state by 20th Oct.
8. Branch Users Forum
8.1 The purpose of the Branch User Forum is to provide a way for sub-postmasters
and others to raise issues and insights around business processes, training and
support directly feeding into the organisation’s thinking at the highest level. The
forum is a forward looking mechanism to ensure the business processes and
approaches are fit for purpose for users and are in keeping with Post Office
behaviours and values.
8.2 The Branch User Forum terms of reference have been established.
8.3 It is intended to issue a communication to the network to raise awareness of the
Branch User Forum and invite Subpostmasters and staff to put themselves
forward to become Forum members with a view to holding the inaugural Branch
User Forum in early/mid October
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9. Next Steps
9.1 Interview and appoint (subject to agreement on fees) the Independent Chair of
the Working Group. Once this appointment has been made it will be necessary
to finalise the terms of reference for the Working Group and plan for meetings.
9.2 Work with SS to manage the flow of cases through the mediation process and
ensure that the new Post Office have sufficient resources to make the process
timely and efficient.
9.3. Continue to engage with MPs.
9.4 Facilitate a discussion on remedies to be offered as part of mediation process..
9.5 Brian Altman’s review to be completed by end October; including a
recommendation on Post Offices prosecution policy; and whether it should
continue to act as a public prosecution.
9.6 Implementation of process improvements in support the Post Office gives its
subpostmasters.
9.7 Continue to monitor costs of programme (see appendix A)
10. Risks
10.1 Continued risk to reputation and brand if the mediation process is not successful,
i.e. insufficient cases are reviewed, it should be noticed that media interest has
been more balanced since the announcement of the mediation process.
10.2 Risk to NTP if concerns as to how subpostmasters are treated leads to lower
take up of new models.
10.3 Potential of destabilising relationship with NFSP mitigated by Angela Van Den
Bogerd who has regular meetings to keep them informed and they will be invited
to take part in the Branch User Forum.
10.4 The process re-engineering that will be required for the IT training and support
systems which may in the short term add further complexity and risk to the
existing transformation programme.
10.5 The costs of the programme may over-run as the budget has been based on 75
cases going through the full mediation process and there may be more than that,
it addition the criminal costs are front loaded as the main bulk of the reviews
have been completed.
11. Recommendations
The Board is asked to note the update.
Susan Crichton
18 September 2013
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Budget — Forecast (Aug 2013 — March 2014)
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Appendix A
[Complete Cases (using Mediation) ‘Assumed number of cases: 75
Second Sight 25 ‘Second Sight at 25k per month (Aug-December) 100 150
Back fill for internal resources & 90 15k per month, 6 months
external assistance
Mediator(s) 25 ‘Assumed 3k per case - will use a national company
Mediator Expenses 50 travel, meeting rooms, training ete
Legal support case preparation - 8D 56 £750 per case assume all cases
Legal support - case advice 28 £400 per case. assume all cases. £400 is their estimate for
simple cases, but if we assume some will drop out this should
average out.
Legal support - mediation meeting 150 £2k per case - assume all cases - could recruit intemal staff tc
reduce costs?
Independent advisor for 238 Per case: £1.5k case prep + £1k mediation meeting.
Subpostmasters Plus £50k contingency for more complex cases 350 sso
{Total: Complete Cases (using Mediation) 1154 450 700)
legal and Governance
General External Legal Advice - 80 120 ‘Advice on: preparing and agreeing mediation process and
packs of information for SPMIRs. Engaging and briefing
‘mediators, attending working group meetings (ie. advising on
rejecting cases; revising mediation process). Advising on Fujits
related matters. £15K per month
Case Review - CK us Includes QC, Bond Dickinson and Cartwright King. 100 300
Kay Linnell/ Alan Bates Fay £2k per month (up to)
Independant Chair 25 0 19)
{Total_Legal and Governance 401 100__310]
Improvement project
Back Fill for Gayle Peacock and Ann a2 Back fill for 5 people to conduct the gap analysis across the 200 200)
Allaker business groups
Contact Centre ° ‘assumed this can be done with current resources 40 a0]
FSC ° ‘assumed this can be done with current resources 100 100
{Total: Improvement project 50 340__ 340]
Technology
Horizon improvements 50 Funding needed beyond the £100k Fujitsu funded costs. 0) I
{Total: Technology 60 0 oj
[Total 1665 890] 1350
Horizon Update
September 2013
Susan Crichton
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Performance Report
August 2013
Produced By : Financial Control and Compliance Team
For Queries & Comments Contact : Sarah Hall or Kam Bassra
CONFIDENTIAL
Commercially Sensitive and not for onward circulation
information tha’ ikely to cause damage in the event of unauthorised disc
Period 5 Performance Pack - Chris Day 25th September 2013 Page 1 of 17
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(— >
Contents
Page
Headlines 3
Profit & Loss Statement 4
CFO High Level Profit Forecast At Period 5 5
Cashflow Analysis & Balance Sheet Summary 6
Net Income By Pillar vs Budget 7
Net Income By Channel 8
Crown Profit & Loss Statement 9
Business Scorecard 10
Cost Management Report
Staff Cost By Directorate 12
Non Staff Cost by Directorate & Type 13
Transformation Delivery Heat-map 14
Appendices
Cashflow Statement 16
Income By Product Groups & Pillar 17
XN S
Period 5 Performance Pack - Chris Day 25th September 2013 Page 2 of 17
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Headlines Strictly Confidential
August 2013
(Financials - YTD >
Profit
Period 5 YTD operating profit was £37.9m, which was £1.5m adverse to budget of £39.4m, and £7.3m
adverse to prior year of £45.2m.
Net Income was £358.5m which was £14.9m adverse to budget and £15.3m adverse to prior year.
- Versus budget - driven by Mails and lottery. Mails performance shows signs of improvement in P5,
although another disappointing month for lottery.
= Versus prior year, driven primarily by the stamps buy forward last year and the fall in Motoring, Card
Account and NS&i income; partially offset by growth in FS commissions reflecting Eagle.
Staff costs were £1.6m adverse due to budget due to bonus adjustments, and £4.1m adverse to prior year
due to pay awards, higher pension costs, and increased headcount.
Agents’ costs were £11.8m favourable to budget. £8.4m of this relates to lower sales income and £1.6m
relates to sales mix (parcels). The remainder relates primarily to timing. £10.1m favourable to prior year,
£7.9m due to lower sales, predominantly Mails buy forward pre price increase and £1.9m lower fixed pay
from unfreezing the Core Tier Payment and roll out of Locals.
Non people costs were £1.1m adverse to budget, and £6.3m adverse to prior year. The adverse budget
position is driven by Horizon costs which were budgeted to be taken last year. The prior year variance is
due to increased IT costs mainly Horizon, timing of marketing spend and the removal of the FX bureau
rebate received last year.
Interbusiness expenditure was £1.3m lower to budget, driven by lower official mail costs and £0.7m
favourable to prior year, due to services switching into POL from RM.
Project costs were £1.8m favourable YTD. The underspend is driven by timing of marketing/brand
expenditure and the Project Eagle sales capability investment. Unspent marketing/ brand budget is also
covering the spend that was delayed from last year.
Cashflow
The YTD cashflow was an inflow of £233m which was £99m favourable to the £135m inflow budget
(period 4 was £172m favourable).
The £99m favourable variance was driven by Client balances which was £56m favourable due to the new
DVLA contract terms and delays to NTP expenditure.
Crown Profit - YTD
The Crown profit is £2.0m adverse to budget. Income was £1.4m adverse driven primarily by Mails, but
offset by Government Services. Costs are £0.9m adverse driven by infrastructure costs and direct product
costs.
Non financials - YTD
* Queue times in branches (less than 5 minutes) were 82.5% which was 4.9% favourable to target.
* YTD Network conversions were 9 ahead of the 1750 target, (P4 was 32 ahead of target).
FYF
This pack has been updated with the Q1 FYF presented earlier. As noted at the time there is a net risk of
£12m to this FYF. A period 5 high level CFO forecast has been included in this pack. A full Q2 FYF is in
progress for the October Board
vy,
Period 5 Performance Pack - Chris Day
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Cumulative EBIT pre exceptionals
£m
apa Acwat Budget
80
60
40
20
LV 9 4 2 go
SS EEFEESEEERS
Total Net Income - Budget to Actual Bridge
em
19
I ee I f
(13.4)
(2.7) (0.3) (0.4)
2013-14 YTDMails & Retail Financial Government Telephony Other 2013-14 YTD
Net Income Services Services Net Income
Budget ‘Actual
Financials
Total Net Income (excl NSP) £m (Bonus)
Operating profit £m (Bonus)
Free cashflow £m
Crown Profit (Loss) £m (Bonus)
Non Financials
Queue time % < 5 minutes - Top 4k branches 82.5% I 77.6%
Network Conversions (Mains & Locals) (Bonus) 1759 1750
Page 3 of 17
25th September 2013
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Profit & Loss Statement Strictly Confidential
August 2013
Current Month Prior Year Period Year to Date Prior Year YTD Full Year Prior Year [Prior Year
Em Actual Budget Variance Actual Variance ‘Actual Budget Variance Actual — Variance! Fosse Budget Variance Outturn I Variance
[External Income: 466 50.4 (3.8) 52.4 (5.8) 263.5 2720 276.6 (13.2) 643.3 6513
Interbusiness Income 256 264 (5) I 248 os I 113 149.4 1467 (5.4) 3689 3723
[TOTAL GROSS INCOME 72.2 765 (4.3) 772 (5.0) 404.8 421.3 423.3 (18.5) 1,012.2 1,023.6
\Cost of Sales (7.9) (9.4) 15 (9.5) 16 (46.3) (48.0) (49.5) 32 (122.2) (121.2)
[TOTAL NET INCOME 64.3 674 (2.7) 677 (3.4) 358.5 373.4 373.8 (15.3) 900.0 902.4
Staff Costs (22.1) (20.9) (1.2) (20.4) (1.6) (110.6) (109.0) (106.5) (4.4) (256.1) (257.4)
[Agents Costs. (34.2) (36.2) 24 (34.7) 06 (189.8) (201.6) (199.9) 101 (480.0) (478.2)
Non-Staff Costs (16.4) (13.8) (2.7) (13.4) (3.0) (69.1) (68.0) (62.8) (6.3) (160.0) (162.3)
interbusiness Expenditure (5.8) (6.4) 07 (7.0) 12 (34.1) (35.4) (34.8) (83.9) (83.6)
[Depreciation (0.0) (0.1) O41 (0.1) 0.0 (0.2) (0.5) (0.4) (0.9) (0.4)
[Total Expenditure (pre POOC) (78.4) (77.4) (1.0) (75.6) (2.8) (403.8) (414.5) (404.5) (980.8) (981.8)
FRES - Share Of Operating Profits 47 4S 0.2 48 (0.1) 18.8 18.0 18.1 315 31.9
EBIT Pre Overhead Allocations (9.4) (5.8) (3.6) (3.1) (6.3) (26.4) (23.2) (12.5) (49.2) (47.5)
IGroup Overhead allocations (1.1) (1.4) 0.0 (1.2) O41 (5.7) (5.7) (6.2) (13.8) (14.9)
EBIT - BAU 110.5) (7.0) (3.5) I (aa) (6.2) I (32.2) (28.9) 118.8) (63.0) (2)
lOne off Project costs (POOC) (1.4) (3.2) 18 (4.6) 3.1 (14.5) (16.3) (23.2) (35.0)
EBIT - Post Project Costs Wy woz) a7 es) 30) fe.) ta5.2) 198.0)
[Network Payment 15.4 15.4 0.0 158 (0.5) 84.6 84.6
EBIT pre exceptionals ems 35 52 ay] 69 G5) [379 39.4
Interest 04 00 04 00 O4 15 (1.5)
Impairment (4.3) (11.5) 72 (23) (1.9) (28.2) (48.3)
IExceptionals & Redundancy & Severance Costs (52.6) (61.2) 86 (3.9) (48.7) (41.6) (60.3)
Government Grant Utilisation 55.6 772 (21.6) 63 493 99.0 133.4
Profit/(Loss) On Asset Sale 00 00 0.0 00 00 25 00
IColleaque Share/ Business Transformation Payments. 0.0 00 0.0 0.0 0.0 0.0 00
‘otal Profit/(Loss) Before Tax 2.6 97 (7.1) 7.0 (4.4) 711 62.7
Period vs. Budget
Operating profit (EBIT) of £3.5m was £1.7m adverse to budget
BAU was £3.5m adverse:
+ Lower income of £2.7m due partly to the continuation of the
trend in Mails and Retail, but this period there was also a
shortfall in Financial Services related to Travel bureau, due to
budget phasing,
‘Higher staff costs of €1.2m relating to bonus adjustments, and
‘Higher non-staff costs of £2.7m, which are largely timing
related and some of which are correcting the YTD position.
Specifically £0.9m relates to FX losses which will be offset by
hedging and £0.4m relates to Fujitsu costs
Offset by:
+ Lower Agents costs of £2:1m mainly due to reduced income.
One-off variance of £1.8m favourable - relates to timing of
project spend,
Below EBIT
Impairments were favourable due to slower progress than plan
on NTP,
Period § Performance Pack - Chris Day
(0 vs. Budget
Operating profit (EBIT) of £37.9m was £7.5m adverse to budget.
BAU variance of £3.3m adverse was mainly due to:
* Lower income of £14.9m, mainly Mails and Lottery
‘* Higher staff cost of £1.6m, due to bonus adjustments, and
‘* Higher non staff costs of €1.1m due to Horizon costs which were budgeted to be
incurred last year, but incurred this year.
Offset by
+ Lower agents costs of £11.8m due to; £8.4m of this is related to lower sales income
and £1.6m relates to sales mix (parcels). The remainder is related to some timing
difference.
* Lower IB of £2.3m driven by lower official mail costs, and
‘Higher FRES JV income of £0.9m,
One-off variance of €1.8m favourable. The underspend is driven by timing of project
spend. Unspent marketing/ brand budget is also covering the spend that was delayed
from last year.
Below EBIT
‘The main variance was due to the slower pace of capital spend and operating
exceptionals, including agents compensation, compared to budget. Government grant
Utilisation follows this trend, but also included utilisation against the remaining 2012/13
exceptional costs, The profit on sale related to the lease surrender of Midway House.
25th September 2013
Operating profit (EBIT) of £37.9m was £7.3m adverse to prior year.
Like for like adverse variance of £13.4m was mainly due to:
* Lower net income of £15.3m primarily due to Mails (last year included high stamp
sales in period 1 ahead of the price rise) and reduced DVLA income,
‘+ Higher staff cost of £4.1m due to increased pension charges, and bonus costs slippage
into this year, and
‘+ Higher non staff costs of £6.3m due higher IT costs relating to Horizon, phasing of
‘marketing expenditure and the removal of the FX bureau rebate received last year.
Offset by:
'* Lower agents costs of £10.1m mainly due to lower sales volumes,
* Lower IB of £0.7m and
‘© Higher JV income of £0.7m.
Non like for like favourable variance of £6.1m was due to:
+ Lower project costs of €8.7m, and
+ Lower Network payment of £2.6m.
Below EBIT
2012/13 capital expenditure included €1'1m property transfers from Group. NT
exceptionals including compensation were ahead of the equivalent pace in 2012/13.
2013/14 grant utilisation includes £30m against 2012/13 exceptional costs not covered
by the 2012/13 grant.
NN yy,
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CFO High Level Profit Forecast At Period 5
August 2013
£'m Income JV Income Costs NSP EBIT
[Budget 900 32 (2,030) 200 102]
Downsides High level forecast PBIT of circa £100m.
Media trices (24) (24) Income £13m down is offset by agents
Govt Services income (3) (3) costs savings of £8m and other net cost
Telephony income it} 0 opportunities of £2m.
FS income (6) (6)
Other income (5) (5)
Staff efficiency (2) (2)
Fujitsu costs (2) (2)
IT&C efficiency task (2) (2)
Inter-business (2) (2)
Mails segregation penalty (4) (1)
Bonuses (2) (2)
Agents pay - sales impact 8 8
8) 0 (3) 0 (41)
Mitigating actions
Mails income - dangerous goods 7 7
Mails income - format changes/campaigns 6 6
Lottery price rise 3 3
Gov't - UKBA Cost of Sales correction a 1
Govt - volume trends 2 2
FS income - Santander volumes 2 2
FS income - Junction deal 3 3
FRES upside (higher ATV's) 1 1
PhotoMe income 1 1
Telephony implementation a 1
Pay award 12/13 not consolidated 2 2
No pay award for 13/14 2 2
POOC current forecast a 1
VAT upside 5 5
Bonus upside 2 2
[25 1 13 0 39 I
[Latest View at P5 887 33 (4,020) 200 100 I
Variance to budget (13) Ey 10 ie) (2)
Period 5 Performance Pack - Chris Day 25th September 2013 Page 5 of 17
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Cashflow Analysis & Balance Sheet Summary
Strictly Confidential
Cashflow to period 5 was a cash inflow of £233m versus a budget of £135m inflow resulting in a favourable variance of £99m (period 4 £172m fav).
August 2013
r
YTD Cashflow YTD Cashflow Variances
25
215 £m 52 20
2
65)
(28)
Frey cy
fm @
0)
38
Operating Network Cent & Govt Funding Working —Capital_-~Redundancy, Free cash flow
profit before Payment Network Cash Capital Inc expenditure provsions and
euoral Interest, ta vacaptonale YD Budget Operating profit Client & Working Capital Capital Redundancy, YTD Actual
pensions, other Network Cash Inc Interest, tax, expenditure provisions and
pensions, other exceptionals
Balance Sheet PS
£m Mar-13_[ Actual Budget_I Variance I (Cashflow
Fixed Assets 71 90 89 1
Debtors 122 109 109 0 The YTD cashflow was an inflow of £233m which was £98m favourable to the £135m budgeted,
cash 870 876 872 rn The £98m variance was mainly due to
* Client balances and Network Cash combined were £52m favourable, Client balances were £56m
Client Bat 288) 287 231 56)
Henk Balances ea Pat (231) (56) favourable of which DVLA contributes £55m resulting from new contract terms which were not budgeted.
[Trade Creditors (362) (540) (516) (24)
Network cash is £4m adverse to budget.
Pension (deficit)/surplus 97 98 74 27 ‘© Capital expenditure is £20m favourable driven by lower than planned expenditure on NTP.
Provisions (26) (22) (16) (6) ‘* Exceptionals are £25m favourable primarily due to lower than planned NTP and CTP expenditure.
Investments, Funding 95 34 86 (52)
Loan (291) 0 (148) 148
Net Assets 288 358 316 42
Reserves Mar-13_[ Actual Budget_I Variance
(Capital and Reserves (288) (358) (316) (42) (Cash Management
(288) (358) (3146) (42)
}* Retail and Cash Centre cash (manageable cost) - £24m favourable to budget. Of this
Cash Management Table variance, branches were £2m adverse and cash centres were £26m favourable. Good
£m Prior Year I _Mar-13 P5 performance despite earlier bank holiday, which leads to increased holdings.
PS Opening ‘Actual Budget var }* Bureau (manageable cost) - £13m favourable to budget but notably improved on the
Reta Cash Centres 620 650 636 660 rn equivalent period in 2012/13, due to management action following the summer peak
' } Cheques and debit cards (customer driven) - £41m adverse to budget and also higher than
jeunes 103 - BP a 3B 2012/13. Impaired by coinciding of period end with calendar month end which also increased
Cheques, debit cards 102 161 151 110 (a) client creditors and therefore cashflow neutral
Network Cash 825 870 876 872 (4)
Headroom (£m)
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Net Income By Pillar vs Budget Strictly Confidential e
‘August 2013,
Period Prior Year Period Year to Date Prior Year YTD. Full Year Prior Year
Net Income (Em) Actual I Budget I Variance I Actual I Variance I Actual I Budget I Variance I Actual I Variance I@1 Forecast } Budget I Variance I Outturn I Variance
Mails & Retail 2s 22 ri) 285 aa 39 I 4673 I asa I a8 I Goo 746 “a6 0 “040 107
Financial Services 20.4 227 (23) 232 (28) uss I 1186 (2.7) 1142 16 2774 2774 oo 2796 (22)
Government Services 87 90 (0.3) 4 (on 504 504 (0.3) 589 (68) as9 I 1159 (00) 1332 I (47.4)
[Telephony 46 34 15 35 11 226 206 19 190 36 50.4 50.4 00 45.0 54
other 33 30 03 32 04 164 165 (0.4) 169 (08) 367 “a7 (50) 40.7 (40)
‘TOTAL NET INCOME 663 674 (27) 617 G4) 3585 3734 (14.9) 373.8 (45.3) 895.0 900.0 (5.0) 902.6 (74)
FRES - Share OF Operating Profits 47 45 02 48 (04) 188 18.0 09 184 7 315 315, 0 31.9 (0.4)
Mails & Retail Services Financial Services
em had 42 04 Pilla Performancevs YTO Budget
em 7
ay ' 1 os)
9) » : (12) Mails & Retail Services -(£13.4m) Adv
(20) (0) ‘st lass Labels -(£2.5m) adv driven by lower parcel volumes.
28) 2nd class labels £016m adverse.
ey 4) Lottery ~(€3.0r) adv due primariy to lower than planned
volumes. The new terminalz are not yet generating the
(4) expected income.
Other Mais ~ (€2.6m) adv due to unallocated stretch and lower
than planned volumes across the mali product range
PEW - (€2.0m) adv - due to lower volumes vs. budget, but
£1.5m favourable to prior year indicating a stretching target.
International - (1.9m) adv ue to lower volumes.
Financial Services ~(€2,7m) Adv
Other -(€3.4m) adv due to unassigned income targets including
Sales Effectwenese stil tobe allocated to products
2019-4 YTD Special Stamps (Iet@ Iniatonal PFW Ofer Male Rela Lotiry Labels (Ist 2013-18 YTD {ATMs = (€1.0m) adv driven by lower volumes than planned.
Netincome Demety and lst). Zn lass) Netincome II—! Travel Services ~(€1.2m) adv driven by lower bureau,
Ser ‘ackat” II 201914 y10 Bu Parent” Gankng PFS ——~Payment TravelSericerATH®—Oter 201544 70 I peer pe
etiam serness semen et ino
age onsyeram) “Acuel”™ II Bill Payment - 1.7m fav driven by loner decline than expected
Banking Services ~ £4.2m fav driven by higher personal
withdrawal volumes and higher business barking volumes,
>) I PES - £0.4m fav driven by mortgages (budget ramps up later in
Government Services Telephony Services te ear para oft by an abe mr varacein
Savings that wil uri
Government Services 'e (€0. =p Adv
19 Gov. Services Other = (E09) adv driven by smale variances.
em 10 on including new local authorities and rod licences.
; —_— — — Motoring" (£0.5m) adv dv ta lover than planned velumes in
(04) (08) line with atest OVUA forecast,
em Offet by
Check Send ~£4.0m fav du to higher volumes.
Telephony Services - £1.9m Fav
Homephone - £2.0m fav due to cost of sales correction relating,
‘to previous period and higher than plarmed custamer numbers,
Other ~ (€0.4m) Adv
This relates to the unassigned income stretch,
FRES Profit Share - £0.9m Fav.
KY
2013-14 YTD Net Check and Send "1D Sewices Poca Metoing OtterGont "2013-14 YTD Net
nome Budget Income Actua {210-14 YTD Net nse Busoet” —HerePhane Dial &boachand 2043-4 YTD Nat neo Ach
Period § Performance Pack - Chris Day 25th September 2013, Page 7 of 17,
POL-0024548
Net Income By Channel
August 2013
Strictly Confidential
Period 5 YTD - Focus products were on target, whilst Standard products were £10.3m adverse (mainly Mails and Lottery), with the
Agency network driving the variance. The favourable Direct channel performance is driven by mortgage phasing as targets started to
ramp up from period 4.
£m Month Year to date Full Year
Targeted Income Actual Budget Variance Actual Budget Variance Budget
Focus Products
Crown Offices 27 28 (04) 16.2 wa (08) 390
WHS: os 05 0.0 ai 3.1 01 67
Agents - Managed 55 54 O41 325 320 05 740
Centrally Supported 33 a3 0.0 19.6 198 (0.2) 49.6
Direct Sales 08 08 (0.0) 48 43 05 9.0
Central O41 0.10 (0.0) 0.2 04 0.0 05
Focus Products Total 2.9 12.9 0.0 76.4 76.4 0.0) 178.8
Standard Products
Crown Offices 37 43 (0.6) 224 225 (05) 584
WHS 08 08 (0.0) 43 44 (01) 106
Agents - Managed 13.9 149 (1.0) 77.0 814 (4.4) 191.2
Centrally Supported 12.4 136 (12) 735 787 (5.4) 198.1
Direct Sales 06 06 0.0 24 25 (0.4) 65
Central 0.4 05 (0.1) 05 06 (02) 0.6
Standard Product Total 31.8 34.6 2.3) 179.8 190.2 410.3 765.3
TOTAL TARGETED INCOME 44.7 47.5 2.8) 256.2 266.6 10.4) 644.0
Other Income
Cash Services 16 17 (0.2) 9.0 94 (01) 220
Gamma 08 08 0.0 8.8 84 04 84
Fixed Income & Other 133 thd (4.2) 65.2 723 (72) 185.0
Retentions 39 26 14 19.2 169 23 406
TOTAL POL NET INCOME
TOTAL POL NET INCOME
Centrally Supported Net
Account Mgd Net Income YTD
Crown Offices Net Income
Direct Sales Net Income YTD
Income YTD (£m) (Em) YTD (£m) (£m) *
18 140 50 3
Ee 90% 100 101% ° I if 4
Lye" , $.
fe] so, 30 95% I 5 4141
20 93% 60 20 4
2 40 95% " 98% 2. 96% I
70 20 5 1
oO oO r i) r oO 1
Actual Target Actual Target Actual Target Actual Target
UStandard Focus %oftargetI] [ UStandard Focus %oftarget I [I \Standard I (Focus _& of target I
[standard Focus % of target] [“Fstandard Focus % of target
Period 5 Performance Pack - Chris Day
(14.9)
0.0
WHS Net Income
YTD (£m)
103%
98%
OANneauore©
Actual Target
* Both target and actual exclude lead
generation income
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Crown Profit & Loss Statement Strictly Confidential °
August 2013
Period Prior Year Period Year To Date Prior Year YTD Full Year I Prior Year
Em Actual Budget Variance I Actual Variance I Actual © Budget Variance I Actual Variance I Budget I Outturn
Income and Distributions
Variable income
~ Mails 28 3.0 (0.3) 38 (1.0) 157 17.2 (15) I 187 (3.0) 43.2 448
- Financial Services 23 25 (0.2) 25 (0.2) 125 13.4 (05) I 134 (0.9) 29.6 30.4
- Government Services 15 14 04 18 (03) 96 89 08 10.7 (1.0) 19.9 26.4
- Telephony 0.0 01 (0.0) 01 (0.0) 03 04 (0.1) 06 (0.3) 13 13
Fixed income 16 19 (03) 28 (1.2) 101 10.1 (00) I 123 (2.2) 24.8 28.2
Gamma/ Other 09 12 (03) 05 04 42 56 (1.4) 4.0 02 14.8 10.9
Renewals and Retentions 17 12 05 09 08 85 74 14 2.9 56 165 114
Total Income including Gamma/other 10.8 11.3 (0.5) I 123° (1.5) 61.0 625 (1.5) I 626 (1.6) 150.1 153.2
Direct Product Costs (0.6) (0.4) (02) I (08) 03 (2.7) (20) (07) [ (3.2) 06 (5.0) (8.3)
Branch costs
~ Staff (8.4) (8.5) O41 (9.4) 07 (45.9) (45.8) (0.0) (49.2) 3.4 (106.0) (117.9)
- Property (2.7) (27) 01 (2.7) (0.0) (14.8) (14.8) (0.0) I (14.5) (0.3) (35.4) (36.9)
- Other branch costs (0.6) (03) (03) I (06) 0.0 (1.8) (16) (0.2) I (26) 08 (47) (6.3)
Infrastructure costs (1.8) (18) (00) I (1.8) 0.0 (9.0) (86) (0.4) I (9.2) 02 (22.9) (22.5)
Allocated central costs (0.9) (0.8) (01) I (0.7) (01) (3.8) (4.3) 04 (3.3) (0.5) (8.4) (7.7)
Total Expenditure (44.9) (44.5) (0.4) I (458) 08 (78.0) (77.4) (0.9) I (82.0) 4.0 (182.2) I (199.7)
JV Share of Profits 14 13 01 12 01 55 5.2 03 47 08 94 96
Statutory PBIT (2.8) (1.9) (0.8) I (2.2) (0.6) (41.5) (9.4) (2.1) I (14.7) 3.2 (23.0) _] (37.0)
Summary
+ Income £1.5m less than plan
+ Adverse Mails performance continues to be impacted by a change in customer behaviour as a result of size based pricing, Targets for Parcelforce 24/48 have now been adjusted but
this is offset by an increase in target on 2nd class. Priority Mails £0.2m, 1st class and 2nd class £0.7m, International Standard £0.3m are products most impacted by PIP. Retail
sales are also underperforming against target by £0.1m.
+ Main drivers of favourable Government income are UKBA (due to backlog in applications) £0.6m, ID Services £0.4m and Passports£0.2m, offset by Motorist services (DVLA Licences
and AEl) which are £0.3m behind target.
+ Savings £0.5m and Life Insurance £0.1m are the main drivers in the shortfall against Financial Services netted off against the Travel portfolio delivering a £0.2 upside.
+ Costs are £0.9m greater than plan:
+ Of the overall £0.9m variance, there are timing issues of £0.5m which will be corrected next period.
+ Direct product costs are adverse by £0.7m as a result of Brand spend early in the year, but this is offset by the allocated central costs.
+ Branch Staff costs - Remain on target with industrial action savings compensating for the budgeted CTP savings that have not been achieved year to date.
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Business Scorecard Strictly Confidential
August 2013
Key Performance Indicators Current Month Year to Date Prior Full Year 2012-13
Act Target Var Act Target Var Year F'cast Target Var Outturn
Growth
y 64.3 67.1 358.5 373.4 373.8 895.0 900.0 902.4
Oper 7 ) 36 b2 37.9 39.4 45.2 102.0 102.0 94.2
Earnings before ITDA and Subsidy £m* (12.9) (10.1) (46.5) (44.7) (41.5) (97.2) (97.2) (115.4)
Free cashflow £m (46.8) 2h, 233.1 134.6 235.7 (16.3) (16.3) 132.2
Customer
Customer Satisfaction** 87% 88% 88% 88% 86% 88% 88% 87%
to 38% 44% 45% 44% N/A 44% 44% N/A
Net Promoter score** (6) 5 (4) 5 N/A 5 5 N/A
Queue time % < 5 minutes - Top 1k branches 84.7% 81.8% 82.5% 77.6% 77.9% 81.0% 81.0% 80.7%
Horizon availability 99.9% 99.7% 99.9% 99.7% 99.8% 99.7% 99.7% 99.8%
Branch - Compliance (new basket) TBC 98.0% “ TBC 98.0% bal 97.8% 98.0% 98.0% 97.8%
People
e 55% 56% 55% 56% 55% 56% 56% 55%
ar dakobene aeonmens oer total recruits at senior on 4% 10% 4% NA % “% WA
(No.) % of Female appointments over total recruits at senior 25% 40% 52% 40% NVA 40% 40% N/A
leadership and senior manager
Modernisation
c Profit (L (2.8) (1.9) (11.5) (9.4) (14.7) (23.0) (23.0) (37.0)
74 97 1,759 1,750 243 3,000 3,000 1,450
, Tax, Depreciation, Amortisation
** Monthly = 3 month average. YTD = 12 month average
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Strictly Confidential
Cost Management Report
Period 5 Performance Pack - Chris Day 25th September 2013 Page 11 of 17
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Staff Cost By Directorate Strictly Confidential
August 2013
em Year to Date Prior Year YTD Full Year YTD Headcount
Staff Cost by Directorate Actual Budget Variance} Actual Variance Fon sast Budget Variance % Actual Budget Variance
[Central (incl. MD's office) (5.8) (4.0) (1.8) (1.9) (3.9) (10.8) (9.6) (1.2) 0% 14 15 1
(Commercial (3.1) (3.4) (0.1) (2.6) (0.5) (7.4) (7.4) 0.0 1% 116 141 (5)
[Communications (0.9) (0.9) o1 (0.7) (0.4) (2.3) (2.3) 0.0 4% 46 36 (11)
Human Resources: (1.9) (2.0) 01 (2.0) O14 (4.8) (4.8) 0.0 1% 112 110 (2)
HR - Centrally Held Bonus Payments (7.9) (7.5) (0.4) (7.4) (0.4) (18.0) (18.0) 0.0 “ “ nd
Financial Services (2.9) (1.9) (0.4) (0.7) (2.3) (4.5) (4.5) 0.0 3% 225 70 (155)
Finance (4.6) (4.9) 0.2 (4.1) (0.6) (12.8) (12.8) 0.0 3% 245 264 19
Network (76.2) (76.7) 05 (79.7) 3.6 (178.5) (178.5) (0.0) 87% 6,918 7,185 267
Legal (1.0) (1.0) 01 (0.9) (0.4) (2.5) (2.5) 0.0 0% 28 30 2
Security (1.2) (1.4) (0.1) (1.1) (0.0) (2.7) (2.7) 0.0 1% 55 57 2
Strategy (6.1) (5.9) (0.3) (5.2) (0.9) (14.4) (14.1) 0.0 3% 231 239 8
Total Staff Costs (110.6) (109.0) (4.6) _I (106.5) (4.4)_I (257.3) (256.4) (4.2) 100% 7,990 8,116 126
PY Actual 7,893
PY Variance (97)
Human Resources
incl Bonus
%
Period 5 Performance Pack
Staff Cost by Directorate
YTD Staff Costs are £1.6m adverse to budget.
This variance to budget includes higher bonus payments relating to the prior year.
Vs. Prior Year
The staff costs are £4.1m adverse to prior year including the impact of the higher bonus
payments and the higher IAS19 pension rate reflecting market conditions at March
2013.
Headcount of 7,990 is 126 below plan and is due to vacancies within the Network
directorate, both Crowns and transformation projects. The adverse variance in Financial
Services (FS) is offset by a favourable variance in Network. This is due to some of the
Financial Specialists transferring from Network to FS. The remainder are due to
transfer next month and once complete the headcount budget will also be transferred,
Vs. prior year headcount has increased by 97 primarily due to NTP and separation
strengthening.
Note: The budget is flat for all directorates, with only the Crown savings being the
difference between each month.
Strategy
prs Finance Central (incl. MD's
rn ‘office)
5%
Commercial
3%
Security
1%
‘Communications
1%
Chris Day I I
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Non Staff Cost by Directorate & Type Strictly Confidential .
August 2013
Em Year to Date Prior Year YTD Full Year Em Year to Date Prior Year YTD Full Year
INon- Staff Cost by Directorate ‘Actual Budget Variance I Actual VarianceI Budget Variance] INon- Staff Cost by Type ‘Actual Budget VarianceI Actual Variance! _ Ot Budget VarianceI
Forecast. Forecast
[Central - Centrally Held incl. Computers & Telephones (31.9) (30.4) (18) I (302) (1.7) (75.9) (75.9) (0.0)
Strengthening a Ie me) 8 Other Operating Costs (7a) 7) ©(02) I 79) 07 I Goa) = 456) 5)
Commercial (6.2) (6.5) 02 (7.0) 08 (15.5) (15.5) 00 Consultancy, Marketing & Legal Fees (12.5) (12.4) (0.2) (10.5) (2.0) (29.5) (29.5) (0.0)
Communications “2 0 2) I @7) 5) I @) 21) 00
Finance (5.6) (53) (0.4) (2.6) (34) (12.6) 00
[Financial Services (2.2) (3.0) os (2.5) 03 (5.3) 00 Finance (9.8) (9.9) 02 (74a) (2.7) (27.2) (17.2) (0.0)
IHuman Resources (2.2) (2.6) 03 (1.6) (0.7) (64) 00 Property Facilities (2.9) (2.2) (07) (2.7) (0.2) (6.2) (6.2) 00
Network (119) (10.9) (09) I (424) os (27.9) 00 Property Maintenance (27) (28) 04 I (26) = (0.2) (69) (6.9) (0.0)
Vehicles (0.9) (1.0) o1 (1.0) 01 (2.4) (2.4) 00
Compensation (0.5) (1.0) OS (0.6) o1 (2.6) (2.6) (0.0)
Collection, Delivery & Conveyance Charges (0.1) (0.1) 00 (0.5) O4 (0.3) (0.3) 00
jLegal (1.9) (1.9) 00 Staff & Agent Related Costs & Consumables. (0.5) (1.4) oo 02 (0.7) (3.4) (3.4) 00
[Security (2.5) (25) 00
Programme costs 00 00 00 03 (03) i) ti) 00
(Strategy (36.6) (34.5) (2.0) (34.3) (2.3) (91.2) (87.4) (3.8)
[Total Non Staff Costs (69.1) (68.0) __ (4.4) _] (62.8) __(6.3) I (460.5) _ (160.0) __(0.5)_} [Total Non Staff Costs (69.4) (68.0) __(4.1) I (62.8) __(6.3) I (160.5) __ (160.0) __(0.5)
Non Staff by Type
Non Staff by Directorate (Variance neaeriaadaald
Commercial YTD non people costs were £1.1m adverse to budget and
baal Financial Services. £6.3m adverse to prior year.
~ Property
‘ot
france
_— Vs. Budget =
Network Costs were £11m adverse to budget and this is driven by Property Fates
8% Horizon/ Fujitsu costs, which were budgeted for the prior %
year, but have been incurred this financial year. ‘Consultancy Marketi
ee
— Vs, Prior Year ner
Other Cost were £6.3m adverse to prior year. Half of this
= increase is driven by the FX bureau rebate received in ‘Vehicles:
Soomnienent previous years, but which ceased from period 6 last year. Talletton-pettonde. “
po The remainder is due to higher Fujitsu costs this year as scnarsed
oo ‘outlined in the explanation vs, budget above, increased
marketing costs and increased legal costs driven by ae nen Relate
Iitigation; Horizon and. public liability which is now Fo
py managed in house.
* Skills group is the internal ‘consultancy’ providing project resource made up of a
mixture of employees topped up with contractors. If demand is high the contractor
spend increases but this is offset by higher recharges to projects.
eee lance Pacl- Gitris Gay I I I 25th September 2013 Page 13 of 17
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Transformation Delivery Heat-map Shinty Cenfidentel *
August 2013
Highlights heatmap status of key transformation programmes, and points of escalation to Transformation Board on selected projects
including resulting Transformation Board action / guidance. Also highlights wider points of discussion / action.
nsformation Board (TB)- Key Points of Focus
IT&C Transformation: Systems Integrator Service Delivery (SISD) preferred partner selected with alcatel period
to start imminently. Decision to restart AS! Tower procurement and commence a second POS tower
procurement confirmed by the programme board. Transformation Board discussed outstanding commercial
lagreements in relation to Data Centre procurement and required negotiation mandate to progress this to
conclusion. Sponsor now comfortable that team in place with correct remit to progress with these negotiations.
(Crown Transformation: Transformation Board discussed risks to the ability of the Crown Transformation
programme to meet its P&L targets as a result of wider income challenges especially around mails, It was
jagreed that mitigating activity in response to this should continue (including the set of responses around
Bentley), that Crown Board should continue to track this risk proactively and that Trading Board should make
this a specific point of focus in its next meeting.
HP&BB - Data migration complete but Transformation Board discussed key issue around high call levels into
the call centre and resulting long waiting times. Agreed actions in response include:
11) Re-focus on performance against agreed SLAs, additional focus on accurate call time monitoring and
customer complaints with Fujitsu,
2) Additional resourcing by Fujitsu into both in the call centre and the back office, and
3) Assessment of mid term autornation options to reduce impact on call centre.
Penguin - Go live date subject to change due to a late change in the third party BIN sponsor. Transformation
Board discussed importance of revised FRES plan to agree launch timescales - the project remains confident of
la pre-Christmas launch. Transformation Board agreed that assessment of the impact on delivery timing and
benefits will follow delivery of FRES plans, but confirmed that 2013-14 benefits are under review; the 2014/15
benefits remain unchanged.
Separation: RMG and POL have agreed it would be mutually beneficial to consider alternative approaches to
deliver separation. Two streams of activity to complete this, 1) A joint replanning exercise to assess best
lapproach / timings in a scenario unconstrained by MSA deadlines 2) Confirmation of alignment of current
Owen Amie? Red lworkstream approaches and solutions against the 2020 vision, organisationaloperating model and associated
Delivery to Baseline Milestones 25% cost reduction. As part of 2), discussion is taking place with a small number of external service providers to
gain their views on alternative approaches (including BPO) and the potential risks / benefits of this.
O Colour of Circle reflects 13-14 financial benefits
FS Sales Capability - 2013/14 benefits of £2.2M are at risk, potentially due to CWU action towards Financial
Services. Transformation Board discussed key initiatives needed to deliver the benefits, including the placement
of FS Area Managers along with a changed incentive scheme (due 1st Oct), changed Sales Process (1st Oct) and
relaunch of Salesforce (1st Oct); these initiatives are progressing to delivery but Board and executive sponsor
recognised importance of next few weeks to their delivery.
—» Shows movement from last period
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Appendices
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Cashflow Statement tretly Configentia
August 2013
YTD Full Year
£m Actual Budget Variance Forecast Budget Variance
Operating Profit 38.0 39.5 (1.5) 102.0 102.0 0.0
Depreciation 0.1 0.4 (0.3) 0.9 0.9 0.0
Working Capital (49.9) (49.3) (0.6) (41.2) (41.2) 0.0
Client Balances (0.3) (56.4) 561 (44.4) (44.4) 0.0
Network Cash (6.1) (2.4) (3.7) 114.6 114.6 0.0
Dividends (18.8) (18.0) (0.8) (4.5) (4.5) 0.0
Capital Expenditure (28.2) (48.3) 20.1 (167.5) (167.5) 0.0
Government funding 215.0 215.0 0.0 215.0 215.0 0.0
NSP in advance 115.4 115.4 0.0 0.0 0.0 0.0
Exceptional Items (45.8) (71.2) 25.4 (198.8) (198.8) 0.0
Pensions 1.6 0.9 0.7 2.3 2.3 0.0
Proceeds from asset sales 25 0.0 2.5 0.0 0.0 0.0
0.0 0.0
Free cashflow before interest, tax 223.5 125.6 97.9 (21.6) (21.6) 0.0
0.0 0.0
Interest (0.6) (T.5) 0.9 (5.0) (5.0) 0.0
Tax 10.2 10.3 (0.1) 10.3 10.3 0.0
Free Cashflow 233.1 134.6 98.5 (16.3) (16.3) 0.0
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Income By Product Groups & Pillar Strety Confidentia
August 2013 Adverse; Mails is £13.4m, Financial Services is £2.3m, other income is £0.8m and Government Services is £0.3m
adverse, Only Telephony is favourable by £1.9m
Current Month Prior Year Year to date Prior Year Full Year Prior Year
Met ineame-<m Actuals Budget Variance I Period Monts "I Actuals Budget Variance IYTD Actual von OF tact Budget Variance 2onats
Parcelforce 16 24 (05) 03 94 qd (2.0) 75 17 30.7 30.7 00 19.9
Special Delivery 38 36 02 0.0 21.5 21.2 03 21.9 (0.4) 50.0 50.0 0.0 53.2
International Priority & Standard 23 2.4 (0.1) O41 13.2 15.1 (1.9) 13.5 (0.4) 373 373 00 34.9
Stamps (Ast & 2nd Class plus other stamps) 18 24 (0.2) 02 10.2 113 (1) 15.3 (5.1) 338 86-338 0.0 35.2
Labels (Ast & 2nd Class) 68 66 02 04 377 40.8 (3) 40.8 (3.0) I 100.0 1000 0.0 100.2
RM Mail Fixed 43 43 0.0 (0.4) 23.7 23.7 0.0 24.0 (0.3) 56.0 56.0 0.0 57.9
Retail & Lottery 29 44 (1.2) (0.9) 18.3 21.2 (2.9) 19.4 (0.8) 51.6 51.6 0.0 45.7
Mails Other 38 40 (0.2) (1.2) 20.3 22.9 (2.6) 22.8 (2.5) 55.3 55.3 0.0 57.0
Total Mail Services 27h 29.2 G9 (a) [453.9 167.3 (43.4) [164.8 (40.9) I 4446 414.6 0.0 404.0
Total Telephony Services 46 34 a5 a4 22.6 20.6 19 19.0 3.6 50.4 50.4 0.0 45.0
Motoring Services 18 16 0.2 (0.5) 75 80 (0.5) 143 (6.8) 214 21.4 0.0 318
Card Account 46 5.0 (0.3) (0.8) 25.5 25.6 (0.1) 28.4 (2.9) 59.4 59.4 0.0 65.8
Check and Send 13 12 O41 (0.0) 1.4 10.6 20.4 20.4 0.0 21.4
JAEI (DVLA & UKBA) 06 06 (0.0) 08 33 35 79 79 (0.0) 10.4
(Other Government Services 0.4 06 (0.2) (0.1) 2.4 24 67 67 (0.0) 42
Total Government Services 87 9.0 (0.3) (0.77 50.4 58.9 115.9 115.9 (0.0) 133.2
Bill Payment Services Direct 0.7 08 (0.1) (0.1) 4h 46 141.41 4.4 0.0 118
Bill Payment Services Reseller 26 19 0.7 05 118 123 24.9 24.9 0.0 27.6
Postal Orders 15 16 (0.0) (0.2) 88 9.6 20.2 20.2 0.0 23.1
Payment Services 04 06 (0.2) (0.1) 22 22 89 89 (0.0) 63
Personal Banking Clients 2.2 19 03 0.2 qd 1.4 25.4 25.4 0.0 26.4
DWP Exceptions (0.0) 0.0 (0.0) (0.3) 0.0 18 O41 01 0.0 39
Business Banking 19 18 0.0 (0.8) 116 14.6 26.6 26.6 0.0 34.8
ATM 18 26 (08) (0.4) 127 126 33.2 332 0.0 30.2
PFS-Savings 42 4.0 02 (0.2) 203 124 50.5 50.5 0.0 40.6
PFS-insurance (0.2) 05 (0.7) (0.4) 27 18 67 67 0.0 53
PFS-Lending 07 04 0.2 04 24 12 49 4.9 0.0 47
Bureau (excl profit share) (incl Travel Money Card) 20 34 (14) 25.0 25.0 0.0 244
Travel insurance 08 12 (0.4) 9.0 9.0 0.0 94
MoneyGram 13 12 4 16.6 © 166 0.0 15.4
NS&I 03 03 0.0 39 3.9 0.0 13.3
Other 0.2 os (0.6) 10.4 104 0.0 25
Total Financial Services 20.4 22.7 (23) 2774 277-4 0.0 279.6
(Other Income 11 07 0.4 75 125 (5.0) 10.7
ISupply Chain 30.0
Net Income
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Top Board Risks
FS — our plan depends on FS growth which is fairly risky due to the complexities of the
BOI relationship and our ‘uncertain’ shape of distribution channels
Financial Services does not deliver — weak implementation and unforeseen risks
Macro — Financial Service markets move more rapidly than anticipated in our current
plans and we are unable to respond in time
Failure to deliver FS strategy and maintain our reputation for ‘trust’
Banking partner — failure to provide pipeline of competitive FS products to deliver our
branded retailer ambitions
Financial Services compliance
The Financial services strategy fails to deliver the revenue requirements of the strategic
plan
Delivery of NT i.e. it is too slow/expensive/noisy
Inability to deliver network conversions in time: e.g. NFSP and inability to implement
conversions in a timely fashion and hence competitive pressure make business non-viable
NT does not work. We need it to transform the network into a viable competitive estate —
at good value for money for the taxpayer. It might not work — either because the strategy
is flawed or because it is badly executed
Failure to transform agency network effectively — missing the once in a generation
(lifetime!) opportunity to optimise public value delivery
IT change — slippage/expense/security/reliability
IT transformation — cost over-runs/customer data inadequate
Weak IT/IT failure/digital offering weak
Systems
Top team capability and succession — specifically, pace and in transforming the
position
Lack of succession plan for the CEO
Top team - the people on our leadership team are not good enough/don't stay to do what
needs to be done
Insufficient management bandwidth and siloed thinking
Royal Mail — privatisation will change our contract/their priorities and endanger our plan
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11.
12.
13.
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Royal Mail
Missing mails opportunity SME’S
Politics — our shareholder won’t make tough decisions for good political reasons (NT
especially)
Political — current political goodwill dissipates over time perhaps exacerbated by PO
mistakes (rather like the Police and now NHS) —- AM
Slowing down of NT as a result of short-term stakeholder/political reluctance
Support from the Shareholder for our strategy, especially in relation to NTP and requiring
subpostmasters ‘ to choose’
Post Office is unable to convince stakeholders of the need to effect the changes required
to deliver financial sustainability
Government ownership
Operations issues - Fallout from Horizon issues seriously damages public and
government confidence in the Post Office
Further operational issues uncovered (but considered lower risk and lower impact)
Unforeseen shock (cf unexpected network problems, rainbow, SS) [Mitigation better
Horizon scanning and good forward looking KPI]
Brand reputation takes a serious blow and damages news areas of expansion, e.g. SME
Strategy - Post Office is unable to cope with the change required to deliver the strategy
unable to achieve growth targets
Execution — management bandwidth limitations with a small number (507) critical to the
delivery of the PO strategy
Development of the digital channels happens too slowly and we fail to engage younger
customer groups and maximise our business opportunities in growth areas
Failure to deliver multichannel solutions/left as physical/exceptions channel
Cost reduction is too difficult to deliver due to union opposition
Financial — unable (unwilling) to reduce costs sufficiently quickly to both achieve targets
and also mitigate against revenue shortfalls
Failure to accelerate topline growth in mails and FS in the next 2/3 years, in order to
underpin the business ambitions
Competition
1A backdrop distracts management and hampers financial turnaround
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POST OFFICE LIMITED BOARD
Status Report
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No. I REFERENCE ACTION BY WHOM STATUS
ta I January 2013 Idea of high profile event suggested for early adopters being planned. Mark Davies Discussions have been held
POLB 13/03(h) with No10 and BIS but this
remains ongoing. BIS keen
to reach Strategy conclusion
before taking further.
1b I July 2013 Full report on Strike Action to September Board. Kevin Gilliland September Board
POLB 13/54
: 2. : a
2a I July 2013 Produce analysis to explain economics of the Crown and agents network Chris Day November Board for Crown;
POLB 13/48(g) models and set up a workshop for those NEDs who would find it helpful. January Board for Agents.
2c I July 2013 Check with corporate insurers to ensure that the planned changes to structure Chris Day The RMG transaction will
POLB 13/56(b) of the wider Group to facilitate an IPO of RMG had no detrimental effect on the have no impact on any of the
cover or cost. Insurance policies except
D&O. Discussions continue
with ShEx and RMG to
ensure the outcome on D&O
is optimal from Post Office’s
point of view.
3.
3a I November 2012 I “Point person” to be identified for SME’s, across pillars Nick Kennett I have interviewed three
Strategy Evening
candidates. We are awaiting
feedback from the Hays on
two candidates that have
been passed for assessment.
I think that this is due at the
end of this week. The
working assumption is that
the leading candidates will
meet Martin George for final
review etc.
Status Report at 19 September 2013
Alwen Lyons
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3b I May 2013 Prepare simple crib sheet of 4-5 communication points to be used for engaging I Mark Davies A key issues briefing pack is
POLB 13/32 with stakeholders around Post Office’s strategy for 2013-2020. To ensure that being developed for Board
any statements used left room for manoeuvre in case circumstances changed in and senior management and
the future. will be introduced in w/c 16
September.
3c I May 2013 Update Stakeholder Plan to make better use of DVLA framework contract. To Kevin Seller
POLB 13/38 be shared with CEO and CFO to agree how the Board can support the
Stakeholder engagement.
3d I July 2013 Write to BIS setting out alternative approach for the strategic plan. Sue Barton
POLB 13/50(f)
3e I July 2013 Provide note to the Board setting out the expected timeline and milestones over I Sue Barton
POLB 13/50(k) the next two months.
3f I July 2013 Noting paper to the Board setting out the Mercer Recommendation for the new I Nick Kennett Noting paper to October
POLB 13/52(b) Financial Services Strategy update paper. Board
3g I July 2013 Draw up Terms of Reference for FS Board Sub-Committee with input from Tim Nick September
POLB 13/52(d) Franklin and Virginia Holmes Kennett/Alwen
Lyons
4, Personal Injury Referral Fees i i
4a Post Office Insurance will work with BGL to evaluate the impact on the business I Nick Kennett I have evaluated the position
model (including income and incentives) and management proposes to update and with the regulatory
the board later in 2013 of any changes. changes having being
implemented only in April it is
rather early to have seen the
impact - I suggest that this
would be better presented
back to the Board in the
autumn when we will have
seen both a better
understanding of the market
impact and how BGL has
responded. To October
Board.
Z 5. NFSP & Trade Association, ! !
5a I May 2013 Present the detail of the subpostmaster engagement satisfaction measure when I Kevin Gilliland January
POLB 13/33 available.
‘I @ information Security
6a_I July 2013 Review of Second Sight report to be provided to ARC explaining how we Paula Vennells Lessons learned review to
Status Report at 19 September 2013
Alwen Lyons
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POLB 13/51(g)
awarded and managed the contract. This should be prepared asap.
take place
October/November. Interim
report to November ARC —
Action: Belinda Crowe/Alwen
Lyons
6b I July 2013 Ensure both RMG and the Business’ Insurers were given notice of the Second Chris Day Post Office’s insurers have
POLB 13/51(i) Sight review findings. been notified of the Second
Sight report.
I i 7, Board Effectiveness i i ! ]
7a I July 2013 A future Board to be held at Camden Branch Alwen Lyons October Board to be held at
POLB 13/48(f) the Camden office.
7b I July 2013 Advise Board members of dates of SLT Quarterly Business Updates Alwen Lyons SLT and Quarterly Business
POLB 13/48(i) Update dates to be
confirmed. Dates will be
circulated once finalised.
7c I July 2013 Addition of an index for the Reading Room Alwen Lyons Index by Board date to be
POLB 13/48(j) produced by the end of
October. Index alphabetically
by topic by end of November.
7d I July 2013 Provide a paper highlighting the processes in place for monitoring the use of Chris Day Paper to be brought to
POLB 13/48(h) advisors, procuring advisors and negotiating their terms. November Board.
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POST OFFICE LIMITED BOARD AWAY DAY ACTION LOG
No. I ACTION BY WHOM STATUS
[AT Matai aM
1.1_ I Updated Rothschild Report to be circulated Chris Day Completed
1.2 I Ensure Strategic Plan refers to commercial sustainability and not mutualisation I Sue Barton Completed
and change of ownership
2._New ways of working _
2.1 I Ask Franchise Partners what they do to engage branches Mark Davies/Kevin I Network Communications
Gilliland team has taken this on.
2.2 I Look at introducing a ‘members’ council of 20-30 people, with unions/staff/ I Sue Barton
subpostmasters and customers all represented. Return to the Board with a full
proposal in line with the agreed timeline
2.3 I Final proposal on ways of working to be circulated, excluding Trade Association I Sue Barton
(although this may be necessary, so a TA proposal to be developed off the page
for now)
2.4 I Check where the term ‘hold the business to account’ is used, and come back I Sue Barton
with options for taking this forward without introducing additional governance.
3. People : :
3.1 I Show how many people in each business area as a % Fay Healey Chris Day - a % column will
be added to the staff costs
page of the monthly
performance report.
3.2_I Business to consider whether POCA should sit within FS in the new structure Fay Healey
3.3 I The Business had three possible internal candidates for Service Delivery but I Fay Healey
was asked also to search the market for possible external candidates
3.4 I Send the Board the proposed structure charts for the final and interim stages of I Fay Healey
the People Strategy
3.5 I ExCo succession plan to return to RemCom Fay Healey
3.6 I Outstanding questions to return to NomCom Fay Healey
Outsourcing
4.1 I Itis not always necessary to sort out the business processes before OS, as long I Chris Day/Susan
as the business produces clear requirements; clear rules and then manages the
relationship.
Barton
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it as easy as possible for people
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4.2 I Sue Barton/ Lesley Sewell to meet Tim to revisit the SI Terms of Reference and I Sue Barton
the relationship with the Towers. Neil McCausland was unsure that the
Board should be revisiting a decision it had already made.
4.3 I Chris to send a note to the Board before the next meeting setting out a timeline I Chris Day Completed
for the next steps including: defining core; defining requirements; procurement;
the effects of separation; and management information.
4.4 I Return to the November Board with the plan and milestones, showing direction I Chris Day/Sue
of travel and the prize, having consulted Tim Franklin & Alasdair Marnoch. Barton
Lisi i i a a La ll Tl
5.1 I Investigate options to incentivise quicker growth Paul Brown Drop & Go was incentivised
throughout August with
SPMRs receiving £5 per sign
up to coincide with launch to
the whole Network. This
produced a weekly run rate
of well over 500 sign ups.
Customers have been
incentivised since 2" Sept
with a 20% medium parcel
discount this promotion is
currently driving well in
excess of 1000 sign ups per
week.
5.2 I Spend time in branch to understand the barriers in the sales process and make I Paul Brown Following feedback from
branches several changes
were made to the Drop & Go
service including lower
qualification limits and
minimum deposits. A you
tube video was produced
following feedback
demonstrating the most
effective ways to manage the
service and complete the
application process. There
have now been some 6000+
sign ups to Drop & Go since
the end of June.
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5.3
Once we have a story to communicate make sure we do so loudly!
Paul Brown
Drop & Go has been featured
heavily in industry press and
across the key internet sites
including eBay, and via social
media. Several newspapers
have also run stories and
there has been a substantial
in branch campaign. Collect+
actually copied the discount
within a week of our launch
but have now discontinued,
their discount does not seem
to have deflected from our
success.
We are now preparing to
integrate the first retailers to
click and collect and will
announce jointly (and loudly)
with RMG when the services
are ready for launch.
5.4
Think radically about how we would respond to changes in the USO. Are there
any opportunities for us
Paul Brown/Sue
Barton
Paul and Sue have been
working on potential risks
and opportunities related to
potential changes to the
USO. These include Post
Offices acting as collection
points, local delivery hubs
and the potential need to
contract with multiple carriers
in the longer term future. It is
also becoming clear that
short to medium term change
to the USO looks increasingly
unlikely. The planning for the
possible impacts of RMG
privatisation and future
fegulatory changes will
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continue as part of ongoing
mails strategy review.
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SEPTEMBER 2013
POST OFFICE LIMITED MATTERS — DISPUTE RESOLUTION
PRIVILEGED AND CONFIDENTIAL — CLAIMS OVER £500K OR THOSE OF A SENSITIVE NATURE
NAMI BUSI a By
J
Horizon claims POL/HF/RW
Susan Crichton
This is also a separate agenda item for the
September 2013 Board meeting.
POL has received various claims from
subpostmasters (SPMs) alleging defects in the
Horizon system and POL’s internal processes.
These allegations were initially made in 5
claims brought through solicitors Shoosmiths.
Similar allegations have been made through:
- SPMs’ MPs;
- the “Justice for
Alliance” (JFSA);
- defences to court proceedings brought
by POL to recover debts from SPMs;
and
- direct contact with POL.
Subpostmasters
An independent investigator Second Sight
Support Services Ltd (Second Sight) has been
reviewing these allegations in consultation with
James Arbuthnot MP and JFSA.
On 08.07.13, Second Sight published an
Interim Report finding shortcomings in POL's
internal training and support to SPMs on the
Horizon system, but no systemic problems with
Horizon itself.
Following the Second Sight Interim Report,
on 27.08.13 POL launched a Mediation
Scheme aimed at finally resolving individual
complaints made about Horizon.
Submissions to the scheme close on
18.11.13.
Second Sight is continuing to investigate the
SPMs’ concerns. POL is cooperating with
those investigations.
POL is also reviewing past and present
criminal prosecutions brought against SPMs
to ensure they continue to satisfy the
evidential, public interest, and disclosure
standards required for prosecutions.
POL is not issuing any new criminal
summons pending the instruction of a new,
independent expert who can give evidence to
support the Horizon system. The process of
identifying this expert is underway.
To date, no claim has been made against
POL in the civil courts, and no appeal has
been made to the Court of Appeal against
any conviction obtained in the criminal
courts, following the Interim Report.
Bond Dickinson
Significant Litigation Report
Susan Crichton
16 September 2013
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his SPM contract.
The SPM claimed that POL'’s termination
process was flawed and infringed his Human
Rights. He has asked the court to review
POL's decision and find that it was unlawful
and/or an abuse of power.
POL is asking the Court to dismiss the claim
on the grounds that it is a commercial matter
which the Court cannot review, and in any
event POL did not breach the SPM’s rights.
The matter has been listed for hearing in the
High Court, Birmingham on 12 and 13
December 2013, unless it is settled earlier.
POL will continue to explore options for
resolving the claim before any Court hearing
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Claim for Judicial I POL/HF/RW I Angela A former subpostmaster (SPM) has sought I POL and the SPM will attempt to settle the I DAC
Review Van-Den-Bogerd “judicial review” of POL’s decision to terminate I} dispute at mediation on 11 October 2013. Beachcrofts
Significant Litigation Report
Susan Crichton
16 September 2013
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PART (B) — PRINCIPAL CRIMINAL CASES BROUGHT BY POST OFFICE LIMITED
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IS
Two assistant sub postmasters accused of covering shortages by delaying
the processing of business deposits to Santander. Case concerned 40
deposit slips being suppressed with a total value of £34,115.50.
Both defendants pleaded guilty, and were sentenced to 5 months and 6 months
imprisonment (suspended for 12 months) respectively.
Sub postmaster accused of theft of £78,660.63.
Defendant pleaded guilty on 05.02.13 and was sentenced to 2 years imprisonment.
The parties are now awaiting a date from the Court to determine recovery of funds
under the Proceeds of Crime Act (POCA).
Sub postmasters accused of theft of £85,000.
Case discontinued on public interest grounds.
Subpostmaster accused of theft of £77,905.02.
The case has been committed to the Crown Court, which is yet to fix a date for trial.
POL has recovered £62,992.78 to date.
Subpostmaster accused of theft of £57,811.79.
Defendant pleaded guilty and on 28.11.12 was sentenced to 9 months imprisonment.
(suspended for 18 months) and 180 hours unpaid community work.
The parties are now awaiting a date from the Court to determine recovery of funds
under POCA. POL has recovered £43,988.03 to date.
Subpostmaster accused of two offences of theft of £9,999.43 and
£175,260, and two offences of false accounting.
The case has been committed to the Crown Court, which is yet to fix a date for trial.
A restraint order has been obtained to assist recovery of the financial loss under
POCA.
Subpostmaster accused of fraud of £115,172.11.
Defendant pleaded guilty and on 03.05.13 was sentenced to 16 months
imprisonment.
A final hearing has been set for 20.09.13 to determine the sum payable to POL.
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under POCA. POL has recovered £61,000 to date.
The parties are awaiting a date from the Court for a hearing to determine the details
for trial.
Defendant has stated that he intends to repay loss in full if no POCA proceeding are
Subpostmaster accused of theft of £197,107.36. commenced.
Subpostmaster accused of theft of £115,000. The Court has set a timetable to address recovery of funds under POCA.
POL has recovered £61,000 to date
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POST OFFICE LTD BOARD
Health & Safety Report
1. Purpose
The purpose of this paper is to:
-1__ Provide an update on safety performance.
1.2. Outline risk reduction activities.
2. Current Situation
2.1 Injury accidents, up to period 4, are showing a positive trend against last year, and
against the target reduction of 5%. Accidents involving absence have decreased
from 16 to 10 compared to the same period last year. The “per 1000 staff in post”
comparison indicator, which takes account of head count fluctuation year on year, is
showing a favourable trend for ‘all accidents’.
Table 1 All Injury accidents and those resulting in absence (Cumulative)
350
wo a
250
2 2 —— 2012/13 All
5™ 2013/14 All
¥ 450 ~-»- 2012/13 Absence
< 2013/14 Absence
100
a
tY)
P1 P2 P3 P4 P5 P6 P7 P8& PY P10 P11 P12
Period
2.2 The number of days lost due to accidents is showing a significant reduction
compared to last year and against a target reduction of 5%. (Table 2) This
indicates that not only is there a positive trend of frequency of incidents there is
also positive trend in the severity of those accidents.
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Table 2 Days lost resulting from injury accidents (Cumulative)
1200
1000
800
$ pn + 2012/13
= 2013/14
400
200
t)
P1 P2 P3 P4 P5 P6 P7 P8& PQ P10 P11 P12
Period
2.3. The total number of road traffic collisions (RTCs) during period four was
significantly down on last year resulting in a cumulative effect of a reduction
against the same period to date last year. The number of ‘at fault’ incidents is
showing an improving trend against the same year to date period as last year.
Road risk reduction opportunities continue to be the subject of analysis at the
Road Risk Forum with a view to identifying improvement activities in addition to
those already in place. (3.1 below) Injuries as a result of road traffic collisions
are infrequent. Road traffic collisions account for less than 3% of the overall
number of injury accidents, however they have the potential for high impact in
terms of injury and loss.
Table 3 Road Traffic Collisions (cumulative)
250
200
a
° —— 2012/13 All
a 150
S = 2013/14 All
5 _ + 2012/13 ‘at fault’
2 = 2013/14 ‘at fault’
2 50
t')
P1 P2 P3 P4 PS P6 P7 P8& PQ P10 P11 P12
Period
2.4 The majority of accidents currently fall into three main categories: lifting and
handling, stepping and striking and outdoor falls. These are high frequency
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events with, in the majority, relatively low severity. The lower frequency types of
incident can carry the potential for very high impact, for example, assaults
during robberies and road traffic collisions. .
25 Robberies on Post Office Cash and Valuables in Transit (CViT) crews are down
2 from 16 to 14 cumulative for the first four months. Physical injuries during
robberies, of which there have been 2, a reduction of 3 on last year, remain
relatively minor in severity. Three of the fourteen robberies were enabled by the
presence and/or threat of use of fire arms however the firearms were not
discharged. Risk reduction activities are identified at 3.2. (Appendix 1 —
Significant Incidents refers)
2.6 The robbery risk assessment and associated assessment of the provision and
use of body armour was endorsed during August by all members of the Post
Office ExCo Sub Committee for Health and Safety and can be found at
Appendix 2.
2.7 Robberies and attempted robberies on the Post Office network, cumulative to
period 4, are lower than last year — 29 compared to 33 — 13 of the 29 were
successful. Supporting activities have been introduced to continue to mitigate
this risk and are identified at 3.2. (Appendix 1 — Significant Incidents refers)
Burglaries and attempted burglaries (which do not involve personal attack) have
reduced from 24 to 23 compared to the same four month period last year.
3. Act
ies
3.1 Road Risk
Current activities to mitigate road risk are:
e Road risk forum in place to scope and develop road risk reduction initiatives
and activities
¢ Analysis of effectiveness of face to face training given to top 50 high risk drivers
has indicated that accidents amongst this community have reduced significantly
following the refresher training
¢ Eye sight checks for operational drivers are in place
e Technical accident reduction interventions on new vehicles e.g. Reversing aids
Analysis and evaluation of data (e.g. risk profiles) to determine further accident
reduction interventions
Introduction of coloured ‘high visibility’ seat belts on new vehicles
Safety team input and concurrence for vehicle specification and changes
Safe driver of the year award
Weekly case conferences to ensure consistent approach to accident
investigation, follow up activity and sharing of best practice
3.2 Robbery/Burglary Risk
Current activities to mitigate robbery and burglary risk are:
e Active liaison activities with the police and increased police support activity
¢ Liaison with Met. Police on the general increase in gun enabled robberies
e Introduction of new deterrent technologies e.g. Smartwater — a solution that
contains a unique identifier that is released automatically in the event of a
robbery, spraying those involved and enabling identification of the individuals
involved in the robberies
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September 2013
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¢ Significant reduction in opportunities for duress type robberies linked to the
introduction of single person vehicles
Increased security support visits to Post Offices in ‘hotspot’ areas
Increased use of crime alert communication techniques to Post Offices
Trialling new point of transfer arrangements to reduce exposure
Increased use of surveillance vehicles
3.3 Health and Wellbeing
Current activities to enhance wellbeing
¢ Programme of visits to all Post Office sites to offer and encourage the use of
health check equipment that provides a wide range of indicators on physical
wellbeing
e Plans in place to re-visit all Post Office Crown Branches and Supply Chain sites
within 18 months
Health and wellbeing ‘Team Talk’ modules
Health and wellbeing poster themed campaigns
Online wellbeing monitoring tool to support health check initiative
Enhanced Occupational health service provision from January 2013
4. Residual Risks
44 Driving activities have the potential for high impact/loss and remain a significant
residual risk. However, the actions identified above are aimed at mitigating that
risk and improving performance.
5. Recommendation
The Post Office Ltd Board is asked to:
5.1 Note the overall safety performance
6.2 Note the risk reduction activities
5.3 Note the outcome of the robbery risk assessment (App 2).
Susan Crichton
September 2013
Health and Safety Susan Crichton Page 4 of 6
September 2013
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Confidential
Appendix 1
Significant Incidents (Period 4)
Crowns and Network
Health and Safety Report Susan Crichton 5 of 6
September 2013
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Confidential
Appendix 2
Post Office Robbery Risk Assessment 2013/14 including associated assessment for the
provision and use of body armour as personal protective equipment (PPE)
Robbery Risk
Assessment 2013-14
Health and Safety Report Susan Crichton 6 of 6
September 2013
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POST OFFICE LIMITED BOARD
Sealings 10 July — 16 September 2013 inclusive
Register of Sealings
The Directors are invited to consider the seal register and approve the affixing of the Common Seal of the Company to the documents set out against items
numbered 1059 to 1074 inclusive in the seal register.
“The Directors resolve that the affixing of the Common Seal of the Company to the documents set out against items numbered 1059 to 1074 inclusive in the
seal register is hereby confirmed.”
Alwen Lyons
Company Secretary
16 September 2013
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Date
16/09/2013
POST OFFICE LIMITED
Register of Sealings
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Company Number
2154540
Seal Number
/ File Ref.
Date of
Sealing
Date of
Authority
Description of Document
Persons Attesting
To Document
Destination of
Document
1059
10/07/2013
09/07/2013
Lease of Cygnet House, 111 Taylorson Street South,
Salford, MS 3BL between POL and Bredale Properties
Limited.
Gill Catcheside
Jean Reynolds
1060
11/07/2013
10/07/2013
Service Tenancy Agreement relating to Blackheath Village
Post Office, Black Heath Grove, Blackheath, London SE3
OAU between POL and Manish Garg.
Gill Catcheside
Jean Reynolds
1061
11/07/2013
10/07/2013
Lease of 18 Harben Parade Finchley Road, Hampstead,
NWS between the London Borough of Camden and POL.
Gill Catcheside
Jean Reynolds
1062
24/07/2013
23/07/2013
Lease of 199/201 High Street Southend between POL and
Threadneedle Pensions Limited
Alwen Lyons
Jean Reynolds
1063
25/07/2013
25/07/2013
Deed of novation of BoardPad Software contract between
POL, ICSA Software International Limited, ICSA Boardroom
Apps Limited
Gill Catcheside
Gill Catcheside
1064
26/07/2013
25/07/2013
Licence to underlet relating to Post Office, 67 Victoria Street,
Grimsby between Corncrake Properties Limited, Argos
Limited and POL
Alwen Lyons
Jean Reynolds
1065
1066
1067
26/07/2013
01/08/2013
01/08/2013
25/07/2013
01/08/2013
01/08/2013
Underlease of 67/71 Victoria Street, Grimsby between
Argos Limited and POL
Lease renewal - 122-124 Field End Road, Eastcote
between POL and the trustees of the will of SirG MM
Mallaby Deeley Deceased
Licence to carry out works at 5- 7 London Street,
Basingstoke between POL, the Wardens and the
Commonalty of the Mystery of the Goldsmiths of the City of
London and National Westminster Bank pic
Alwen Lyons
Susan Crichton
Susan Crichton
Jean Reynolds
Jean Reynolds
Jean Reynolds
1068
12/08/2013
07/08/2013
Licence to assign premises at Willesdon Post Office, 78
High Road, London, NW10 2PX between POL, Vijay Parekh
and Gita Parekh acting by the Receivers Michael Daniel
Worsley Hardy and Mark Swiers of Sanderson Weatherall
LLP, and Denton & Co. Trustees Limited, Sunil Suryakant
Badiani, Suryakant Nanji Badiani and Sheila Suryakant
Badiani
Susan Crichton
Jean Reynolds
1069
15/08/2013
15/08/2013
Licence for alterations and additions by Tenant relating to
Susan Crichton
Jean Reynolds
Register of Sealings
16/09/2013
Page 2 of 3
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POST OFFICE LIMITED
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Date . . Company Number
16/09/2013 Register of Sealings 2154540
‘Seal Number Date of Date of Persons Attesting Destination of
/ File Ref. Sealing Authority Description of Document To Document Document
premises on Ground Floor and Basement of 26 Spring
Gardens Manchester between POL, British Overseas Bank
Nominees Limited and WGTC Nominees Limited.
1070 29/08/2013 28/08/2013 Updated plan for 18 Harben Parade Gill Catcheside Jean Reynolds
1071 12/09/2013 11/09/2013 Underlease of premises at First Floor Offices, 57/58 High Gill Catcheside Jean Reynolds
Street, Banbury, Oxfordshire, OX16 5LB between POL and
Office Angels Limited
1072 12/09/2013 11/09/2013 Licence to Underlet relating to First Floor Offices, 57/58 Gill Catcheside Jean Reynolds
High Street, Banbury, OX16 5LB between Panbrook
(Banbury) Limited, POL and Office Angels Limited
1073 16/09/2013 13/09/2013 Lease of Post Office, 191 High Road, Wood Green N22 Alwen Lyons Jean Reynolds
between the Mayor and Burgesses of the London Borough
of Haringey and POL
1074 16/09/2013 13/09/2013 Service Tenancy Agreement of Unit 35c, The Galleries, Alwen Lyons Jean Reynolds
Washington, NE38 7SB between POL and Potent Solutions
Limited
Register of Sealings 16/09/2013 Page 3 of 3
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Confidential
POST OFFICE LTD BOARD
New Articles of Association for Post Office Limited and Postal Services Holding
Company pic
Purpose
The purpose of this paper is to:
4.
1.1 update and inform the Board that the Post Office and Postal Services Holding
Company ple (PSHC), formerly Royal Mail Holdings plc (RMH), have adopted
new Articles of Association.
Background
2.1 At July's Board meeting, the Board received a paper on the planned changes to
the structure of the wider Group to facilitate an IPO of Royal Mail Group Limited.
2.2 At this same meeting, the Board delegated authority to approve and execute any
documents necessary to remove the references to the RMG Special Share and
the RMH Special Share in the Post Office’s Articles of Association
ies/Current Situation and Conclusion
3.1 On 9 September 2013, the Shareholder Executive granted its consent to the
adoption of new Articles of Association for the Post Office and on 12 September,
the Articles were adopted by written resolution.
3.2. Similarly, PSHC adopted its new Articles of Association at a general meeting
convened on 10 September and changed its name from RMH with effect from 11
September.
3.3 Copies of these new Articles are attached as Appendix A and Appendix B to this
Board paper and will be available in the Reading Room.
Recommendations
The Board is asked to:
44 note the adoption of new Articles of Association for the Post Office and PSHC;
and
4.2. note that the company formerly named Royal Mail Holdings plc is now called
Postal Services Holding Company plc.
Alwen Lyons
17 September 2013
Articles of Association Alwen Lyons Page 1 of 1
17 September 2013
POL-0024548
Company No. 2154540
THE COMPANIES ACT 2006
A PRIVATE COMPANY LIMITED BY SHARES
NEW
ARTICLES OF ASSOCIATION
of
Post Office Limited
(adopted by a written resolution passed on 12 September 2013)
Registered office
148 Old Street
London
EC1V 9HQ
A16821608/0. 10/06 Sep 2013
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Company No. 2154540
ARTICLES OF ASSOCIATION
of
Post Office Limited
(adopted by a written resolution passed on 12 September 2013)
INTERPRETATION
1. EXCLUSION OF MODEL ARTICLES
No regulations set out in any statute, or in any statutory instrument a other subordinate
legislation made under any statute concerning companies shall apply as the regulations
or articles of the company.
2. DEFINITIONS
In these articles unless the context otherwise requires -
“the Act" means the Companies Act 2006 (including any orders, regulations or other
subordinate legislation made under it) to the extent from time to time in force;
"the articles" means these articles of association of the company as altered from time
to time by special resolution and the expression "this article" shall be construed
accordingly;
“the board” means the board of directors from time to time of the company or the
directors present at a meeting of the directors at which a quorum is present;
“business day” means any day which is not a Saturday or Sunday or a public holiday;
"clear days” in relation to the period of a notice, means that period excluding the day
when the notice is given or deemed to be given and the day for which it is given or on
which it is to take effect;
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“Enlarged Group” means the company, its ultimate parent company and all
subsidiaries of such ultimate parent company, but excluding any subsidiary of the
ultimate parent company which is a USP Listco (and its subsidiaries}
"executed" includes any mode of execution;
“group” means the company and its subsidiary undertakings (as defined in Section
1162 of the Companies Act 2006) from time to time;
"the holder” in relation to shares means the member whose name is entered in the
register of members as the holder of the shares;
"member" means a member of the company;
“network subsidiary” means any subsidiary of Royal Mail Holdings plc (other than any
subsidiary of Royal Mail Holdings pic which is a USP Listco (and its subsidiaries)) which
is, or any of whose wholly owned subsidiaries is, engaged in the provision of a network
of places from which postal services and/or services provided under arrangements
between a UK government department and that subsidiary or any of its wholly owned
subsidiaries, are provided directly to the public;
“office” means the registered office of the company;
"Parent" means the parent undertaking of the company (as defined inSection 1162 of
the Companies Act 2006);
“Primary Territories” means all those countries or parts of the world being members of
the Organisation for Economic Co-operation and Development, and (whether or not the
same are or become members of the said organisation) eachof the Isle of Man, the
Channel Islands and Gibraltar, together with such other territories as shall be agreed in
writing between the Special Shareholder and the company;
“public holiday” has the meaning given to that term in the Postal Services Act 2000;
"the register" means the register of members of the company;
“Relevant Decision” has the meaning given to that term in article 13(A);
“Relevant Issue” has the meaning given to that term in article 13(D);
“relevant transaction” means any actual or proposed acquisition, sale or other
disposition (whether by security or otherwise) or parting with or sharing of ownership
(including, without limitation, by partnership, joint venture or otherwise) of any assets,
rights or property whatsoever by any member of the group, other than:
(a) any transaction in the ordinary course of business (including without
limitation the taking of assets on lease or hire purchase);
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(b) any transaction between the company and any other member of the
Enlarged Group or between members of the Enlarged Group; and
(c) any transaction approved in any Strategic Plan;
“Royal Mail Holdings pic” means the company incorporated in England and Wales
with registered number 4074919;
"the seal" means the common seal of the company;
"secretary" means the secretary of the company or any other person appointed to
perform the duties of the secretary of the company, including a joint, assistant or deputy
secretary;
"Secretary of State" means one of Her Majesty's Secretaries of State;
"share rights" has the meaning given to such term in section 15 of the Postal Services
Act 2011;
"shares" shall be interpreted in accordance with section 15 of the Postal Services Act
2011;
"Special Share" means the one special rights redeemable preference share of £1.00 in
the capital of the company;
“Special Shareholder” means the holder of the Special Share;
"Strategic Plan" means the strategic plan relating to the operation and overall strategic
direction of the group described in article 72;
“Trade Mark" means the registered trade mark "The Post Office" anywhere in the
world;
“the United Kingdom" means Great Britain and Northern Ireland;
“USP Listco” means a company:
(a) shares in which are or have been admitted to the premium listing
segment of the Official List of the Financial Conduct Authority of the
United Kingdom (acting in its capacity as the competent authority for the
purpose of Part VI of the Financial Services and Markets Act 2000) and
admitted to trading on the main market for listed securities of the
London Stock Exchange plc; and
(b) which is or has been, or a subsidiary of which is or has been,
designated as the universal service provider under section 35 of the
Postal Services Act 2011; and
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“wholly owned by the Crown” shall be interpreted in accordance with Part 1 of the
Postal Services Act 2011.
Unless the context otherwise requires, words or expressions contained in thesearticles
bear the same meaning as in the Act but exclude any statutory modification thereof not
in force when these articles become binding on the company. Subject to the foregoing
sentence, references to any provision of any enactment or any subordinate kegislation
(as defined by section 21(1) of the Interpretation Act 1978) include any modification or
re-enactment of that provision for the time being in force.
References to "writing" include references to any method of representing or
reproducing words in a legible and non-transitory form, whether in electronic form or
otherwise.
References in articles 82, 83 and 94 to (i) a contract include references to any proposed
contract and to any transaction or arrangement or proposed transaction or arrangement
whether or not constituting a contract; and (ii) a conflict of interest include a conflict of
interest and duty and a conflict of duties.
Headings are included only for convenience and shall not affect meaning.
If, and for so long as, the company has only one member, these articles shall (in the
absence of any express provision to the contrary) apply with such modification as may
be necessary in relation to the company.
FORM OF RESOLUTION
FORM OF RESOLUTION
Aresolution in writing executed by or on behalf of each member who would have been
entitled to vote upon it if it had been proposed at a general meeting at which he was
present shall be as effectual as if it had been passed at a general meeting properly
convened and held and may consist of several instruments in the like form each
executed by or on behalf of one or more of the members.
LIMITED LIABILITY
LIMITED LIABILITY
The liability of members of the company is limited to the amount, ifany, unpaid on the
shares in the company held by them.
SHARE CAPITAL
RIGHTS ATTACHED TO SHARES
Subject to the provisions of the Act and to any rights conferred on the holders of any
other shares, any share may be issued with or have attached to it such rights and
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restrictions as the company may by ordinary resolution decide or, if no such resolution
has been passed or so far as the resolution does not make specific provision, as the
board may decide.
REDEEMABLE SHARES
Subject to the provisions of the Act, shares may be issued which are to be redeemed or
are to be liable to be redeemed at the option of the company or the holder.
PAYMENT OF COMMISSION
The company may exercise the powers of paying commissions conferred by the Act.
Subject to the provisions of the Act, any such commission may be satisfied by the
payment of cash or by the allotment of fully or partly paid shares or partly in one way
and partly in the other.
TRUSTS NOT RECOGNISED
Except as required by law, no person shall be recognised by the company as holding
any share upon any trust and (except as otherwise provided by the articles or by law)
the company shall not be bound by or recognise any interest in any share except an
absolute right to the entirety thereof in the holder.
VARIATION OF CLASS RIGHTS
Subject to the provisions of the Act, if at any time the capital of the company is divided
into different classes of shares, the rights attached to any class may be varied, either
while the company is a going concern or during or in contemplation of a winding-up:
(A) in such manner (if any) as may be provided by those rights; or
(B) in the absence of any such provision, with the consent in writing of the holders
of three-quarters in nominal value of the issued shares of that class, or with the
sanction of a special resolution passed at a separate general meeting of the
holders of the shares of that class,
but not otherwise. The provisions of these articles relating to general meetings shall,
with any necessary modifications, apply to every such separate general meeting, except
that the necessary quorum at any such meeting other than an adjourned meeting shall
be two persons together holding or representing by proxy at least one-third in nominal
value of the issued shares of the class in question (unless there is only one person who
holds issued shares in the class, in which case the quorum shall be one person) and at
an adjourned meeting shall be one person holding shares of the class in question or his
proxy.
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10.
7
THE SPECIAL SHARE
SPECIAL SHAREHOLDER
(A) The Special Share may only be issued to the Secretary of State and may be
(Cc)
(D)
(E)
transferred to and held by the Treasury, another Minister of the Crown or any
other duly authorised person (including, without limitation, any nominee) acting
on behalf of the Crown.
The Special Shareholder shall be entitled to receive notice of, and to attend and
speak at, any general meeting or any meeting of any other class of
shareholders of the company, but the Special Share shall carry no right to vote
nor any other rights at any such meeting.
On a distribution of capital in a winding-up of the company the Special
Shareholder shall be entitled to repayment of the lower of (i) the capital paid up
on the Special Share; and (ii) an amount equal to 24% of the assets available
for distribution to equity holders of the company. Any such distribution will be
made in priority to any repayment of capital to any other member. In this article
10(C) the term “equity holders” shall have the meaning given by sections 158
and 159 of the Corporation Tax Act 2010 and the “assets available for
distribution to equity holders” shall be determined in the same manner as they
are determined for the purposes of section 166 of the Corporation Tax Act 2010.
Save as provided above, the Special Share shall confer no right to a dividend or
any other right to participate in the capital or profits of the company.
The Special Shareholder may, subject to the provisions of the Act, require the
company to redeem the Special Share at par (such sum being payable on
redemption) at any time by serving written notice upon the company and
delivering to the company the relevant share certificate. The company shall not
be able to redeem the Special Share without the prior consent of the Special
Shareholder.
In the event that:
(i) the Special Shareholder shall give directions to Royal Mail Holdings pic
under section 72 of the Postal Services Act 2000; and
(ii) Royal Mail Holdings plc requires the company or any member of the
group to do anything to comply with those directions
then for such time as the company remains wholly-owned by the Crown the
company shall take all steps within its power to do what those directions require
to be done by the company, and exercise such rights as it has over any
subsidiary to procure that such subsidiary does what those directions require to
be done by such subsidiary, within the timeframe so required.
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11.
(G) The provisions of this article 10 shall be subject to article 116.
VARIATION OF SPECIAL SHARE RIGHTS
Matters requiring consent
Notwithstanding any provision in these articles to the contrary (save for article 116 to
which this article 11 shall be subject), each of the following shall be deemed to be a
variation of the rights attaching to the Special Share and accordingly shall occur and be
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effective only with the prior written consent of the Special Sharehdder:
(A)
(c)
(D)
(E)
(H)
the alteration or deletion of, or the ratification of any breach of, all or any part of
these articles;
the voluntary winding-up of any member of the group, the passing of a special
resolution to the effect that any member of the group should be wound-up by
the court, the presentation (whether solely or jointly with any other person) of a
petition for the winding-up of any member of the group, or any proposal for any
of the foregoing;
the presentation (whether solely or jointly with any other person) of a petition
applying for the appointment of an administrator of any member of the group, or
any proposal therefor;
the issue or allotment of any shares or granting of any share rights in the
company;
the variation of any rights attached to any shares inthe company in so far as
such variation affects the rights attached to the Special Share;
the declaration or payment of any dividend or the making of any distribution by
the company other than in accordance with the Strategic Plan;
any distribution, payment or return to shareholders of the company out of capital
of the company;
the redemption or purchase by the company of any share in itself or the
reduction of the share capital of the company, or any uncalled or unpaid liability
in respect thereof, capital redemption reserve or share premium account of the
company or the passing of any resolution authorising any of the foregoing;
the adoption of any accounting reference date or any material variation of the
accounting practices and policies to be applied inthe preparation of the
accounts of any member of the group, if different from the practices or policies
then adopted or applied by other members of the group (other than any
accounting practice or policy required to be adopted by law or required by
generally accepted accounting principles applying in the place of incorporation
of the company or the relevant member of the group);
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(J)
(kK)
(N)
the:
(a) appointment or removal from office of any director of the company; or
(b) appointment or removal of any person as chief executive of the
company (whether or not immediately prior to that appointment he was
a director of the company and whether or not immediately after his
removal he continues to be a director of the same), and "chief
executive" shall refer to any person carrying out the general
management functions of a chief executive officer ofthe company or the
group,
or any change in the prescribed minimum number of directors of the company
or the appointment of any person other than a director of the Parent or the
company as an alternate director of any director of the company;
the adoption of a Strategic Plan or any material variation or amendment of a
Strategic Plan previously adopted;
save as specifically provided for in the approved Strategic Plan, any substantial
alteration in the nature of the business carried on by the company;
the entry into any relevant transaction under which the company, directly or
indirectly, ceases to own or retain any such interest as it may have in any asset
in the absence of which the group might reasonably be considered to be unable
to continue to perform the business of the company as provided for in the
Strategic Plan, except in circumstances under which the relevant asset remains
available for exclusive use by any one or more members of the group for the
remainder of its useful economic life or until it is fully depreciated;
any arrangement whereby the directors of any member of the group shall cease
to determine the general policy of the relevant member of the group and the
scope of the activity and operation of the relevant member of the group or
cease to determine all matters involving major or unusual decisions material to
the business of the group taken as a whole or otherwise whereby the control of
the management of the relevant member of the group shall pass from the
directors thereof to any third party or body;
the entry into or implementation of a relevant transaction by any member of the
group which involves or is likely to involve (either individually or when taken
together with all other related relevant transactions (other than any related
relevant transaction previously approved under this article 11.1(O) entered into
or implemented in the previous 12 months)) the incurrence of a commitment or
liability, or the payment of a sum, by any member of the group which is an
amount in excess of £50,000,000;
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(P)
(R)
(S)
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the entry by any member of the group into any relevant transaction which is not
on commercial terms and is not considered by the directors of that member to
be in the interests of that member;
(i) the sale, assignment, charging, mortgaging or outright disposal byany
member of the group of any Trade Mark in any of the Primary Territories (ii) the
granting of an exclusive licence by any member of the group which prevents the
group from using any Trade Mark in any of the Primary Territories (iii) the taking
of any action by any member of the group with the intention of jeopardising any
Trade Mark in any of the Primary Territories (iv) the taking of any action byany
member of the group which has the effect of causing any Trade Mark in any of
the Primary Territories to cease to subsist, or (v) the taking of any decision or
action which has the effect of allowing rights in respect of any Trade Mark in any
of the Primary Territories to lapse;
the approval of or agreement to or any material variation or amendment to:
(a) the remuneration (including, without limitation, salary, share options,
bonuses, benefits in kind and pension rights) paid or granted byany
member of the group to any director of the company if that director was
appointed by the Special Shareholder or the appointment of that
director was duly consented to or deemed consented to by the Special
Shareholder in accordance with the provisions of article 11.1(J); or
(b) the terms and conditions of employment or engagement by any
member of the group of any of the directors of the company if that
director was appointed by the Special Shareholder or the appointment
of that director was duly consented to or deemed consented to by the
Special Shareholder in accordance with the provisions of article 11.1(J);
(a) the incurring of (or entry into of any commitment to incur) any borrowing
by any member of the group in circumstances where the borrowing:
(i) (1) individually; or
(2) taken together with the aggregate principal amount in
respect of borrowings already incurred in the same
accounting period without approval under this
article11.1(S); or
(3) if part of any series of related borrowings to finance a
single investment, then taken together with the
aggregate principal amount incurred in respect of such
related borrowings
exceeds £75,000,000; or
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(b)
(i)
(ili)
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1
is to be provided from any source other than another member of
the Enlarged Group, the National Loans Fund or the Crown,
save in respect of borrowings which are due from the Secretary
of State, the Bank of England and (other) Monetary Financial
Institutions, a Local Authority or a Public Corporation; or
if taken together with the aggregate principal amount
outstanding of all money borrowed by the group from any
source (excluding amounts borrowed by any member of the
group from any other member of the Enlarged Group, other
than amounts to be taken into account underarticle
11.1(S)(b)(v) below) exceeds an amount equal to the lesser of
£2,000,000,000 and 2.5 times the aggregate of:
(1) the amount paid up on the issued share capital of the
company; and
(2) the total of the capital and revenue reserves of the
group, including any share premium account, capital
redemption reserve and credit balance on the profit and
loss account, but excluding sums set aside for taxation
and amounts attributable to outside shareholders in
subsidiary undertakings of the company and deducting
any debit balance on the profit and loss account, all as
shown in the then latest audited consolidated balance
sheet and profit and loss account of the group (or if
consolidated financial statements are not prepared, as
would have been shown in such consolidated financial
statements had they been prepared), but adjusted as
may be necessary in respect of any variation in the paid
up share capital or share premium account or capital
redemption reserve of the company since the date of
that balance sheet and further adjusted as may be
necessary to reflect any change since that date in the
companies comprising the group;
for the purposes of this article 11.1(S), but without prejudice to the
generality of the terms "borrowing" and "borrowed":
(i)
(ii)
amounts borrowed for the purpose of repaying the whole or any
part of any amounts previously borrowed and then outstanding
(including any premium payable on final repayment) and to be
applied for that purpose within six months of the borrowing shall
not, pending such application, be taken into account as money
borrowed;
the principal amount (including any premium payable on final
repayment) of any debt securities issued in whole or in part for
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a consideration other than cash shall be taken into account as
money borrowed by the member of the group issuing them;
(iii) money borrowed by any member of the group and not owing to
another member of the group shall be taken into account as
money borrowed and money borrowed by any member of the
group and owing to another member of the group shall not be
so taken into account;
(iv) borrowings of an undertaking which became a subsidiary
undertaking of the company after the date as at which the latest
audited balance sheet was prepared shall not, pending the date
of the next consolidated audited balance sheet, be taken into
account as money borrowed to the extent that the amount of
those borrowings does not exceed their amount immediately
after such undertaking became a subsidiary undertaking;
(v) amounts outstanding under any arrangement entered into in the
ordinary course of its business by any member of the group for
the leasing or hire purchase of any assets shall not be taken
into account as money borrowed; and
(vi) any amounts outstanding under sections 71(2)(b), (c), (d) and
(e) of the Postal Services Act 2000 shall be taken into account
as moneys borrowed.
for the purposes of this article 11.1(S) the following phrases shall have
the following meanings:
“Local Authority" has the meaning given to it in sections 1(2) and (3) of
the Local Government Act 1999 extended to include any district, island
or regional council in Scotland or any county or district council in
Northern Ireland;
“Public Corporation" means any body within the definition of that
expression in the edition of the "Classification of Accounts Guide Part Ill
— Sector Categories" current at the time that the relevant borrowings
are made; and
“The Bank of England and (other) Monetary Financial Institutions"
means any body within the definition of that expression in the edition of
"Classification of Accounts Guide Part Ill — Sector Categories" current
at the time that the relevant borrowings are made;
in calculating the aggregate amount of borrowings for the purpose of
this article 11.1(S), money borrowed by any member of the group which
is denominated or repayable in a currency other than sterling shall be
treated as converted into sterling:
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(i)
(ii)
at the rate of exchange used for the conversion of that currency
in the latest audited balance sheet of that member; or
if no rate was so used, at the middle-market rate of exchange
prevailing in London at the close of business on the date of that
balance sheet, but if the amount in sterling resulting from
conversion at that rate would be greater than that resulting from
conversion at the middle-market rate prevailing in London at the
close of business on the business day immediately preceding
the day on which the calculation falls to be made, the latter rate
shall apply instead;
(e) no debt incurred or security given in respect of money borrowed in
excess of the above limit shall be invalid or ineffectual except in the
case of express notice to the lender or the recipient of the security at
the time when the debt was incurred or security given that the limit
hereby imposed had been or was thereby exceeded, but no lender or
other person dealing with the company shall be concerned to see or
enquire whether such limit is observed;
(T) the appointment or removal of any person as chairman of the company;and
(U) any action taken by the company or the board (including any appointment,
removal or re-designation) which would have the effect that the board ceased to
include directors appointed to the post of Chairman, Chief Executive and
Finance Director (or directors carrying out the general functions denoted by
such posts).
Approval Procedure
(A) Whenever the company wishes to obtain the Special Shareholder’s consent to
any matter set out in article 11.1 (other than article 11.1(S)):
(a) the company shall give notice to the Special Shareholder, such notice
to:-
(i)
(ii)
(iii)
(iv)
be in writing;
be addressed to such persons as the Special Shareholder shall,
from time to time, notify in writing to the company;
be delivered by hand or such other means (which may include
electronic means) to which the Special Shareholder has
provided (and not revoked) its written consent specifically for
the purpose of receiving such notices;
clearly state that it is important and requires immediate
attention;
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(D)
(E)
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(v) clearly identify itself as a notice served pursuant to this article
11.2(A) and that failure to respond within ten business days will
result in the Special Shareholder being deemed to have given
his consent to the matter in question; and
(vi) contain or annex such information as can reasonably be
expected to enable the Special Shareholder to consider the
matter being proposed.
(b) On or before the date which falls ten business days after the date of
receipt of such notice (the "Initial Expiry Date") the Special
Shareholder shall give written notice to the secretary stating:
(i) his consent to the matter contained in the notice; or
(ii) his refusal to consent to the matter contained in the notice
(providing in reasonable detail and on a confidential basis the
reasons for such refusal); or
(iii) that he requires a further ten business days in which to consider
the matter, commencing on the business day following the Initial
Expiry Date.
If on or before the Initial Expiry Date the Special Shareholder gives written
notice to the company pursuant to article 11.2(A)(b)(iii) the Special Shareholder
shall, on or before the date which falls ten business days after the Initial Expiry
Date, give a further written notice to the secretary stating:
(a) his consent to the matter contained in the notice; or
(b) his refusal to consent to the matter contained in the notice (providing in
reasonable detail and on a confidential basis the reasons for such
refusal).
The Special Shareholder may, at any time, request from the company such
further information as it reasonably requires in order to assist it to consider the
matter being proposed and the company shall deliver such information to the
Special Shareholder as soon as reasonably practicable thereafter.
If the company does not receive any notice from the Special Shareholder
pursuant to article 11.2(A)(b) on or before the Initial Expiry Date or pursuant to
article 11.2(B) within the further period referred to therein, the company shall be
entitled to undertake the matter contained in the notice issued by it pursuant to
article 11.2(A)(a) and the consent of the Special Shareholder shall be deemed
irrevocably given to such matter.
In favour of any third party dealing with any member of the group a certificate by
any director or the secretary to the effect that the Special Shareholder shall
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(A)
(D)
(E)
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have been deemed to have given his consent to any matter as a result of the
operation of article 11.2(D) above shall be conclusive and binding as to that
fact.
Whenever the company wishes to obtain the Special Shareholder's consent to
any matter set out in article11.1(S), the company shall give notice to the Special
Shareholder in accordance with articles 11.2(A)(a)(i) to (iv) and (vi), such notice
to clearly identify itself as a notice served pursuant to this article 11.3 and that
failure to respond within 28 business days will result in the Special Shareholder
being deemed to have given his consent to the matter in question.
On or before the date which falls 28 business days after the date of receipt of
such notice (the "Expiry Date") the Special Shareholder shall give written notice
to the secretary stating:
(a) his consent to the matter contained in the notice; or
(b) his refusal to consent to the matter contained in the notice (providing in
reasonable detail and on a confidential basis the reasons for such
refusal).
The Special Shareholder may, at any time before the Expiry Date request from
the company such further information as it reasonably requires in order to assist
it to consider the matter being proposed and the company shall deliver such
information to the Special Shareholder as soon as reasonably practicable
thereafter.
If the company does not receive any notice from the Special Shareholder
pursuant to article 11.3(B) on or before the Expiry Date the company shall be
entitled to undertake the matter contained in the notice issued by it pursuant to
article 11.3(A)and the consent of the Special Shareholder shall be deemed
irrevocably given to such matter.
In favour of a third party dealing with any member of the group a certificate by
any director or the secretary to the effect that the Special Shareholder shall
have been deemed to have given its consent to any matter as a resut of the
operation of article 11.3(D) above shall be conclusive and binding as such.
Delivery of any notice served upon the Special Shareholder under articles11.2
or 11.3 shall be evidenced by a receipt acknowledging delivery signed and
dated by one of the addressees of the relevant notice and such notice shall be
deemed to have been received on the date on which the receipt acknowledging
delivery of the same is signed.
The directors of the company will exercise all powers exercisable by the
company in relation to group subsidiaries so as to ensure that no subsidiary
shall take any action which (either alone or when taken together with any ather
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action) would result in the variation of any of the rights attached to the Special
Share.
The provisions of this article 11 shall be subject to article 116.
INFORMATION
(A)
(B)
Notwithstanding any other provision of these articles, the Special Shareholder
shall be entitled to request such information in relation to the affairs of the group
(or any particular member of the group) as it may consider necessary or
desirable. The company shall use its reasonable endeavours to comply
promptly with such requests for information from time to time, but only in so far
as the company has such information within its possession or such information
can reasonably be obtained by it.
Notwithstanding any other provision of these articles the company shall, at the
request of the Special Shareholder, procure that such specified or other relevant
directors and senior managers of the company shall meet with the Special
Shareholder (or its representatives) to discuss the affairs of the group (or any
particular member of the group) and the company shall release such directors
or managers from any obligation of confidentiality owed to the company for the
purpose of these discussions.
NOTIFICATION
(A)
(Cc)
The board shall, prior to taking any final decision on a Relevant Issue @
“Relevant Decision"), give to the Special Shareholder notice in writing setting
out details of the Relevant Issue and the preliminary decision (if any) reached
by the board in relation thereto.
Any notice given pursuant to article 13(A) shall be given not less than ten
business days before the Relevant Decision is taken unless, as a result of the
urgency of the Relevant Issue, it would, in the opinion of the board, be
materially prejudicial to the company or the group to delay making a decision on
the Relevant Issue, in which case the notice may be given on shorter notice but
not less than three business days prior to the taking of the Relevant Decision.
Any notice provided to the Special Shareholder under article 13(A) shall:
(0) be in writing;
(ii) be delivered by hand;
(iii) clearly identify that it is important, requires immediate attention, and that
itis a notice served under article 13; and
(iv) contain or annex such information as is reasonably necessary to enable
the Special Shareholder to consider the Relevant Issue.
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(D) An issue is a Relevant Issue if, in the reasonable opinion of the board:
(0) it is not set out in reasonable detail in an approved Strategic Plan;
(ii) it is an issue which may have material adverse effect upon the business
or financial prospects of either a USP Listco (or any of its subsidiaries)
or any network subsidiary and a corresponding benefit to the other of
them; and
(iii) it is an issue which involves the entry by the company into any
arrangement which falls within either of the following categories,
namely:
(a) it involves or is likely to involve the incurring of a capital
commitment or liability, or the payment of a capital sum, in each
case by a USP Listco (or any of its subsidiaries) or network
subsidiary, of an amount in excess of £20,000,000 (and for this
purpose a series of related transactions in any six month period
shall be aggregated); or
(b) it has or is likely to have a net impact on the annual net
revenues after tax of a USP Listco (or any of its subsidiaries) or
network subsidiary in excess of £20,000,000 per six months.
(E) For the purposes of this article, the board shall procure that any Relevant Issue
is referred to the board for consideration.
SHARE CERTIFICATES
RIGHT TO SHARE CERTIFICATES
Every member, upon becoming the holder of any shares, shall be entitled without
payment to one certificate for all the shares of each class held by him (and, upon
transferring a part of his holding of shares of any class, to a certificate for the balance of
such holding) or several certificates each for one or more of his shares upon payment
for every certificate after the first of such reasonable sum as the board may determine.
Every certificate shall be executed under the seal or otherwise in accordance with the
Act or in such other manner as the board may approve and shall specify the number,
class and distinguishing numbers (if any) of the shares to which it relates and the
amount or respective amounts paid up thereon. The company shall not be bound to
issue more than one certificate for shares held jointly by several persons and delivery of
a certificate to one joint holder shall be a sufficient delivery to all of them.
REPLACEMENT OF SHARE CERTIFICATES
If a share certificate is defaced, worn out, lost or destroyed, it may be renewed on such
terms (if any) as to evidence and indemnity and payment of the expenses reasonably
incurred by the company in investigating evidence as the board may determine but
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otherwise free of charge, and (in the case of defacement or wearing out) on delivery up
of the old certificate.
LIEN
COMPANY’S LIEN ON SHARES NOT FULLY PAID
The company shall have a first and paramount lien on every share (not being a fully
paid share) for all moneys (whether presently payable or not) payable at a fixed time or
called in respect of that share. The board may at any time declare any share to be
wholly or in part exempt from the provisions of this article. The company's lien on a
share shall extend to any amount payable in respect of it.
ENFORCING LIEN BY SALE
The company may sell in such manner as the board may determine any shares on
which the company has a lien if a sum in respect of which the lien exists is presently
payable and is not paid within fourteen clear days after notice has been given to the
holder of the share or to the person entitled to it in consequence of the death or
bankruptcy of the holder, demanding payment and stating that if the notice is not
complied with the shares may be sold. To give effect to a sale, the board may authorise
some person to execute an instrument of transfer of the shares sold to, or in
accordance with the directions of, the purchaser. The title of the transferee to the
shares shall not be affected by any irregularity in or invalidity of the proceedings in
reference to the sale.
APPLICATION OF PROCEEDS OF SALE
The net proceeds of the sale, after payment of the costs, shall be applied in payment of
so much of the sum for which the lien exists as is presently payable, and any residue
shall (upon surrender to the company for cancellation of the certificate for the shares
sold and subject to a like lien for any moneys not presently payable as existed upon the
shares before the sale) be paid to the person entitled to the shares at the date of the
sale.
CALLS ON SHARES AND FORFEITURE
CALLS
Subject to the terms of allotment, the board may make calls upon the members in
respect of any moneys unpaid on their shares (whether in respect of nominal value or
premium) and each member shall (subject to receiving at least fourteen clear days’
notice specifying when and where payment is to be made) pay to the company as.
required by the notice the amount called on his shares. A call may be required to be
paid by instalments. A call may be revoked in whole or part and payment of a call may
be postponed in whole or part as the board may decide. A person upon whom a call is
made shall remain liable for calls made upon him notwithstanding the subsequent
transfer of the shares in respect whereof the call was made. A call shall be deemed to
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22.
23.
24.
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have been made at the time when the resolution of the board authorising the call was
passed.
LIABILITY OF JOINT HOLDERS
The joint holders of a share shall be jointly and severally liable to pay all calls in respect
thereof.
INTEREST DUE ON NON-PAYMENT
If a call remains unpaid after it has become due and payable the person from whom it is
due and payable shall pay interest on the amount unpaid from the day it became due
and payable until it is paid at the rate fixed by the terms of allotment of the share or in
the notice of the call or, if no rate is fixed, at the appropriate rate (as defined by the Act)
but the board may waive payment of the interest wholly or in part.
SUMS DUE ON ALLOTMENT TREATED AS CALLS
An amount payable in respect of a share on allotment or at any fixed date, whetherin
respect of nominal value or premium or as an instalment of a call, shall be deemed to
be a call and if it is not paid the provisions of the articles shall apply as if that amount
had become due and payable by virtue of a call.
POWER TO DIFFERENTIATE
Subject to the terms of allotment, the board may make arrangements on the issue of
shares for a difference between the holders in the amounts and times of payment of
calls on their shares.
FORFEITURE OF SHARES
NOTICE IF CALL OR INSTALMENT NOT PAID
If a call remains unpaid after it has become due and payable the board may give to the
person from whom it is due not less than fourteen clear days’ notice requiring payment
of the amount unpaid together with any interest which may have accrued. The notice
shall name the place where payment is to be made and shall state that if the notice is
not complied with the shares in respect of which the call was made will be liable to be
forfeited.
FORFEITURE FOR NON-COMPLIANCE WITH NOTICE
If the notice is not complied with any share in respect of which it was given may, before
the payment required by the notice has been made, be forfeited by a resolution of the
board and the forfeiture shall include all dividends or other moneys payable in respect of
the forfeited shares and not paid before the forfeiture.
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SALE OF FORFEITED SHARES
Subject to the provisions of the Act, a forfeited share may be sold, re allotted or
otherwise disposed of on such terms and in such manner as the board determines
either to the person who was before the forfeiture the holder or to any other person and
at any time before sale, re allotment or other disposition, the forfeiture may be cancelled
on such terms as the board thinks fit. Where for the purposes of its disposal a forfeited
share is to be transferred to any person the board may authorise some person to
execute an instrument of transfer of the share to that person.
ARREARS TO BE PAID NOTWITHSTANDING FORFEITURE
Aperson any of whose shares have been forfeited shall cease to be a member in
respect of them and shall surrender to the company for cancellation the certificate for
the shares forfeited but shall remain liable to the company for all moneys which at the
date of forfeiture were presently payable by him to the company in respect of those
shares with interest at the rate at which interest was payable on those moneys before
the forfeiture or, if no interest was so payable, at the appropriate rate (as defined in the
Act) from the date of forfeiture until payment but the board may waive payment whdly
or in part or enforce payment without any allowance for the value of the shares at the
time of forfeiture or for any consideration received on their disposal.
STATUTORY DECLARATION AS TO FORFEITURE
Astatutory declaration by a director or the secretary that a share has been forfeited on a
specified date shall be conclusive evidence of the facts stated in it as against all
persons claiming to be entitled to the share and the declaration shall (subject to the
execution of an instrument of transfer if necessary) constitute a good title to the share
and the person to whom the share is disposed of shall not be bound to see to the
application of the consideration, if any, nor shall his title to the share be affected by any
irregularity in or invalidity of the proceedings in reference to the forfeiture or disposal of
the share.
TRANSFER OF SHARES
EXECUTION OF TRANSFER
The instrument of transfer of a share may be in any usual form or in any other form
which the board may approve and shall be executed by or on behalf of the transferor
and, unless the share is fully paid, by or on behalf of the transferee.
RIGHT TO DECLINE REGISTRATION
The board may refuse to register the transfer of a share which is not fully paid to a
person of whom they do not approve and they may refuse to register the transfer of a
share on which the company has a lien or where such transfer is restricted by the Act or
the articles. They may also refuse to register a transfer unless -
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(A) it is lodged at the office or at such other place as the board may appoint and is
accompanied by the certificate for the shares to which it relates and such other
evidence as the board may reasonably require to show the right of the
transferor to make the transfer;
(B) it is in respect of only one class of shares; and
(C) it is in favour of not more than four transferees.
NO FEE FOR REGISTRATION
No fee shall be charged for the registration of any instrument of transfer or other
document relating to or affecting the title to any share.
RETENTION OF INSTRUMENT OF TRANSFER
The company shall be entitled to retain any instrument of transfer which is registered,
but any instrument of transfer which the board refuses to register shall be returned to
the person lodging it when notice of the refusal is given.
TRANSMISSION OF SHARES
TRANSMISSION ON DEATH
If a member dies the survivor or survivors where he was a joint holder, and his personal
representatives where he was a sole holder or the only survivor of joint holders, shall be
the only persons recognised by the company as having any title to his interest; but
nothing herein contained shall release the estate of a deceased member from any
liability in respect of any share which had been jointly held by him.
ELECTION OF PERSON ENTITLED BY TRANSMISSION
Aperson becoming entitled to a share in consequence of the death or bankruptcy of a
member may, upon such evidence being produced as the board may properly require,
elect either to become the holder of the share or to have some person nominated by
him registered as the transferee. If he elects to become the holder he shall give notice
to the company to that effect. If he elects to have another person registered he shall
execute an instrument of transfer of the share to that person. All the articles relating to
the transfer of shares shall apply to the notice or instrument of transfer as if it were an
instrument of transfer executed by the member and the death or bankruptcy of the
member had not occurred.
RIGHTS OF PERSON ENTITLED BY TRANSMISSION
Aperson becoming entitled to a share in consequence of the death or bankruptcy of a
member shall have the rights to which he would be entitled if he were the holder of the
share, except that he shall not be entitled to attend or vote at any meeting of the
company or at any separate meeting of the holders of any class of shares in the
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company, in respect of the share before being registered as the holder of the share,
unless authorised to do so by the board.
ALTERATION OF SHARE CAPITAL
SUB-DIVISION
The company may by ordinary resolution sub-divide its shares, or any of them, into
shares of smaller amount provided that none of the shares resulting from the sub-
division may have any right, preference or advantage not attached to the shares
immediately prior to the sub-division.
FRACTIONS
Whenever as a result of a consolidation, consolidation and sub-division, or sub-division
of shares any members would become entitled to fractions of a share, the board may
deal with the fractions as it thinks fit, including by aggregating and selling them or by
dealing with them in some other way. The board may sell shares representing fractions
to any person (including, subject to the provisions of the Act, the company) and may
authorise some person to execute an instrument of transfer of the shares 6, or in
accordance with the directions of, the purchaser. The transferee shall not be bound to
see to the application of the purchase money nor shall his title to the shares be affected
by any irregularity in or invalidity of the proceedings in reference to the sale.
GENERAL MEETINGS
OMISSION OR NON-RECEIPT OF NOTICE
The accidental omission to give notice of a meeting to, or the non receipt of notice of a
meeting by, any person entitled to receive notice shall not invalidate the proceedings at
that meeting.
Amember present in person or by proxy at a meeting shall be deemed to have received
proper notice of that meeting and, where applicable, of the purpose of that meeting.
POSTPONEMENT OF GENERAL MEETINGS
If the board, in its absolute discretion, considers that it is impractical or unreasonable for
any reason to hold a general meeting on the date or at the time or place specified in the
notice calling the general meeting, it may postpone the general meeting to another date,
time and place. When a meetingis so postponed, notice of the date, time and place of
the postponed meeting shall be given to the members. Notice of the business to be
transacted at such postponed meeting shall not be required.
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PROCEEDINGS AT GENERAL MEETINGS
QUORUM
No business shall be transacted at any meeting unless a quorum is present. Two
persons entitled to vote upon the business to be transacted, each being a member or a
proxy for a member or a duly authorised representative of a corporation, shall be a
quorum. If, and for so long as, the company has only one member, that member or the
proxy for that member or, where that member is a corporation, its duly authorised
representative shall be a quorum at any general meeting of the company or of the
holders of any class of shares.
PROCEDURE IF QUORUM NOT PRESENT
If such a quorum is not present within half an hour from the time appointed for the
meeting, or if during a meeting such a quorum ceases to be present, the meeting shall
stand adjourned to the same day in the next week at thesame time and place or to
such time and place as the board may determine.
CHAIRMAN OF GENERAL MEETING
The chairman, if any, of the board or in his absence some other director nominated by
the board shall preside as chairman of the meeting, but if neitherthe chairman nor such
other director (if any) be present within fifteen minutes after the time appointed for
holding the meeting and willing to act, the directors present shall elect one of their
number to be chairman and, if there is only one director present and willing to act, he
shall be chairman. If no director is willing to act as chairman, or if no director is present
within fifteen minutes after the time appointed for holding the meeting, the members
present and entitled to vote shall choose one of their number to be chairman.
ORDERLY CONDUCT
The chairman shall take such action as he thinks fit to promote the orderly conduct of
the business of the meeting as laid down in the notice of the meeting and the
chairman's decision on matters of procedure or arising incidentally from the business of
the meeting shall be final as shall be his determination as to whether any matter is of
such a nature.
ENTITLEMENT TO ATTEND AND SPEAK
Each director shall be entitled to attend and speak at any general meeting ofthe
company and at any separate general meeting of the holders of any class of shares in
the company. The chairman may invite any person to attend and speak at any general
meeting of the company whom the chairman considers to be equipped by knowledge or
experience of the company's business to assist in the deliberations of the meeting. In
addition, the chairman may invite any person who has been nominated for the purpose
by a member, where the chairman is satisfied that such time as the chairman may
determine, the member holds any shares in the company as such person's nominee, to
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attend and, if the chairman considers it appropriate, to speak at any general meeting of
the company.
ADJOURNMENTS
The chairman may, with reasonable cause but without requiring the consent of the
meeting (whether or not it has commenced or a quorum is present), adjourn any
meeting from time to time and from place to place, but no business shall be transacted
at an adjourned meeting other than business which might properly have been
transacted at the meeting had the adjournment not taken place. When a meeting is
adjourned for fourteen days or more, at least seven clear days' notice shall be given
specifying the time and place of the adjourned meeting and the general nature of the
business to be transacted. Otherwise it shall not be necessary to give any such notice.
AMENDMENTS RULED OUT OF ORDER
If an amendment proposed to any resolution under consideration is ruled out of order by
the chairman, the proceedings on the resolution shall not be invalidated by any error in
the ruling.
VOTING
VOTES OF MEMBERS
Subject to any special terms as to voting upon which any shares may be issued or may
for the time being be held and to any other provisions of these articles, on a show of
hands every member who (being an individual) is present in person or by proxy or
(being a corporation) is present by a duly authorised representative or by proxy shall
have one vote and on a poll every member shall have one vote for every share of which
he is the holder. For this purpose, where a proxy is given discretion as to how to vote
on a show of hands, this shall be treated as an instruction by the relevant member to
vote in the way in which the proxy elects to exercise that discretion.
METHOD OF VOTING
Aresolution put to the vote of a meeting shall be decided on a show of hands unless
before, or on the declaration of the result of, the show of hands a poll is duly demanded.
Subject to the provisions of the Act, a poll may be demanded -
(A) by the chairman; or
(B) by at least two members having the right to vote on the resolution; or
(C) by a member or members representing in the aggregate not less than one tenth
of the total voting rights of all the members having the right to voteon the
resolution; or
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50.
51.
52.
53.
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(D) by a member or members holding shares conferring a right to voteon the
resolution being shares on which an aggregate sum has been paid up equal to
not less than one tenth of the total sum paid up on all the shares conferring that
right;
and a demand by a person as proxy for a member shall be the same as a demand by
the member.
PROCEDURE IF POLL NOT DEMANDED
Unless a poll is duly demanded a declaration by the chairman that a resolution has
been carried or carried unanimously, or by a particular majority, or lost, or not carried by
a particular majority and an entry to that effect in the minutes of the meeting shall be
conclusive evidence of the fact without proof of the number or proportion of the votes
recorded in favour of or against the resolution.
WITHDRAWAL OF DEMAND FOR POLL
The demand for a poll may, before the poll is taken, be withdrawn but only with the
consent of the chairman and a demand so withdrawn shall not be taken to have
invalidated the result of a show of hands declared before the denand was made.
PROCEDURE IF POLL DEMANDED
Apoll shall be taken as the chairman directs and he may appoint scrutineers (who need
not be members) and fix a time and place for declaring the result of the poll. The result
of the poll shall be deemed to be the resolution of the meeting at which the poll was
demanded.
WHEN POLL TO BE TAKEN
A poll demanded on the election of a chairman or on a question of adjournment shall be
taken forthwith. A poll demanded on any other question shall be taken either forthwith
or at such time and place as the chairman directs not being more than thirty days after
the poll is demanded. The demand for a poll shall not prevent the continuance of a
meeting for the transaction of any business other than the question on which the pdl
was demanded. Ifa poll is demanded before the declaration of the result of a show of
hands and the demand is duly withdrawn, the meeting shall continue as if the demand
had not been made.
NO NOTICE OF POLL
No notice need be given of a poll not taken forthwith if the time and place at which itis
to be taken are announced at the meeting at which it is demanded. In any other case at
least seven clear days' notice shall be given specifying the time and place at which the
poll is to be taken.
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55.
56.
57.
26
VOTES OF JOINT HOLDERS
In the case of joint holders the vote of the senior who tenders a vote, whether in person
or by proxy, shall be accepted to the exclusion of the votes of the other joint holders;
and seniority shall be determined by the order in which the names of the holders stand
in the register of members.
VOTING ON BEHALF OF INCAPABLE MEMBER
Amember in respect of whom an order has been made by any court having jurisdiction
(whether in the United Kingdom or elsewhere) in matters concerning mental disorder
may vote and may exercise any other right conferred by membership in relation to
general meetings by or through any receiver, curator bonis or other person authorised in
that behalf appointed by that court (and that person may vote by proxy). Written
evidence to the satisfaction of the board of the authority of the person claiming to
exercise the right to vote shall be hand-delivered to the company's registered office, or
delivered by such other means (which may include electronic means) as the board may
accept, not less than forty eight hours before the time appointed for holding the meeting
or adjourned meeting at which the right to vote is to be exercised and in default the right
to vote shall not be exercisable.
NO RIGHT TO VOTE WHERE SUMS OVERDUE ON SHARES
No member shall vote at any general meeting or at any separate meeting of the holders
of any class of shares in the company, either in person or by proxy, in respect of any
share held by him unless all moneys presently payable by him in respect of that share
have been paid.
OBJECTIONS OR ERRORS IN VOTING
(A) Ife
(i) any objection shall be raised to the qualification of any voter, or
(ii) any votes have been counted which ought not to have been counted or
which might have been rejected, or
(iii) any votes are not counted which ought to have been counted,
the objection or error shall not vitiate the decision of the meeting or adjourned
meeting on any resolution unless it is raised or pointed out at the meeting or, as
the case may be, the adjourned meeting at which the vote objected to is given
or tendered or at which the error occurs. Any objection or error shall be referred
to the chairman and shall only vitiate the decision of the meeting on any
resolution if the chairman decides that the same may have affected the decision
of the meeting. The decision of the chairman on such matters shall be
conclusive.
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59.
60.
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(B) The company shall not be obliged to ascertain whether a proxy or
representative of a corporation has voted in accordance with a member's
instructions and the failure of a proxy or representative so to do shall not vitiate
the decision of the meeting or adjourned meeting or poll on any resolution.
PROXIES
APPOINTMENT OF PROXY
Votes may be given either personally or by proxy. Amember may appoint more than
one proxy to attend on the same occasion.
FORM OF PROXY
An instrument appointing a proxy shall be in writing, executed by or on behalf of the
appointor and shall be in the following form (or in a form as near thereto as
circumstances allow or in any other form which is usual or which the board may
approve)
"Post Office Limited
We, , of ,
being a member/members of the above named company, herebyappoint
of , oF failing him, of es
my/our proxy to vote in my/our name[s] and on my/our behalf at the general meeting of
the company to be held on 20, and at any adjournment thereof.
Signed on 20 ."
INSTRUCTIONS TO PROXY
Where it is desired to afford members an opportunity of instructing the proxy how he
shall act the instrument appointing a proxy shall be in the following form (or in a form as
near thereto as circumstances allow or in any other form which is usual or which the
board may approve) -
"Post Office Limited
We, , of :
being a member/members of the above named company, hereby appoint
of , or failing him, of ,as
my/our proxy to vote in my/our name[s] and on my/our behalf at the general meeting of
the company to be held on 20 =, and at any adjournment thereof.
This form is to be used in respect of the resolutions mentioned below as follows:
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Resolution No.1 “for *against
Resolution No.2 *for *against.
*Strike out whichever is not desired.
Unless otherwise instructed, the proxy may vote as he thinks fit or abstain from voting.
Signed on 20 =="
DELIVERY OF PROXIES
The instrument appointing a proxy and any authority under which it is executed maybe
delivered:
(A)
(Cc)
in hard copy form at the office (or such other place in the United Kingdom as
may be specified by the company for the receipt of appointments of proxy in
hard copy form) to be received not less than 48 hours (or such shorter time as
the board may determine) before the time appointed for holding the meeting or
adjourned meeting at which the person named inthe appointment proposes to
vote together with (if required by the board) any authority under which it is made
or a copy of the authority, certified notarially or in accordance with the Powers of
Attorney Act 1971 or in some other manner approved by the board;
by electronic means, to be received at the address specified by the company for
the receipt of appointments of proxy by electronic means not less than 48 hours
(or such shorter time as the board may determine) before the time appointed for
holding the meeting or adjourned meeting at which the person named in the
appointment proposes to vote. Any authority pursuant to which such an
appointment is made or a copy of the authority, certified notarially or in
accordance with the Powers of Attorney Act 1971 or in some other manner
approved by the board, must, if required by the board, be received at such
address or at the office (or such other place in the United Kingdom as may be
specified by the company for the receipt of such documents) not less than 48
hours (or such shorter time as the board may determine) before the time
appointed for holding the meeting or adjourned meeting at which the person
named in the appointment proposes to vote;
in the case of a poll taken more than 48 hours after it was demandad, to be
received as aforesaid not less than 24 hours (or such shorter time as the board
may determine) before the time appointed for the taking of the poll;
in the case of a poll taken following the conclusion of a meeting or adjourned
meeting but not more than 48 hours after it was demanded, to be received as
aforesaid before the end of the meeting at which it was demanded (or at such
later time as the board may determine),
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63.
64.
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and an appointment of a proxy which is not, or in respect of which the authority a copy
thereof is not, received in a manner so permitted shall be invalid. When two or more
valid but differing appointments of a proxy are received in respect of the same share for
use at the same meeting or poll, the one which is last received (regardless of its date or
of the date of its signature) shall be treated as replacing and revoking the others as
regards that share; if the company is unable to determine which was last received, none
of them shall be treated as valid in respect of that share. The appointment of a proxy
shall not preclude a member from attending and voting in person at the meeting or poll
concerned. The proceedings at a general meeting shall not be invalidated where an
appointment of a proxy in respect of that meeting is sent in dectronic form as provided
in these articles, but it cannot be read by the recipient because of a technical problem.
CANCELLATION OF PROXY’S AUTHORITY
A vote given or poll demanded by proxy or by the duly authorised representative of a
corporation shall be valid notwithstanding the previous determination of the authority of
the person voting or demanding a poll unless notice of the determination was received
by the company before the commencement of the meeting or adjourned meeting at
which the vote is given or the poll demanded or (in the case of a poll taken otherwise
than on the same day as the meeting or adjourned meeting) the time appointed for
taking the poll. Such notice of determination shall be received either in hard copy form
by the office or such other place within the United Kingdom as may be specified by the
company in accordance with article 61(A) or in electronic form at the address (if any)
specified by the company in accordance with article 61(B), regardless of whether any
relevant proxy appointment was effected in hard copy form or in electronic form.
APPOINTMENT, RETIREMENT AND REMOVAL OF DIRECTORS
NUMBER OF DIRECTORS
Unless otherwise determined by ordinary resolution and subject to the articles, the
number of directors (other than alternate directors) shall not be subject to any maximum
but shall be not less than two.
ALTERNATE DIRECTORS
(A) Any director (other than an alternate director) may appoint any other director, or,
subject to the articles, any other person approved by the resolution of the board
and willing to act, to be an alternate director and may remove from office an
alternate director so appointed by him.
(B) An alternate director shall be entitled to receive notice of all meetings of the
board and of all meetings of committees of the board of which his appointor is a
member, to attend and vote at any such meeting at which the director
appointing him is not personally present, and generally to perform all the
functions of his appointor as a director in his absence but shall not be entitled to
receive any remuneration from the company for his services as an alternate
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director. But it shall not be necessary to give notice of such a meeting to an
alternate director who is absent from the United Kingdom.
(C) An alternate director shall cease to be an alternate director if his appointor
ceases to be a director; but, if a director retires but is reappointed or deemed to
have been reappointed at the meeting at which he retires, any appointment of
an alternate director made by him which was in force immediately prior to his
retirement shall continue after his reappointment.
(D) Any appointment or removal of an alternate director shall be by notice to the
company signed by the director making or revoking the appointment or in any
other manner approved by the board.
(E) Save as otherwise provided in the articles, an alternate director shall be
deemed for all purposes to be a director and shall alone be responsible for his
own acts and defaults and he shall not be deemed to be the agentof the
director appointing him.
PERSONS ELIGIBLE AS DIRECTORS
No person shall be appointed or reappointed a director at any general meeting unless-
(A) he is recommended by the directors;
(B) not less than fourteen nor more than thirty-five clear days before the date
appointed for the meeting, notice executed by a member qualified to vote at the
meeting has been given to the company of the intention to propose that person
for appointment or reappointment stating the particulars which would, if he were
So appointed or reappointed, be required to be included in the company's
register of directors together with notice executed by that person of his
willingness to be appointed or reappointed; or
(C) he is nominated by the Parent.
NOTICE OF APPOINTMENT OR REAPPOINTMENT
Not less than seven nor more than twenty eight clear days before the date appointed for
holding a general meeting notice shall be given to all who are entitled to receive notice
of the meeting of any person who is recommended by the directors for appointment or
reappointment as a director at the meeting or in respect of whom notice has been duly
given to the company of the intention to propose him at the meeting for appointment or
reappointment as a director. The notice shall give the particuars of that person which
would, if he were so appointed or reappointed, be required to be included in the
company's register of directors.
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68.
69.
31
POWER OF BOARD TO APPOINT DIRECTORS
Subject to the articles, the board may appoint a person who is willing to act tobe a
director, either to fill a vacancy or as an additional director, provided that the
appointment does not cause the number of directors to exceed any number fixed by or
in accordance with the articles as the maximum number of directors. A director so
appointed shall hold office only until the next following annual general meeting. If not
reappointed at such annual general meeting, he shall vacate office at the conclusion
thereof.
POSITION OF RETIRING DIRECTORS
Subject as aforesaid, a director who retires at an annual general meeting may, if willing
to act, be reappointed. If he is not reappointed, he shall retain office until the meeting
appoints someone in his place, or if it does not do so, until the end of the meeting or (if
earlier) when a resolution is passed to appoint someone in his place.
DISQUALIFICATION AND REMOVAL OF DIRECTORS
(A) Without prejudice to the provisions of the articles and in addition to any power of
removal conferred by the Act, the company may, by special resolution, remove
any director before the expiry of his period of office and may (subject to these
articles) by ordinary resolution appoint another person who is willing to act to be
a director in his place.
(B) The office of a director shall be vacated if -
(a) he ceases to be a director by virtue of any provision of the Act or he
becomes prohibited by law from being a director; or
(b) he becomes bankrupt or makes any arrangement or composition with
his creditors generally; or
(c) he is, or may be, suffering from mental disorder and either -
(i) he is admitted to hospital in pursuance of an application for
admission for treatment under the Mental Health Act 1983 or, in
Scotland, an application for admission under the Mental Health
(Scotland) Act 1960, or
(ii) an order is made by a court having jurisdiction (whether in the
United Kingdom or elsewhere) in matters concerning mental
disorder for his detention or for the appointment of a receiver,
curator bonis or other person to exercise powers with respect to
his property or affairs; or
(d) he resigns his office by notice to the company;
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71.
72.
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(e) he is removed pursuant to article 69(A) or article 70; or
(f) he shall for more than six consecutive months have been absent
without permission of the board from meetings of the board held during
that period and the directors resolve that his office be vacated.
If the office of a director is vacated for any reason, he shall cease to be a
member of any committee or sub committee of the board.
APPOINTMENT OF CHAIRMAN AND DIRECTORS
(A)
(B)
Chairman
The Special Shareholder shall be entitled from time to time to appoint and
remove any person as chairman of the company by notice in writing delivered to
the company and signed on behalf of the Special Shareholder.
Directors
The Special Shareholder shall be entitled from time to time to appoint and to
remove any person as a director of the company by notice in writing delivered to
the company and signed on behalf of the Special Shareholder The chairman
shall be required to consult with and obtain the approval of the Special
Shareholder in relation to the appointment and the removal of any person as a
director.
POWERS OF THE BOARD
GENERAL POWERS OF COMPANY VESTED IN THE BOARD
Subject to the provisions of the Act, these articles and to any directions given by the
company by special resolution (including without limitation article 11.1), the business of
the company shall be managed by the board who may exercise all the powers of the
company. No alteration of these articles and no such special resolution shall invalidate
any prior act of the board which would have been valid if that alteration had not been
made or that resolution had not been passed. The powers given by this article shall not
be limited by any special power given to the board by the articles.
STRATEGIC PLAN
(A)
Preparation and approval of Strategic Plan
No later than 31 December each year (or such other time as the Special
Shareholder may from time to time agree with the board) the board shall submit
to the Special Shareholder a draft Strategic Plan in relation to the group for the
following five financial years, complying with the principles set out in article
72(C) below.
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(B)
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Consultation with the Special Shareholder
(a) Further information
Within 10 business days (or such other time as the Special Shareholder may
from time to time agree with the board) following receipt by the Special
Shareholder of the draft Strategic Plan pursuant to article 72(A) above, the
Special Shareholder shall be entitled to request such further information as may
reasonably be necessary in order for it to reach an informed view as to the
content, reasonableness and prudence of the draft Strategic Plan. The board
shall, in so far as it is able to do so, comply with any such request within 10
business days of its receipt (or such other time as the Special Shareholder may
from time to time agree with the board).
(b) Consultation
Following the receipt by the Special Shareholder of the draft Strategic Plan
pursuant to article 72(A) above, and, as appropriate, any further information
supplied pursuant to article 72(B)(a) above, the Special Shareholder and the
board shall promptly consult upon the content of the plan (such consultation
period to end no later than 20 Business Days (or such other time as the Special
Shareholder may from time to time agree with the board) after receipt by the
Special Shareholder of the draft Strategic Plan and further information provided
pursuant to article 72(B)(a) as the case may be).
(c) Approval
The Special Shareholder shall within 20 Business days (or such other time as
the Special Shareholder may from time to time agree with the board) of the end
of the consultation period referred to in article 72(B)(b) above, approve the
Strategic Plan, subject to such qualifications as the Special Shareholder may
determine, or shall inform the board of its reasons for not approving the
Strategic Plan, in which event the Special Shareholder shall request that the
board prepare a new Strategic Plan to be submitted to the Special Sharetolder
within such time as shall be agreed with the Special Shareholder and in respect
of which the provisions of this article 72 shall apply (mutatis mutandis).
(d) Amendments to the Strategic Plan
The board may from time to time request any changes to bemade to any
Strategic Plan approved by the Special Shareholder. Any such request shall be
made to the Special Shareholder. The Special Shareholder may request further
information and consult with the board about the proposed change in
accordance with articles 72(B)(a) and (b) above, and shall then approve (or
reject) the change in accordance with article 72(B)(c)
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(C) Principles Governing the Strategic Plan
(a)
Fundamental Objectives:
The Strategic Plan shall:
(i)
(i)
clearly set out the group's objectives and contain such
information as can reasonably be expected to enable the
Special Shareholder to give consideration to the strategic
direction of the group's activities; and
provide targets, expressed in terms of both cashflow and
accounting rate of retum and sufficient other financial
information in order to enable the Special Shareholder to set the
group's profit target and dividend floor and consider the
framework of the group's borrowings.
In particular the Strategic Plan shall:
(i)
(ii)
(iii)
(iv)
include a statement of the overall commercial direction and
goals of the group;
summarise the way in which it has evolved from the previous
Strategic Plan, including a high level evaluation of the value
added by the new Strategic Plan;
analyse the commercial and regulatory environment in which
the group operates, including the board's view of the way in
which the market is evolving and the development of
competitors’ activities;
set out the group's strategic response to the commercial and
regulatory environment, including:
(1) its principal strategic options;
(2) its proposals for meeting the universal service
obligation;
(3) its proposals for managing the nationwide network of
post offices;
(4) the key issues to be resolved in the Strategic Plan for
the following financial year;
(5) its strategic approach to remuneration of employees,
including an expected ceiling on the aggregate level of
employee remuneration;
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(D)
(E)
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(6) the resources needed, in particular personnel,
technology and funding;
(7) its high level financial and performance projections, at
both the corporate and line-of-business level, with
sensitivity analyses of the major risks;
(8) outline possibilities and plans for entering into
partnerships and alliances;
(9) clear performance indicators which will enable the
group's performance, in achieving its strategic
objectives, to be measured; and
(10) any proposals for entering into relevant transactions or
for making any substantial alterations in the nature of
the business carried on by any member of the group.
Quarterly Information and Performance
The board shall prepare and discuss each quarter progress reports of the
group's performance in relation to the Strategic Plan, and at the end of each
quarter submit to the Special Shareholder its assessment of the group's
performance in comparison with the Strategic Plan.
Variations from Strategic Plan
If the information provided pursuant to article 72(D) above demonstrates a
significant departure from the Strategic Plan, the board shall prepare a revised
Strategic Plan for the remainder of the relevant financial year and the following
four years which shall be submitted to the Special Shareholder within such time
as shall be agreed with the Special Shareholder. The provisions of article
72(B)(d) above shall apply to such revised Strategic Plan.
Effect of Approval of Strategic Plan
The approval of any Strategic Plan shall be deemed to be an approval of any
matter within that Strategic Plan which would have required approval in
accordance with article 11.1 if such matter is specifically identified with
reasonable detail in that Strategic Plan as being proposed for approval in
accordance with that aforementioned article.
BORROWING POWERS.
The board may exercise all the powers of the company to borrow and to mortgage or
charge all or any part of the undertaking, property and assets (present and future) and
uncalled capital of the company, but subject to the restrictions contained in the articles.
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74,
75.
76.
77.
78.
79.
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APPOINTMENT OF AGENT
The board may, by power of attorney or otherwise, appoint any person to be the agent
of the company for such purposes and on such conditions as it determine, including
authority for the agent to delegate all or any of his powers.
POWER TO PROVIDE FOR EMPLOYEES
The board may by resolution exercise any power conferred by the Act to make provision
for the benefit of persons employed or formerly employed by the company or any of its
subsidiaries in connection with the cessation or the transfer to any person of the whole
or part of the undertaking of the company or that subsidiary.
POWER TO RECEIVE UNCALLED MONEYS
The board may, if it thinks fit, receive from any member willing to advance the same all
or any part of the moneys uncalled and remaining unpaid on any shares held by him.
DELEGATION OF THE BOARD’S POWERS
The board may delegate any of its powers to any committee consisting of one or more
directors with power to sub-delegate. It may also delegate to any managing director or
any director holding any other executive office such of its powers as it considers
desirable to be exercised by him. Any such delegation may be made subject to any
conditions the board may impose, and either collaterally with or to the exclusion of its
own powers and may be revoked or altered. Subject to any such conditions, the
proceedings of a committee with two or more members shall be governed by the articles
regulating the proceedings of the board so far as they are capable of applying.
REMUNERATION OF DIRECTORS
DIRECTORS’ FEES
Subject to the articles, each of the directors shall be paid a fee at such rate as may fom
time to time be determined by the board provided that the aggregate of all fees so paid
to directors (excluding amounts payable under any other provision of these articles)
shall not exceed £400,000 per annum or such higher amount as may from time to ime
be decided by ordinary resolution of the company.
ADDITIONAL REMUNERATION
Subject to the articles, any director who performs services which in the opinion of the
board or any committee authorised by the board go beyond the ordinary duties of a
director may be paid such extra remuneration (whether by way of salary, commission,
participation in profits or otherwise) as the board or any committee authorised by the
board may in its discretion decide in addition to any remuneration provided for by or
pursuant to any other article.
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81.
82.
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DIRECTORS’ EXPENSES
The directors may be paid all travelling, hotel, and other expenses properly incurred by
them in connection with their attendance at board meetings or committees of directors
or general meetings or separate meetings of the holders of any class of shares or of
debentures of the company or otherwise in connection with the discharge of their duties.
DIRECTORS’ APPOINTMENTS AND INTERESTS
MANAGING DIRECTOR AND EXECUTIVE OFFICE
Subject to the provisions of the Actand the articles, the directors may appoint one or
more of their number to the office of managing director or to any other executive office
under the company and may enter into an agreement or arrangement with any director
for his employment by the company or for the provision by him of any services outside
the scope of the ordinary duties of a director. Any such appointment, agreement or
arrangement may be made upon such terms as the directors determine and they may
remunerate any such director for his services as they think fit. Any appointment of a
director to an executive office shall terminate if he ceases to be a director but without
prejudice to any claim to damages for breach of the contract of service between the
director and the company.
CONFLICTS OF INTEREST REQUIRING BOARD AUTHORISATION
(A) The board may, subject to the quorum and voting requirements set out in this
article, authorise any matter which would otherwise involve a director breaching
his duty under the Act to avoid conflicts of interest (a “Conflict’).
(B) Adirector seeking authorisation in respect of a Conflict shall declare to the
board the nature and extent of his interest in that Conflict as soon as is
reasonably practicable. The director shall provide the board with such details of
the relevant matter as are necessary for the board to decide how to address the
Conflict together with such additional information as may be requested by the
board.
(C) Any director (including the relevant director) may propose that the relevant
director be authorised in relation to any matter the subject of a Conflict. Such
proposal and any authority given by the board shall be effected in the same way
that any other matter may be proposed to and resolved upon by the board
under the provisions of these articles save that:
(i) the relevant director and any other director with a similar interest shall
not count towards the quorum nor vote on any resolution giving such
authority; and
(ii) the relevant director and any other director with a similar interest may, if
the other members of the board so decide, be excluded from any board
meeting while the Conflict is under consideration.
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Where the board gives authority in relation to a Conflict:
(i) the board may (whether at the time of giving the authority or
subsequently) (a) require that the relevant director is excluded from the
receipt of information, the participation in discussion and/or the making
of decisions (whether at meetings of the board or otherwise) related to
the Conflict; and (b) impose upon the relevant director such other terms.
for the purpose of dealing with the Conflict as it may determine;
(ii) the relevant director will be obliged to conduct himself in accordance
with any terms imposed by the board in relation to the Conflict;
(iii) the board may provide that where the relevant director obtains
(otherwise than through his position as a director of the company)
information that is confidential to a third party, the director will not be
obliged to disclose that information to the company, or to use or apply
the information in relation to the company’s affairs, where to do so
would amount to a breach of that confidence;
(iv) the terms of the authority shall be recorded in writing (but the authority
shall be effective whether or not the terms are so recorded); and
(v) the board may revoke or vary such authority at any time but this will not
affect anything done by the relevant director prior to such revocation or
variation in accordance with the terms of such authority.
83. OTHER CONFLICTS OF INTEREST
(A)
(B)
If a director is in any way directly or indirectly interested in a proposed contract
with the company or a contract that has been entered into by the company, he
must declare the nature and extent of that interest to the directors in
accordance with the Act.
Provided he has declared his interest in accordance with article 83(A) a director
may:
(i) be party to, or otherwise interested in, any contract with the company or
in which the company has a direct or indirect interest;
(ii) hold any other office or place of profit with the company (except that of
auditor) in conjunction with his office of director for such period and
upon such terms, including as to remuneration, as the board may
decide;
(iii) act by himself or through a firm with which he is associated in a
professional capacity for the company or any other company in which
the company may be interested (otherwise than as auditor);
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85.
86.
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(iv) be or become a director or other officer of, or employed by or otherwise
be interested in any holding company or subsidiary company of the
company or any other company in which the company may be
interested; and
(v) be or become a director of any other company in which the company
does not have an interest and which cannot reasonably be regarded as.
giving rise to a conflict of interest at the time of his appointment as a
director of that other company.
(C) Adirector shall not, by reason of his office or of the fiduciary relationship
thereby established be liable to account to the company for any remuneration,
profit or other benefit realised by reason of his having any type of interest
authorised under article 82(A) or permitted under article 83(B) and no contract
shall be liable to be avoided on the grounds of a director having any type of
interest authorised under article 82(A) or permitted under article 83(B).
DIRECTORS’ GRATUITIES AND PENSIONS
DIRECTORS’ GRATUITIES AND PENSIONS
Subject to the articles, the board may exercise all the powers of the company to provide
benefits, either by the payment of gratuities or pensions or by insurance or in any other
manner whether similar to the foregoing or not, for any director or former director or the
relations, connections or dependants of any director or former director who holds or has
held any executive office or employment with the company or with any body corporate
which is or has been a subsidiary of the company or with a predecessor in business of
the company or of any such body corporate and may contribute to any fund and pay
premiums for the purchase or provision of any such benefit. No director or former
director shall be accountable to the company or the members for any benefit provided
pursuant to this article and the receipt of any such benefit shall not disqualify any
person from being or becoming a director of the company.
PROCEEDINGS OF DIRECTORS
BOARD MEETINGS
Subject to the provisions of the articles, the board may regulate its proceedings as it
thinks fit. A director may, and the secretary at the request of a director shall, call a
meeting of the board.
NOTICE
Notice of a meeting of the board shall be deemed to be properly given to a director if it
is given to him personally or by word of mouth or sent in writing to him at his last known
address or any other address given by him to the company for this purpose, or by any
other means authorised in writing by the director concerned. Notice shall be given in this
manner to all directors including any director who is for the time being absent from the
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87.
88.
89.
90.
91.
92.
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United Kingdom. A director may waive notice of any meeting either prospectively or
retrospectively.
VOTING
Questions arising at a meeting shall be decided by a majority of votes. In the case of an
equality of votes, the chairman shall have a second or casting vote. A director who is
also an alternate director shall be entitled in the absence of his appointor to a separate
vote on behalf of his appointor in addition to his own vote.
QUORUM
The quorum for the transaction of the business of the board may be fixed by the board
and unless so fixed at any other number shall be two. A person who holds office only as
an altemate director shall, if his appointor is not present, be counted in the quorum.
DIRECTORS BELOW MINIMUM THROUGH VACANCIES
The continuing directors or a sole continuing director may act notwithstanding any
vacancies in their number, but, if the number of directors is less than the number fixed
as the quorum, the continuing directors or director may act only for the purpose of filling
vacancies or of calling a general meeting.
CHAIRMAN
The chairman shall be the person appointed pursuant to article70. In the absence of
such appointment the directors may (subject to article 11) appoint one of their number to
be the chairman of the board and may at any time remove him from that office. Unless
he is unwilling to do so, the chairman shall preside at every meeting of the board at
which he is present. But if there is no director holding that office, or if the director
holding it is unwilling to preside or if the chairman is not present within five minutes after
the time appointed for the meeting, the directors presentmay appoint one of their
number to be chairman of the meeting
VALIDITY OF ACTS OF BOARD OR COMMITTEE
All acts done by the board, or by a committee of directors, or by a person acting as a
director or member of a committee shall, notwithstanding that it be afterwards
discovered that there was a defect in the appointment of any director or member of a
committee or person so acting or that any of them were disqualified from holding office,
or had vacated office, or were not entitled to vote, be as valid as f every such person
had been duly appointed and was qualified and had continued to be a director or
member of the committee and had been entitled to vote.
RESOLUTION IN WRITING
Aresolution in writing signed by all the directors entitled to receive notice of a meeting
of the board (if that number is sufficient to constitute a quorum) or by all the members of
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94,
a“
a committee of directors shall be as valid and effectual as if it had been passed at a
board meeting or (as the case may be) a committee of directors duly convened and held
and may consist of several documents in the like form each signed by one or more
directors; but a resolution signed by an alternate director need not also be signed by his
appointor and, if it is signed by a director who has appointed an alternate director, it
need not be signed by the alternate director in that capacity.
PARTICIPATION IN BOARD MEETINGS BY TELEPHONE
All or any of the members of the board or any committee of the board may participate in
a board meeting or that committee by means of a conference telephone or any
communication equipment which allows all persons participating in the meeting to hear
each other. A person so participating shall be deemed to be present in person at the
meeting and shall be entitled to vote or be counted in a quorum accordingly. Such a
meeting shall be deemed to take place where the largest group of those participating is
assembled, or, if there is no such group, where the chairman of the meeting then is.
PERMITTED INTERESTS AND VOTING
(A) Save as otherwise provided by the articles, a director shall not vote at a meeting
of the board or of a committee of directors on any resolution conceming a
matter in which he has, directly or indirectly, an interest or duty unless that
interest or duty cannot reasonably regarded as likely to give rise to a conflict of
interest or his interest or duty arises only because the case falls within one or
more of the following paragraphs -
(a) the resolution relates to the giving to him of a guarantee, security, or
indemnity in respect of money lent to, or an obligation incurred by him
for the benefit of, the company or any of its subsidiaries; and/or
(b) the resolution relates to the giving to a third party of a guarantee,
security, or indemnity in respect of an obligation of the company or any
of its subsidiaries for which the director has assumed responsibility in
whole or part and whether alone or jointly with others under a guarantee
or indemnity or by the giving of security; and/or
(c) his interest arises by virtue of his subscribing or agreeing to subscribe
for any shares, debentures or other securities of the company or any of
its subsidiaries, or by virtue of his being, or intending to become, a
participant in the underwriting or sub underwriting of an offer of any
such shares, debentures, or other securities by the company or any of
its subsidiaries for subscription, purchase or exchange; and/or
(d) the resolution relates in any way to a retirement benefits scheme which
has been approved, or is conditional upon approval, by the HM
Revenue and Customs for taxation purposes.
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95.
96.
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For the purposes of this article, in relation to an alternate director, an interest of
his appointor shall be treated as an interest of the alternate director without
prejudice to any interest which the alternate director has otherwise.
(B) Adirector shall not be counted in the quorum present at a meeting in relation to
a resolution on which he is not entitled to vote.
(C) The company may by ordinary resolution suspend or relax to any extent, either
generally or in respect of any particular matter, any provision of the articles
prohibiting a director from voting at a meeting of the board or of a committee of
directors.
(D) Where proposals are under consideration concerning the appointmert of two or
more directors to offices or employments with the company or any body
corporate in which the company is interested the proposals may be divided and
considered in relation to each director separately and (provided he is not for
another reason precluded from voting) each of the directors concerned shall be
entitled to vote and be counted in the quorum in respect of each resolution
except that concerning his own appointment.
(E) If a question arises at a meeting of the board or of a committee of drectors as
to the right of a director to vote, the question may, before the conclusion of the
meeting, be referred to the chairman of the meeting and his ruling in relation to
any director other than himself shall be final and conclusive
SECRETARY
APPOINTMENT AND REMOVAL OF COMPANY SECRETARY
Subject to the provisions of the Act, the secretary shall be appointed by the directors for
such term, at such remuneration and upon such conditions as they may think fit; and
any secretary so appointed may be removed by them.
MINUTES
KEEPING OF MINUTES
The directors shall cause minutes to be made in books kept for the purpose-
(A) of all appointments of officers made by the directors; and
(B) of all proceedings at meetings of the company, of the holders of any class of
shares in the company, and of the board, and of committees of directors,
including the names of the directors present at each such meeting.
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97.
98.
99.
100.
101.
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DIVIDENDS
DECLARATION OF DIVIDENDS
Subject to the provisions of the Act and the articles, the company may byordinary
resolution declare dividends in accordance with the respective rights of the members,
but no dividend shall exceed the amount recommended by the board.
PAYMENT OF INTERIM AND FIXED DIVIDENDS BY BOARD
Subject to the provisions of the Act and the articles, the board may pay interim
dividends if it appears to it that they are justified by the profits of the company available
for distribution. If the share capital is divided into different classes, the board may pay
interim dividends on shares which confer deferred or non preferred rights with regard to
dividend as well as on shares which confer preferential rights with regard to dividend,
but no interim dividend shall be paid on shares carrying deferred or non preferred rights
if, at the time of payment, any preferential dividend is in arrear. The board may also pay
at intervals settled by them any dividend payable at a fixed rate if it appears to them that
the profits available for distribution justify the payment. Provided the directors act in
good faith they shall not incur any liability to the holders of shares conferring preferred
rights for any loss they may suffer by the lawful payment of an interim dividend on any
shares having deferred or non preferred rights.
CALCULATION OF DIVIDENDS
Except as otherwise provided by the rights attached to shares, all dividends shall be
declared and paid according to the amounts paid up on the shares on which the
dividend is paid but no outstanding amount paid up on a share in advance of the
applicable call date shall be treated for the purposes of this article as paid up on the
share. All dividends shall be apportioned and paid proportionately to the amounts paid
up on the shares during any portion or portions of the period in respect of which the
dividend is paid; but, if any share is issued on terms provided that it shall rank for
dividend as from a particular date, that share shall rank for dividend accordingly.
DIVIDENDS NOT IN CASH
Without prejudice to article 98 above, a general meeting declaring a dividend may, upon
the recommendation of the board, direct that it shall be satisfied wholly or partly by the
distribution of assets and, where any difficulty arises in regard to the distribution, the
board may settle the same and in particular may issue fractional certificates and fix the
value for distribution of any assets and may determine that cash shall be paid to any
member upon the footing of the value so fixed in order to adjust the rights of members
and may vest any assets in trustees.
PAYMENT OF DIVIDENDS.
Any dividend or other moneys payable in respect of a share may be paid by cheque
sent by post to the registered address of the person entitled or, if two or more persons
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103.
104,
105.
106.
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are the holders of the share or are jointly entitled to it by reason of the death or
bankruptcy of the holder, to the registered address of that one of those persons who is
first named in the register of members or to such person and to such address as the
person or persons entitled may in writing direct. Every cheque shall be made payable
to the order of the person or persons entitled or to such other person as the person or
persons entitled may in writing direct and payment of the cheque shall be a good
discharge to the company. Any joint holder or other person jointly entitled to ashare as
aforesaid may give receipts for any dividend or other moneys payable in respect of the
share.
NO INTEREST ON DIVIDENDS.
No dividend or other moneys payable in respect of a share shall bear interest against
the company unless otherwise provided by the rights attached to the share.
AMOUNTS DUE ON SHARES MAY BE DEDUCTED FROM DIVIDENDS
The board may deduct from any dividend or other moneys payable to a member by the
company on or in respect of any shares all sums of money (if any) presently payable by
him to the company on account of calls or otherwise in respect of shares of the
company.
FORFEITURE OF UNCLAIMED DIVIDENDS
Any dividend which has remained unclaimed for twelve years from the date when it
became due for payment shall, if the directors so resolve, be forfeited and cease to
remain owing by the company.
ACCOUNTS
RECORDS TO BE KEPT
The board shall cause to be kept accounting records sufficient to show and explain the
company's transactions, and such as to disclose with reasonable accuracy at anytime
the financial position of the company at that time, and which accord with the Act.
CAPITALISATION OF PROFITS
POWER TO CAPITALISE RESERVES AND FUNDS
The board may with the authority of an ordinary resolution of the company-
(A) subject as hereinafter provided, resolve to capitalise any undivided profits of the
company not required for paying any preferential dividend (whether or not they
are available for distribution) or any sum standing to the credit of the company’s
share premium account or capital redemption reserve (including retained
earnings);
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108.
(B)
(D)
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appropriate the sum resolved to be capitalised to the members who would have
been entitled to it if it were distributed by way of dividend and in the same
proportions and apply such sum on their behalf either in or towards paying up
the amounts, if any, for the time being unpaid on any shares held by them
respectively, or in paying up in full shares or debentures of the company of a
nominal amount equal to that sum, and allot the shares or debenturescredited
as fully paid to those members, or as they may direct, in those proportions, or
partly in one way and partly in the other; but the share premium account, the
capital redemption reserve, retained earnings and any profits which are not
available for distribution may, for the purposes of this article, only be applied in
paying up shares that are then to be allotted and distributed to members
credited as fully paid;
resolve that any shares so allotted to any member in respect of a holding by him
of any partly paid shares shall so long as such shares remain partly paid rank
for dividend only to the extent that the latter shares rank for dividend;
make such provision by the issue of fractional certificates or by payment in cash
or otherwise as they determine in the case of shares or debentures becoming
distributable under this article in fractions; and
authorise any person to enter on behalf of all the members concemed into an
agreement with the company providing for the allotment to themrespectively,
credited as fully paid, of any shares or debentures to which they are entitled
upon such capitalisation, any agreement made under such authority being
binding on all such members.
RECORD DATES
RECORD DATES
Notwithstanding any other provision of these articles, but without prejudice to the rights
attached to any shares, the company or the directors may fix a date as the record date
by reference to which a dividend will be declared or paid or a distribution, allotment or
issue made, and that date may be before, on or after the date on which the dividend,
distribution, allotment or issue is declared, paid or made. Where such a record date is
fixed, references in these articles to a holder of shares or member to whom a dividend
is to be paid or a distribution, allotment or issue is to be made shall be construed
accordingly.
NOTICES
NOTICES IN WRITING
Any notice to be given to or by any person pursuant to the articles shall be in writing
except that a notice calling a meeting of the board need not be in writing.
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109.
110.
111.
112.
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SERVICE OF NOTICES
Subject to the articles, the company may give any notice to a member either personally
by post in a prepaid envelope addressed to the member at his registered address or by
leaving it at that address or such other means (which may include electronic means) to
which the member has provided (and not revoked) its written consent for the receipt of
such notices. In the case of joint holders of a share, all notices shall be given to the
joint holder whose name stands first in the register of members in respect of the joint
holding and notice so given shall be sufficient notice to all the joint holders. Amember
whose registered address is not within the United Kingdom and who gives to the
company an address within the United Kingdom at which notices may be given to him
shall be entitled to have notices given to him at that address, but otherwise no such
member shall be entitled to receive any notice from the company.
DEEMED RECEIPT OF NOTICE BY MEMBERS PRESENT AT MEETING
Amember present, either in person or by proxy, at any meeting of the company or of the
holders of any class of shares in the company shall be deemed to have received notice
of the meeting and, where requisite, of the purposes for which it was called.
SHAREHOLDERS BOUND BY NOTICE
Every person who becomes entitled to a share shall be bound by any notice in respect
of that share which, before his name is entered in the register of members, has been
duly given to a person from whom he derives his title.
TIME OF SERVICE
(A) Any notice, document or other information, if served, sent or supplied by the
company by post, shall be deemed to have been received on the day following
that on which it was posted if first class post was used or 48 hours after it was
posted if first class post was not used and, in proving that a notice, document or
other information was served, sent or supplied, it shall be sufficient to prove that
the notice, document or other information was properly addressed, prepaid and
put in the post.
(B) Any notice, document or other information not served, sent or supplied by post
but left by the company at a registered address or at an address (other than an
address for the purposes of communications by electronic means) notified to
the company in accordance with these articles by a person who is entitled by
transmission to a share shall be deemed to have been received on the day it
was so left.
(C) Any notice, document or other information served, sent or supplied by the
company using electronic means shall be deemed to have been received on the
day on which it was sent notwithstanding that the company subsequently sends
a hard copy of such notice, document or information by post. In proving that a
notice, document or other information served, sent or supplied by electronic
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113.
114.
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47
means was served, sent or supplied, it shall be sufficient to prove that it was
properly addressed.
(D) Any notice, document or other information served, sent or supplied by the
company by any other means authorised in writing by the member concerned
shall be deemed to have been received when the company has carried out the
action it has been authorised to take for that purpose.
SERVICE OF NOTICE ON PERSON ENTITLED BY TRANSMISSION
Anotice may be given by the company to the persons entitled to a share in
consequence of the death or bankruptcy of a member by sending or delivering it, in any
manner authorised by the articles for the giving of notice to a member, addressed to
them by name, or by the title of representatives of the deceased, or trustee of the
bankrupt or by any like description at the address, if any, within the United Kingdom
supplied for that purpose by the persons claiming to be so entitled. Until such an
address has been supplied, a notice may be given in any manner in which it might have
been given if the death or bankruptcy had not occurred.
WINDING UP
DISTRIBUTION OF ASSETS OTHERWISE THAN IN CASH
If the company is wound up, the liquidator may, with the sanction of a special resolution
of the company and any other sanction required by the Act, divide among the members
in specie the whole or any part of the assets of the company and may, for that purpose,
value any assets and determine how the division shall be carried out as between the
members or different classes of members. The liquidator may, with the like sanction,
vest the whole or any part of the assets in trustees upon such trusts for the benefit of
the members as he with the like sanction determines, but no member shall be
compelled to accept any assets upon which there is a liability.
INDEMNITY
INDEMNITY OF DIRECTORS
To the extent permitted by the Act, the company may indemnify any director, former
director or company secretary of the company against any liability and may purchase
and maintain for any director, former director or company secretary of the company
insurance against any liability. No director or former director or company secretary of
the company shall be accountable to the company or the members for any benefit
provided pursuant to this article and the receipt of any such benefit shall not disqualify
any person from being or becoming a director of the company.
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PROVISIONS RELATING TO ARTICLES 10 AND 14
116. ARTICLES SUBJECT TO RELEVANT LAW
(A)
(C)
(D)
Nothing contained in articles 10 and 11 shall have effect so as to require the
company or any of the directors to (i) take any action; (ii) omit to take any
action; or (iii) procure that any subsidiary of the company takes or omits to take
any action which action or omission would, in the reasonable opinion of the
board of the company or of such subsidiary, give rise to criminal or civil liability
on the part of the company, such subsidiary or any of the directors of the
company or such subsidiary, or any liability on any of the aforesaid for breach of
any statutory or common law duty or requirement (for the purposes of this
article 116, a "relevant breach").
If a relevant breach is capable of ratification by the shareholders of the company
or subsidiary concerned, and such ratification would have the effect of removing
or avoiding the consequences of the relevant breach (insofar as such
consequences affect or would affect the company or subsidiary or any of their
respective directors), then subject to the shareholders concerned providing a
written undertaking to the company or subsidiary, as the case may be, that the
requisite ratification will be provided, the action or omission which would (but for
ratification), have given rise to the relevant breach shall be effected or, as the
case may be, procured by the company as though this article 116 did not apply
in relation thereto.
For the purposes of this article 116, the "reasonable opinion of the board" in
relation to a matter shall mean the reasonable opinion of the board of directors
of the company or subsidiary concerned, having (i) as soon as is reasonably
practicable taken and having had due regard to appropriate legal and/or
financial advice, (ii) following the receipt of such advice, having promptly
provided the same to the Special Shareholder and consulted with the Special
Shareholder in relation to the said advice, and to the formation of the board's
opinion on the relevant matter, and having had due regard to the views (if any)
of the Special Shareholder notified to it in relation thereto, and (iii) where the
Special Shareholder gives notice under article 116(D), having had due regard to
the independent advice consequently received and having consulted the
Special Shareholder in relation thereto.
If in any case where the company or the directors seek to rely upon article
116(A) in respect of any matter, the Special Shareholder has within 7 days of
receipt of legal and/or financial advice pursuant to article 116(C) notified the
company that it requires independent advice to be taken in relation to the
relevant matter(s) from an independent legal and/or financial adviser approved
by the Special Shareholder, such advice to be addressed to the company, its
directors and the Special Shareholder, the company shall (i) obtain such advice
and (ii) (subject to article 116(A)) not take any decision or action in relation to
the relevant matter, until such advice shall have been obtained and the board
shall have consulted the Special Shareholder in relation thereto.
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(E) Nothing in this article 116 shall fetter any statutory power, or remove or alter any
obligation imposed on any person by statute.
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Company No. 4074919
ARTICLES OF ASSOCIATION
of
POSTAL SERVICES HOLDING COMPANY PLC
(adopted by a special resolution passed on 10 September 2013)
INTERPRETATION
1 EXCLUSION OF MODEL ARTICLES
No regulations set out in any statute, or in any statutory instrument or other subordinate
legislation made under any statute concerning companies shall apply as the regulations or
articles of the company.
2. DEFINITIONS
In these articles unless the context otherwise requires:
the Act means the Companies Act 2006 (including any orders, regulations or other
subordinate legislation made under it) to the extent from time to time in force;
the articles means these articles of association of the company as altered from time to time by
special resolution and the expression “this Article” shall be construed accordingly;
the board means the board of directors from time to time of the company or the directors
present at a meeting of the directors at which a quorum is present,
business day means any day which is not a Saturday or Sunday or a public holiday;
clear days in relation to the period of a notice, means that period excluding the day when the
notice is given or deemed to be given and the day for which it is given or on which it is to
take effect;
executed includes any mode of execution:
government securities means such securities, cash deposits, investments or assets as the
company may agree in writing with the Special Shareholder from time to time;
group means the company and its subsidiary undertakings [(as defined in section 1162 of the
Companies Act 2006)] from time to time;
the holder in relation to shares means the member whose name is entered in the register of
members as the holder of the shares;
major transaction means an acquisition or disposal by the company or a network subsidiary
(excluding a transaction in the ordinary course of business) where the size of the transaction is
such that the percentage ratio resulting from any of the calculations set out in Article 10.1(O)
is 10 per cent. or more;
L.ON26511756/9 026473-0027
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member means a member of the company;
network subsidiary means any subsidiary of the company (other than a subsidiary which is a
USP Listco (and any of its subsidiaries)) which is, or any of whose wholly owned subsidiaries
is, engaged in the provision of a network of places from which postal services and/or services
provided under arrangements between a UK government department and that subsidiary or
any of its wholly owned subsidiaries, are provided directly to the public,
office means the registered office of the company,
POL Special Share means the share defined as the “Special Share” in the articles of
association of Post Office Limited from time to time;
Primary Territories means all those countries or parts of the world being members of the
Organisation for Economic Co-operation and Development, and (whether or not the same are
or become members of the said organisation) each of the Isle of Man, the Channel Islands and
Gibraltar, together with such other territories as shall be agreed in writing between the Special
Shareholder and the company;
public holiday has the meaning given to that term in the Postal Services Act 2000;
the register means the register of members of the company;
relevant transaction means any actual or proposed acquisition, sale or other disposition
(whether by security or otherwise) or parting with or sharing of ownership (including, without
limitation, by partnership, joint venture or otherwise) of any assets, rights or property
whatsoever, other than:
(a) any transaction in the ordinary course of business or of a revenue nature (or both)
(including without limitation the taking of assets on lease or hire purchase), and
(b) any transaction between the company and a wholly-owned subsidiary of the
company;
the seal means the common seal of the company;
Secondary Territories means all those countries or parts of the world not within the Primary
Territories;
Secretary of State means one of Her Majesty’s Secretaries of State;
secretary means the secretary of the company or any other person appointed to perform the
duties of the secretary of the company, including a joint, assistant or deputy secretary,
share rights has the meaning given to such term in section 15 of the Postal Services Act
2011;
shares shall be interpreted in accordance with section 15 of the Postal Services Act 2011;
Special Share means the one special rights redeemable preference share of £1 in the capital of
the company;
Special Shareholder means the holder of the Special Share;
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Strategic Plan means a strategic plan adopted by the network subsidiary in accordance with
the network subsidiary’s articles of association;
Trade Mark means the trade mark “The Post Office” anywhere in the world;
the United Kingdom means Great Britain and Northern Ireland. ; and
USP Listco means a company:
(a) shares in which are or have been admitted to the premium listing segment of the
Official List of the Financial Conduct Authority of the United Kingdom (acting in its
capacity as the competent authority for the purpose of Part VI of the Financial
Services and Markets Act 2000) and admitted to trading on the main market for listed
securities of the London Stock Exchange plc; and
(b) which is or has been, or a subsidiary of which is or has been, designated as the
universal service provider under section 35 of the Postal Services Act 2011.
Unless the context otherwise requires, words or expressions contained in these articles bear
the same meaning as in the Act but exclude any statutory modification thereof not in force
when these articles become binding on the company. Subject to the foregoing sentence,
references to any provision of any enactment or any subordinate legislation (as defined by
section 21(1) of the Interpretation Act 1978) include any modification or re-enactment of that
provision for the time being in force.
References to “writing” include references to any method of representing or reproducing
words in a legible and non-transitory form, whether in electronic form or otherwise.
References in Articles 77, 78 and 89 to (i) a contract include references to any proposed
contract and to any transaction or arrangement or proposed transaction or arrangement
whether or not constituting a contract, and (ii) a conflict of interest include a conflict of
interest and duty and a conflict of duties.
Headings are included only for convenience and shall not affect meaning,
If, and for so long as, the company has only one member, these articles shall (in the absence
of any express provision to the contrary) apply with such modification as may be necessary in
relation to the company.
LIMITED LIABILITY
3. LIMITED LIABILITY
The liability of members of the company is limited to the amount, if any, unpaid on the shares
in the company held by them.
SHARE CAPITAL
4, RIGHTS ATTACHED TO SHARES
Subject to the provisions of the Act and to any rights conferred on the holders of any other
shares, any share may be issued with or have attached to it such rights and restrictions as the
company may by ordinary resolution decide or, if no such resolution has been passed or so far
as the resolution does not make specific provision, as the board may decide
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5. REDEEMABLE SHARES
Subject to the provisions of the Act, shares may be issued which are to be redeemed or are to
be liable to be redeemed at the option of the company or the holder.
6. PAYMENT OF COMMISSION
The company may exercise the powers of paying commissions conferred by the Act. Subject
to the provisions of the Act, any such commission may be satisfied by the payment of cash or
by the allotment of fully or partly paid shares or partly in one way and partly in the other
7. TRUSTS NOT RECOGNISED
Except as required by law, no person shall be recognised by the company as holding any
share upon any trust and (except as otherwise provided by the articles or by law) the company
shall not be bound by or recognise any interest in any share except an absolute right to the
entirety thereof in the holder.
8. VARIATION OF CLASS RIGHTS
Subject to the provisions of the Act, if at any time the capital of the company is divided into
different classes of shares, the rights attached to any class may be varied, either while the
company is a going concern or during or in contemplation of a winding-up:
(A) in such manner (if any) as may be provided by those rights; or
(B) in the absence of any such provision, with the consent in writing of the holders of
three-quarters in nominal value of the issued shares of that class (excluding any
shares of that class held as treasury shares), or with the sanction of a special
resolution passed at a separate general meeting of the holders of the shares of that
class,
but not otherwise. The provisions of these articles relating to general meetings shall, with any
necessary modifications, apply to every such separate general meeting,
THE SPECIAL SHARE
9. HOLDER OF THE SPECIAL SHARE
(A) _ The Special Share may only be issued to the Secretary of State and may be
transferred to and held by the Treasury, another Minister of the Crown or any
other duly authorised person (including, without limitation, any nominee)
acting on behalf of the Crown,
(B) The Special Shareholder shall be entitled to receive notice of, and to attend
and speak at, any general meeting or any meeting of any other class of
shareholders of the company, but the Special Share shall carry no right to
vote nor any other rights at any such meeting.
(C) On a distribution of capital in a winding-up of the company the Special
Shareholder shall be entitled to repayment of the capital paid up on the
Special Share in priority to any repayment of capital to any other member.
(D) The Special Shareholder shall be entitled at any time to require:
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(E)
(F)
(G)
(I) the directors to declare and pay a dividend to the holders of
the shares and the Special Shareholder (or their nominees) in
accordance with their respective rights as members; and/or
(Il) the company to procure that any of the members of the group
(other than a subsidiary which is a USP Listco (and any of its
subsidiaries) declare and pay a dividend to its shareholders,
of such an amount and to be satisfied in such manner (whether in cash, in
specie or otherwise) as may be determined by the Special Shareholder at its
discretion in order to give effect to, or otherwise in connection with, the
powers vested in the Secretary of State under section 72 of the Postal
Services Act 2000 (and, in the event of any request being received pursuant
to this Article 9(D), the directors and/or the company shall do all such things
as are duly required by the Special Shareholder to be done (and, where
appropriate, shall procure that they are done) (including if so required by the
Special Shareholder making application to the court to effect any reductions
of share capital, share premium account or capital redemption reserve) as
soon as is reasonably practicable, and in any event, (save where any such
reduction of share capital, share premium account or capital redemption
reserve has been applied for) the company will pay any dividend required in
accordance with Article 9(D)(1), (and, as required by the Special Shareholder,
shall have procured the payment to the company of any dividend) within 40
days of the Special Shareholder notifying the requirement that the said
dividend be paid by the company).
Save as provided above, the Special Share shall confer no other right to
participate in the capital or profits of the company.
The Special Shareholder may, subject to the provisions of the Act, require the
company to redeem the Special Share at par (such sum being payable on
redemption) at any time by serving written notice upon the company and
delivering to the company the relevant share certificate. The company shall
not be able to redeem the Special Share without the prior consent of the
Special Shareholder.
The provisions of this Article 9 shall be subject to Article 112.
10. VARIATION OF SPECIAL SHARE RIGHTS
10.1
Matters requiring consent
Notwithstanding any provision in these articles to the contrary other than Article 112, each of
the following shall be deemed to be a variation of the rights attaching to the Special Share and
accordingly the company shall not do any of the following without the prior written consent
of the Special Shareholder:
(A) _ the alteration or deletion of, or the ratification of any breach of all or any part
of these articles;
(B) _ the voluntary winding-up of the company, the passing of a special resolution
to the effect that the company should be wound-up by the court, the
presentation by the company (whether solely or jointly with any other person)
of a petition for its winding-up, or any proposal for any of the foregoing;
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(C)
(D)
(E)
(F)
(G)
(A)
()
Od)
(kK)
3)
(M)
the presentation by the company (whether solely or jointly with any other
person) of a petition applying for the appointment of an administrator or any
proposal therefore;
the issue or allotment of any shares or granting of any share rights in the
company;
the variation of any rights attached to any shares in the company in so far as
such variation affects the rights attached to the Special Share;
the declaration or payment of any dividend or the making of any distribution
by the company;
any distribution, payment or return to shareholders of the company out of
capital;
the issue or allotment of any shares or share rights in any network subsidiary
other than to the Secretary of State, the Treasury, any nominee of either of
them or to the company or any other network subsidiary or any nominee of
either of them;
the transfer or other disposal of any issued shares or share rights in any
network subsidiary other than to the Secretary of State, the Treasury or any
nominee of either of them, or to the company or any other network subsidiary
or any nominee of either of them;
the redemption or purchase by the company of any share in itself or the
reduction of the share capital of the company or any uncalled or unpaid
liability in respect thereof, capital redemption reserve or share premium
account of the company or the passing of any resolution authorising any of
the foregoing;
ceasing to produce consolidated accounts of the group which consolidate the
results of the company with those of the network subsidiary;
the adoption of any accounting reference date or any material variation of the
accounting practices and policies to be applied in the preparation of the
accounts of any member of the group (other than a subsidiary which is a USP
Listco (and its subsidiaries)), if different from the practices or policies then
adopted or applied by other members of the group (other than a subsidiary
which is a USP Listco (and its subsidiaries)) (other than any accounting
practice or policy required to be adopted by law or required by generally
accepted accounting principles applying in the place of incorporation of the
company or the relevant member of the group);
the:
(i) appointment or removal from office of any non-executive director of
the company;
(ii) appointment or removal from office of any executive director of the
company;
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(iii)
(iv)
(vy)
appointment or removal from office of any director of the company
designated or re-designated at any time as chief executive officer of
the company or otherwise carrying out the general management
functions of a chief executive officer of the company or the group:
appointment or removal of any person as chief executive of the
company (whether or not immediately prior to that appointment he
was a director of the company and whether or not immediately after
his removal he continues to be a director of the same), and “chief
executive” shall refer to any person carrying out the general
management functions of a chief executive officer of a company or
the group; or
any change in the prescribed maximum or minimum number of
directors of the company or the appointment of any person other than
a director of the company as an alternate director of any director of
the company;
(N) _ save as specifically provided for in the approved Strategic Plan (if any), any
substantial alteration in the nature of the business carried on by the company
or any network subsidiary;
(O) _ the entry into or implementation of a relevant transaction by the company in
relation to which (either individually or when taken together with all other
relevant transactions (other than any relevant transaction previously approved
under this Article 10.1(O)) entered into or implemented by the Company in
the previous 12 months) the percentage ratio resulting from any of the
following calculations is 25 per cent. or more:
(1) the gross assets the subject of the relevant transaction divided
by the gross assets of the group;
(Il) the profit attributable to the assets the subject of the relevant
transaction divided by the profits of the group;
(I) the turnover attributable to the assets the subject of the
relevant transaction divided by the turnover of the group.
For the purposes of this Article 10.1(O):
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(a) the “gross assets of the group” means the total fixed assets
of the group plus the total current assets of the group;
(b) in the case of:
(1) an acquisition of an interest in an undertaking which
will result in consolidation of the net assets of that
undertaking in the consolidated accounts of the
group; or
(2) adisposal of an interest in an undertaking which will
result in the net assets of that undertaking no longer
being consolidated in the accounts of the group,
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(c)
(f)
(g)
(h)
(i)
the “assets the subject of the relevant transaction” means
the value of 100 per cent. of that undertaking’s assets
irrespective of what interest is acquired or disposed of,
in the case of an acquisition or disposal of an interest in an
undertaking which does not fall within Article 10.1(O)(ID,
the “assets the subject of the relevant transaction” means:
(1) for an acquisition, the value of the consideration;
and
(2) for a disposal of an interest, the value attributed to
that interest in the group’s accounts;
in the case of an acquisition of assets other than an interest in
an undertaking the assets the subject of the relevant
transaction means the consideration or, if greater, the book
value of those assets;
in the case of a disposal of assets other than an interest in an
undertaking, the assets the subject of the relevant transaction
means the book value of the assets;
“profits” means profits after deducting all charges except
taxation and extraordinary items. In the case of an acquisition
or disposal of an interest in an undertaking which falls within
Article 10.1(O)(ID, profits means 100 per cent. of the profits
of the undertaking irrespective of what interest is acquired or
disposed of;
“consideration” is the amount paid to the vendors in the
relevant transaction including amounts corresponding to the
assumption by the purchaser of any liabilities whether actual
or contingent (including the repayment of inter-company or
third party debt) as part of the terms of the transaction;
if deferred consideration is or may be payable or receivable
by the relevant member of the group in the future, the
“consideration” is the maximum total consideration payable
or receivable under the agreement;
except as stated below the figures used for the calculation of
the percentage ratios must be:
(1) in the case of “assets” and “profits”, the figures
shown in the latest published audited consolidated
accounts or, where the company has, or will have,
published a preliminary statement of annual results
at the time the terms of a relevant transaction are
agreed, the figures shown in that preliminary
statement;
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(2) in the case of consideration in the form of listed or
quoted securities, the aggregate market value of all
those securities.
Where the company has published a half-yearly report
comprising, inter alia, a balance sheet, that balance sheet
must be used for classification purposes when calculating the
percentage ratios for the purpose of this Article 10.1(O);
(P) the entry by the company into any relevant transaction which is not on
commercial terms and is not considered by the directors of the company to be
in the interests of the company;
(Q) (i) the sale, assignment, charging, mortgaging or outright disposal by the
company of the Trade Mark in any of the Primary Territories, (ii) the granting
of an exclusive licence by the company which prevents the group (excluding
for this purpose a subsidiary which is a USP Listco (and its subsidiaries)
from using the Trade Mark in any of the Primary Territories, (iii) the taking
of any action by the company with the intention of jeopardising the Trade
Mark in any of the Primary Territories, (iv) the taking of any action by the
company which has the effect of causing the Trade Mark in any of the
Primary Territories to cease to subsist, or (v) the taking of any decision or
action which has the effect of allowing rights in respect of the Trade Mark in
any of the Primary Territories to lapse;
(R) (i) the sale, assignment, charging, mortgaging or outright disposal by the
company of the Trade Mark in any of the Secondary Territories, (ii) the
granting of an exclusive licence by the company which prevents the company
from using the Trade Mark in any of the Secondary Territories, or (iii) the
taking of any action by the company with the intention of jeopardising the
Trade Mark in any of the Secondary Territories (save that nothing in this
Article 10.1(R) shall prevent the company from allowing the Trade Mark to
lapse in any of the Secondary Territories, or from ceasing to assert its rights
in respect of the Trade Mark in the Secondary Territories);
(S) the approval of or agreement to or any material variation or amendment to:
(1) the remuneration (including, without limitation, salary, share
options, bonuses, benefits in kind and pension rights) paid or
granted by the company or any member of the group (other
than a subsidiary which is a USP Listco (and its
subsidiaries)), to any director of the company or of any
member of the group (other than a subsidiary which is a USP
Listco (and its subsidiaries), if that director was appointed
by the Special Shareholder or the appointment of that
director was duly consented to or deemed consented to by the
Special Shareholder in accordance with the provisions of
Article 10.1(M) (save where approval has been granted by
the holder of the POL Special Share); or
(Il) the terms and conditions of employment or engagement by
any member of the group (other than a subsidiary which is a
USP Listco (and its subsidiaries)), of any of the directors of
the company if that director was appointed by the Special
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Shareholder or the appointment of that director was duly
consented to or deemed consented to by the Special
Shareholder in accordance with the provisions of
Article 10.1(M);
(T) the incurring of (or entry into of any commitment to incur) any borrowing or
indebtedness in the nature of borrowing (including without limitation by way
of loan stock, bonds, debentures, notes, overdrafts or any other similar
arrangements the purpose of which is to raise money, credit offered by
suppliers and inter-company debt) by the company;
(U) the sale, transfer or disposal of or other dealing (together referred to as
“dealing”) with all or any part of the shares or share rights in the company, or
any network subsidiary, or a USP Listco (or any other interest therein);
(V) (save for dealings in the ordinary course of business which result in
compliance with the requirement of Article 100(B) at the close of business
each day), the sale, transfer or disposal of, or other dealing with (or the
creation (or permission to subsist) of any mortgage, pledge, lien, charge,
equitable interest, third party right, assignment, hypothecation or other
agreement or arrangement which has the effect of granting security over)
government securities held by any member of the group (for the avoidance of
doubt, not including a subsidiary which is a USP Listco and its subsidiaries)
for the purpose described in Article 100(B);
(W) the company or any subsidiary (other than a subsidiary which is a USP Listco
(and its subsidiaries)) applying or reallocating all or any part of any reserve
created in compliance with a direction given pursuant to section 72 of the
Postal Services Act 2000;
(X) where required, the approval of or any agreement to any variation or
amendment to the definition of “government securities’, as that term is
defined in or in accordance with the articles of association of any subsidiary
of the company; and
(Y) the exercise by the company of any voting rights the company has as a
shareholder in a USP Listco (at a general meeting of the USP Listco or
otherwise), or the entry into or amendment of any undertaking given with
respect to the exercise of such voting rights (including any restriction on the
company’s free exercise of such voting rights in a USP Listco).
10.2 Approval Procedure
(A) Whenever the company wishes to obtain the Special Shareholder’s consent to
any matter set out in Article 10.1 (other than 10.1(T)):
()) the company shall give notice to the Special Shareholder,
such notice to:
(aa) be in writing;
(bb) be addressed to such persons as the Special
Shareholder shall, from time to time, notify in
writing to the company;
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(cc) be delivered by hand or such other means (which
may include electronic means) to which the Special
Shareholder has provided (and not revoked) its
written consent specifically for the purpose of
receiving such notices;
(dd) clearly state that it is important and requires
immediate attention;
(ee) clearly identify itself as a notice served pursuant to
this Article 10.2 and that failure to respond within
ten business days will result in the Special
Shareholder being deemed to have given his consent
to the matter in question; and
(ff) contain or annex such information as can reasonably
be expected to enable the Special Shareholder to
consider the matter being proposed.
(Il) On or before the date which falls ten business days after the
date of receipt of such notice (the “Initial Expiry Date”) the
Special Shareholder shall give written notice to the secretary
stating:
(aa) his consent to the matter contained in the notice; or
(bb) his refusal to consent to the matter contained in the
notice (providing in reasonable detail and on a
confidential basis the reasons for such refusal); or
(cc) that he requires a further ten business days in which
to consider the matter, commencing on the business
day following the Initial Expiry Date.
(B) _ If on or before the Initial Expiry Date the Special Shareholder gives written
notice to the company pursuant to Article 10.2(A)(ID(cc) the Special
Shareholder shall, on or before the date which falls ten business days after the
Initial Expiry Date, give a further written notice to the secretary stating:
(1) _ his consent to the matter contained in the notice; or
(II) his refusal to consent to the matter contained in the notice
(providing in reasonable detail and on a confidential basis the
reasons for such refusal).
(C) The Special Shareholder may, at any time, request from the company such
further information as it reasonably requires in order to assist it to consider
the matter being proposed and the company shall deliver such information to
the Special Shareholder as soon as reasonably practicable thereafter.
(D) If the company does not receive any notice from the Special Shareholder
pursuant to Article 10.2(A)(II) on or before the Initial Expiry Date or
pursuant to Article 10.2(B) within the further period referred to therein, the
company shall be entitled to undertake the matter contained in the notice
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issued by it pursuant to Article 10.2(A)(I) and the consent of the Special
Shareholder shall be deemed irrevocably given to such matter.
(E) _ In favour of any third party dealing with any member of the group (other than
a subsidiary which is a USP Listco (and its subsidiaries) a certificate by any
director or the secretary to the effect that the Special Shareholder shall have
been deemed to have given his consent to any matter as a result of the
operation of Article 10.2(D) above shall be conclusive and binding as to that
fact.
(A) Whenever the company wishes to obtain the Special Shareholder’s consent to
any matter set out in Article 10.1(T) the company shall give notice to the
Special Shareholder in accordance with Articles 10.2(A)(I)(aa) to (dd) and
(ff) such notice to clearly identify itself as a notice served pursuant to this
Article 10.3 and that failure to respond within 28 business days will result in
the Special Shareholder being deemed to have given his consent to the matter
in question.
(B) On or before the date which falls 28 business days after the date of receipt of
such notice (the “Expiry Date”) the Special Shareholder shall give written
notice to the secretary stating:
(1) his consent to the matter contained in the notice; or
(ID) his refusal to consent to the matter contained in the notice
(providing in reasonable detail and on a confidential basis the
reasons for such refusal).
(C) The Special Shareholder may, at any time before the Expiry Date request
from the company such further information as it reasonably requires in order
to assist it to consider the matter being proposed and the company shall
deliver such information to the Special Shareholder as soon as reasonably
practicable thereafter.
(D) If the company does not receive any notice from the Special Shareholder
pursuant to Article 10.3(B) on or before the Expiry Date the company shall
be entitled to undertake the matter contained in the notice issued by it
pursuant to Article 10.3(A) and the consent of the Special Shareholder shall
be deemed irrevocably given to such matter.
(E) In favour of a third party dealing with any member of the group (other than a
subsidiary which is a USP Listco (and its subsidiaries)) a certificate by any
director or the secretary to the effect that the Special Shareholder shall have
been deemed to have given its consent to any matter as a result of the
operation of Article 10.3(D) above shall be conclusive and binding as such.
10.4 Delivery of any notice served upon the Special Shareholder under Articles 10.2
or 10.3 shall be evidenced by a receipt acknowledging delivery signed and dated by one
of the addressees of the relevant notice and such notice shall be deemed to have been
received on the date on which the receipt acknowledging delivery of the same is signed.
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10.5 The directors of the company will exercise all powers exercisable by the
company in relation to group subsidiaries so as to ensure that no subsidiary shall take
any action which (either alone or when taken together with any other action) would
result in the variation of any of the rights attached to the Special Share. For the
avoidance of doubt no action taken by a subsidiary which is a USP Listco (or its
subsidiaries) would result in the variation of any of the rights attached to the Special
Share.
10.6 The provisions of this Article 10 shall be subject to Article 112.
il. INFORMATION
(A) Notwithstanding any other provision of these articles, the Special Shareholder
shall be entitled to request such information in relation to the affairs of the
group (or any particular member of the group) as it may consider necessary or
desirable. The company shall use its reasonable endeavours to comply
promptly with such requests for information from time to time, but only in so
far as the company has such information within its possession or such
information can reasonably be obtained by it.
(B) Notwithstanding any other provision of these articles the company shall, at
the request of the Special Shareholder, procure that such specified or other
relevant directors and senior managers of the company and any network
subsidiary shall meet with the Special Shareholder (or its representatives) to
discuss the affairs of the group (or any particular member of the group) and
the company shall release and procure that any network subsidiary shall
release such directors or managers from any obligation of confidentiality
owed to the company or such subsidiary for the purpose of these discussions.
SHARE CERTIFICATES
12. RIGHT TO SHARE CERTIFICATES
Every member, upon becoming the holder of any shares, shall be entitled without payment to
one certificate for all the shares of each class held by him (and, upon transferring a part of his
holding of shares of any class, to a certificate for the balance of such holding) or several
certificates each for one or more of his shares upon payment for every certificate after the first
of such reasonable sum as the board may determine. Every certificate shall be executed under
the seal or otherwise in accordance with the Act or in such other manner as the board may
approve and shall specify the number, class and distinguishing numbers (if any) of the shares
to which it relates and the amount or respective amounts paid up thereon The company shall
not be bound to issue more than one certificate for shares held jointly by several persms and
delivery of a certificate to one joint holder shall be a sufficient delivery to all of them
13. REPLACEMENT OF SHARE CERTIFICATES
If a share certificate is defaced, worn-out, lost or destroyed, it may be renewed on such terms
(if any) as to evidence and indemnity and payment of the expenses reasonably incurred by the
company in investigating evidence as the board may determine but otherwise free of charge,
and (in the case of defacement or wearing-out) on delivery up of the old certificate.
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LIEN
14. COMPANY’S LIEN ON SHARES NOT FULLY PAID
The company shall have a first and paramount lien on every share (not being a fully paid
share) for all moneys (whether presently payable or not) payable at a fixed time or called in
respect of that share. The board may at any time declare any share to be wholly or in part
exempt from the provisions of this Article. The company’s lien on a share shall extend to any
amount payable in respect of it.
15. ENFORCING LIEN BY SALE
The company may sell in such manner as the board may determine any shares on which the
company has a lien if a sum in respect of which the lien exists is presently payable and is not
paid within fourteen clear days after notice has been given to the holder of the share or to the
person entitled to it in consequence of the death or bankruptcy of the holder, demanding
payment and stating that if the notice is not complied with the shares may be sold To give
effect to a sale, the board may authorise some person to execute an instrument of transfer of
the shares sold to, or in accordance with the directions of, the purchaser. The title of the
transferee to the shares shall not be affected by any irregularity in or invalidity of the
proceedings in reference to the sale.
16. APPLICATION OF PROCEEDS OF SALE
The net proceeds of the sale, after payment of the costs, shall be applied in payment of so
much of the sum for which the lien exists as is presently payable, and any residue shall (upon
surrender to the company for cancellation of the certificate for the shares sold and subject to a
like lien for any moneys not presently payable as existed upon the shares before the sale) be
paid to the person entitled to the shares at the date of the sale.
CALLS ON SHARES AND FORFEITURE
17. CALLS
Subject to the terms of allotment, the board may make calls upon the members in respect of
any moneys unpaid on their shares (whether in respect of nominal value or premium) and
cach member shall (subject to receiving at least fourteen clear days’ notice specifying when
and where payment is to be made) pay to the company as required by the notice the amount
called on his shares. A call may be required to be paid by instalments. A call may be revoked
in whole or part and payment of a call may be postponed in whole or part as the board may
decide. A person upon whom a call is made shall remain liable for calls made upon him
notwithstanding the subsequent transfer of the shares in respect whereof the call was made. A
call shall be deemed to have been made at the time when the resolution of the board
authorising the call was passed.
18. LIABILITY OF JOINT HOLDERS
The joint holders of a share shall be jointly and severally liable to pay all calls in respect
thereof.
19. INTEREST DUE ON NON-PAYMENT
If a call remains unpaid after it has become due and payable the person from whom it is due
and payable shall pay interest on the amount unpaid from the day it became due and payable
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until it is paid at the rate fixed by the terms of allotment of the share or in the notice of the
call or, if no rate is fixed, at the appropriate rate (as defined by the Act) but the board may
waive payment of the interest wholly or in part.
20. SUMS DUE ON ALLOTMENT TREATED AS CALLS
An amount payable in respect of a share on allotment or at any fixed date, whether in respect
of nominal value or premium or as an instalment of a call, shall be deemed to be a call and if
it is not paid the provisions of the articles shall apply as if that amount had become due and
payable by virtue of a call.
21. POWER TO DIFFERENTIATE
Subject to the terms of allotment, the board may make arrangements on the issue of shares for
a difference between the holders in the amounts and times of payment of calls on their shares
FORFEITURE OF SHARES
22. NOTICE IF CALL OR INSTALMENT NOT PAID.
If a call remains unpaid after it has become due and payable the board may give to the person
from whom it is due not less than fourteen clear days’ notice requiring payment of the amount
unpaid together with any interest which may have accrued. The notice shall name the place
where payment is to be made and shall state that if the notice is not complied with the shares
in respect of which the call was made will be liable to be forfeited.
23. FORFEITURE FOR NON-COMPLIANCE WITH NOTICE
If the notice is not complied with any share in respect of which it was given may, before the
payment required by the notice has been made, be forfeited by a resolution of the board and
the forfeiture shall include all dividends or other moneys payable in respect of the forfeited
shares and not paid before the forfeiture.
24. SALE OF FORFEITED SHARES
Subject to the provisions of the Act, a forfeited share may be sold, reallotted or otherwise
disposed of on such terms and in such manner as the board determines either to the person
who was before the forfeiture the holder or to any other person and at any time before sale,
re-allotment or other disposition, the forfeiture may be cancelled on such terms as the board
thinks fit. Where for the purposes of its disposal a forfeited share is to be transferred to any
person the board may authorise some person to execute an instrument of transfer of the share
to that person.
25. ARREARS TO BE PAID NOTWITHSTANDING FORFEITURE
A person any of whose shares have been forfeited shall cease to be a member in respect of
them and shall surrender to the company for cancellation the certificate for the shares
forfeited but shall remain liable to the company for all moneys which at the date of forfeiture
were presently payable by him to the company in respect of those shares with interest at the
rate at which interest was payable on those moneys before the forfeiture or, if no interest was
so payable, at the appropriate rate (as defined in the Act) from the date of forfeiture until
payment but the board may waive payment wholly or in part or enforce payment without any
allowance for the value of the shares at the time of forfeiture or for any consideration received
on their disposal.
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26. STATUTORY DECLARATION AS TO FORFEITURE
A statutory declaration by a director or the secretary that a share has been forfeited on a
specified date shall be conclusive evidence of the facts stated in it as against all persons
claiming to be entitled to the share and the declaration shall (subject to the execution of an
instrument of transfer if necessary) constitute a good title to the share and the person to whom
the share is disposed of shall not be bound to see to the application of the consideration, if
any, nor shall his title to the share be affected by any irregularity in or invalidity of the
proceedings in reference to the forfeiture or disposal of the share.
TRANSFER OF SHARES
27. EXECUTION OF TRANSFER
The instrument of transfer of a share may be in any usual form or in any other form which the
board may approve and shall be executed by or on behalf of the transferor and, unless the
share is fully paid, by or on behalf of the transferee.
28. RIGHT TO DECLINE REGISTRATION
The board may refuse to register the transfer of a share which is not fully paid to a person of
whom they do not approve and they may refuse to register the transfer of a share on which the
company has a lien or where such transfer is restricted by the Act or the articles. They may
also refuse to register a transfer unless:
(A) it is lodged at the office or at such other place as the board may appoint and is
accompanied by the certificate for the shares to which it relates and such other
evidence as the board may reasonably require to show the right of the transferor to
make the transfer;
(B) it is in respect of only one class of shares; and
(C) it is in favour of not more than four transferees.
29. NO FEE FOR REGISTRATION
No fee shall be charged for the registration of any instrument of transfer or other document
relating to or affecting the title to any share.
30. I RETENTION OF INSTRUMENT OF TRANSFER
The company shall be entitled to retain any instrument of transfer which is registered, but any
instrument of transfer which the board refuses to register shall be returned to the person
lodging it when notice of the refusal is given.
TRANSMISSION OF SHARES
31. TRANSMISSION ON DEATH
If a member dies the survivor or survivors where he was a joint holder, and his personal
representatives where he was a sole holder or the only survivor of joint holders, shall be the
only persons recognised by the company as having any title to his interest, but nothirg herein
contained shall release the estate of a deceased member from any liability in respect of any
share which had been jointly held by him.
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32. ELECTION OF PERSON ENTITLED BY TRANSMISSION
A person becoming entitled to a share in consequence of the death or bankruptcy of a member
may, upon such evidence being produced as the board may properly require, elect either to
become the holder of the share or to have some person nominated by him registered as the
transferee. If he elects to become the holder he shall give notice to the company to that effect.
If he elects to have another person registered he shall execute an instrument of transfer of the
share to that person. All the articles relating to the transfer of shares shall apply to the notice
or instrument of transfer as if it were an instrument of transfer executed by the member and
the death or bankruptcy of the member had not occurred.
33. RIGHTS OF PERSON ENTITLED BY TRANSMISSION
A person becoming entitled to a share in consequence of the death or bankruptcy of a member
shall have the rights to which he would be entitled if he were the holder of the share, except
that he shall not be entitled to attend or vote at any meeting of the company or at any separate
meeting of the holders of any class of shares in the company, in respect of the share before
being registered as the holder of the share, unless authorised to do so by the board.
ALTERATION OF SHARE CAPITAL
34. SUB-DIVISION
The company may by ordinary resolution sub-divide its shares, or any of them, into shares of
smaller amount provided that none of the shares resulting from the sub-division may have any
right, preference or advantage not attached to the shares immediately prior to the sub-division.
35. FRACTIONS
Whenever as a result of a consolidation, consolidation and sub-division, or sub-division of
shares any members would become entitled to fractions of a share, the board may deal with
the fractions as it thinks fit, including by aggregating and selling them or by dealing with
them in some other way. The board may sell shares representing fractions to any person,
including the company, and may authorise some person to execute an instrument of transfer
of the shares to, or in accordance with the directions of, the purchaser. The transferee shall not
be bound to see to the application of the purchase money nor shall his title to the shares be
affected by any irregularity in or invalidity of the proceedings in reference to the sale.
GENERAL MEETINGS.
36. OMISSION OR NON-RECEIPT OF NOTICE
36.1 The accidental omission to give notice of a meeting to, or the non-receipt of
notice of a meeting by, any person entitled to receive notice shall not invalidate the
proceedings at that meeting.
36.2. A member present in person or by proxy at a meeting shall be deemed to have
received proper notice of that meeting and, where applicable, of the purpose of that
meeting.
37. POSTPONEMENT OF GENERAL MEETINGS
If the board, in its absolute discretion, considers that it is impractical or unreasonable for any
reason to hold a general meeting on the date or at the time or place specified in the notice
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calling the general meeting, it may postpone the general meeting to another date, time and
place. When a meeting is so postponed, notice of the date, time and place of the postponed
meeting shall be given to the members. Notice of the business to be transacted at such
postponed meeting shall not be required.
PROCEEDINGS AT GENERAL MEETINGS.
38. QUORUM
No business shall be transacted at any meeting unless a quorum is present. Two persons
entitled to vote upon the business to be transacted, each being a member or a proxy for a
member or a duly authorised representative of a corporation, shall be a quorum If, and for so
long as, the company has only one member, that member or the proxy for that member or,
where that member is a corporation, its duly authorised representative shall be a quorum at
any general meeting of the company or of the holders of any class of shares.
39, PROCEDURE IF QUORUM NOT PRESENT
If such a quorum is not present within half an hour from the time appointed for the meeting,
or if during a meeting such a quorum ceases to be present, the meeting shall stand adjourned
to the same day in the next week at the same time and place or to such time and place as the
board may determine.
40. CHAIRMAN OF GENERAL MEETING
The chairman, if any, of the board or in his absence some other director nominated by the
board shall preside as chairman of the meeting, but if neither the chairman nor such other
director (if any) be present within fifteen minutes after the time appointed for holding the
meeting and willing to act, the directors present shall elect one of their number to be chairman
and, if there is only one director present and willing to act, he shall be chairman. If no director
is willing to act as chairman, or if no director is present within fifteen minutes afier the time
appointed for holding the meeting, the members present and entitled to vote shall choose one
of their number to be chairman.
41. ORDERLY CONDUCT
The chairman shall take such action as he thinks fit to promote the orderly conduct of the
business of the meeting as laid down in the notice of the meeting and the chairman’s decision
‘on matters of procedure or arising incidentally from the business of the meeting shall be final
as shall be his determination as to whether any matter is of such a nature.
42. ENTITLEMENT TO ATTEND AND SPEAK
Each director shall be entitled to attend and speak at any general meeting of the company and
at any separate general meeting of the holders of any class of shares in the company. The
chairman may invite any person to attend and speak at any general meeting of the company
whom the chairman considers to be equipped by knowledge or experience of the company’s
business to assist in the deliberations of the meeting. In addition, the chairman may invite any
person who has been nominated for the purpose by a member, where the chairman is satisfied
that such time as the chairman may determine, the member holds any shares in the company
as such person’s nominee, to attend and, if the chairman considers it appropriate, to speak at
any general meeting of the company.
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43. ADJOURNMENTS
The chairman may, with reasonable cause but without requiring the consent of the meeting
(whether or not it has commenced or a quorum is present) adjourn any meeting. From time to
time and from place to place, but no business shall be transacted at an adjourned meeting
other than business which might properly have been transacted at the meeting had the
adjournment not taken place. When a meeting is adjourned for fourteen days or more, at least
seven clear days’ notice shall be given specifying the time and place of the adjourned meeting
and the general nature of the business to be transacted Otherwise it shall not be necessary to
give any such notice.
44, AMENDMENTS RULED OUT OF ORDER
If an amendment proposed to any resolution under consideration is ruled out of order by the
chairman, the proceedings on the resolution shall not be invalidated by any error in the ruling,
VOTING
45. VOTES OF MEMBERS
Subject to any special terms as to voting upon which any shares may be issued or may for the
time being be held and to any other provisions of these articles, on a show of hands every
member who (being an individual) is present in person or by proxy or (being a corporation) is
present by a duly authorised representative or by proxy shall have one vote, and on a poll
every member shall have one vote for every share of which he is the holder. For this purpose,
where a proxy is given discretion as to how to vote on a show of hands, this shall be treated as
an instruction by the relevant member to vote in the way in which the proxy elects to exercise
that discretion.
46. METHOD OF VOTING
A resolution put to the vote of a meeting shall be decided on a show of hands unless before,
or on the declaration of the result of, the show of hands a poll is duly demanded. Subject to
the provisions of the Act, a poll may be demanded:
(A) by the chairman; or
(B) by at least two members having the right to vote on the resolution; or
(C) by a member or members representing in the aggregate not less than one-tenth of the
total voting rights of all the members having the right to vote on the resolution; or
(D) by a member or members holding shares conferring a right to vote on the resolution
being shares on which an aggregate sum has been paid up equal to not less than
one-tenth of the total sum paid up on all the shares conferring that right,
and a demand by a person as proxy for a member shall be the same as a demand by the
member.
47. PROCEDURE IF POLL NOT DEMANDED
Unless a poll is duly demanded a declaration by the chairman that a resolution has been
carried or carried unanimously, or by a particular majority, or lost, or not carried by a
particular majority and an entry to that effect in the minutes of the meeting shall be
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conclusive evidence of the fact without proof of the number or proportion of the votes
recorded in favour of or against the resolution.
48. WITHDRAWAL OF DEMAND FOR POLL
The demand for a poll may, before the poll is taken, be withdrawn but only with the consent
of the chairman and a demand so withdrawn shall not be taken to have invalidated the result
of a show of hands declared before the demand was made.
49, PROCEDURE IF POLL DEMANDED.
A poll shall be taken as the chairman directs and he may appoint scrutineers (who need not be
members) and fix a time and place for declaring the result of the poll. The result of the poll
shall be deemed to be the resolution of the meeting at which the poll was demanded.
50. ‘WHEN POLL TO BE TAKEN
A poll demanded on the election of a chairman or on a question of adjournment shall be taken
forthwith. A poll demanded on any other question shall be taken either forthwith or at such
time and place as the chairman directs not being more than thirty days after the poll is
demanded. The demand for a poll shall not prevent the continuance of a meeting for the
transaction of any business other than the question on which the poll was demanded. If a poll
is demanded before the declaration of the result of a show of hands and the demand is duly
withdrawn, the meeting shall continue as if the demand had not been made.
51, NO NOTICE OF POLL
No notice need be given of a poll not taken forthwith if the time and place at which it is to be
taken are announced at the meeting at which it is demanded. In any other case at least seven
clear days’ notice shall be given specifying the time and place at which the poll is to be taken
52. VOTES OF JOINT HOLDERS
Tn the case of joint holders the vote of the senior who tenders a vote, whether in person or by
proxy, shall be accepted to the exclusion of the votes of the other joint holders, and seniority
shall be determined by the order in which the names of the holders stand in the register of
members.
53. VOTING ON BEHALF OF INCAPABLE MEMBER
A member in respect of whom an order has been made by any court having jurisdiction
(whether in the United Kingdom or elsewhere) in matters concerning mental disorder may
vote and may exercise any other right conferred by membership in relation to general
meetings by or through any receiver, curator bones or other person authorised in that behalf
appointed by that court (and that person may vote by proxy). Written evidence to the
satisfaction of the board of the authority of the person claiming to exercise the right to vote
shall be hand-delivered to the company’s registered office, or delivered by such other means
(which may include electronic means) as the board may accept, not less than forty-eight hours
before the time appointed for holding the meeting or adjourned meeting at which the right to
vote is to be exercised and in default the right to vote shall not be exercisable
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54, NO RIGHT TO VOTE WHERE SUMS OVERDUE ON SHARES
No member shall vote at any general meeting or at any separate meeting of the holders of any
class of shares in the company, either in person or by proxy, in respect of any share held by
him unless all moneys presently payable by him in respect of that share have been paid.
55. OBJECTIONS OR ERRORS IN VOTING
(A) If
(i) any objection shall be raised to the qualification of any voter, or
(ii) any votes have been counted which ought not to have been counted
or which might have been rejected: or
(iii) any votes are not counted which ought to have been counted,
the objection or error shall not vitiate the decision of the meeting or adjourned meeting on any
resolution unless it is raised or pointed out at the meeting or, as the case may be, the
adjourned meeting at which the vote objected to is given or tendered or at which the error
occurs. Any objection or error shall be referred to the chairman and shall only vitiate the
decision of the meeting on any resolution if the chairman decides that the same may have
affected the decision of the meeting. The decision of the chairman on such matters shall be
conclusive.
(B) The company shall not be obliged to ascertain whether a proxy or
representative of a corporation has voted in accordance with a member’s
instructions and the failure of a proxy or representative so to do shall not
vitiate the decision of the meeting or adjourned meeting or poll on any
resolution.
PROXIES
56. APPOINTMENT OF PROXY
Votes may be given either personally or by proxy. A member may appoint more than one
proxy to attend on the same occasion.
57. FORM OF PROXY
An instrument appointing a proxy shall be in writing, executed by or on behalf of the
appointor and shall be in the following form (or in a form as near thereto as circumstances
allow or in any other form which is usual or which the board may approve):
“Postal Services Holding Company ple
UWe, , of , being a member/members of the
above-named company, hereby appoint of , or failing
him, of , as my/our proxy to vote in my/our
name[s] and on my/our behalf at the general meeting of the company to be held on
20, and at any adjournment thereof
Signed on 20°”
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58.
INSTRUCTIONS TO PROXY
Where it is desired to afford members an opportunity of instructing the proxy how he shall act
the instrument appointing a proxy shall be in the following form (or in a form as near thereto
as circumstances allow or in any other form which is usual or which the board may approve):
59.
“Postal Services Holding Company ple
I/We, ,of , being a member/members
of the above-named company, hereby appoint of » or
failing him, of , as my/our proxy to vote in
my/our name[s] and on my/our behalf at the general meeting of the company to be
held on 20 , and at any adjournment thereof.
This form is to be used in respect of the resolutions mentioned below as follows
Resolution No I *for *against
Resolution No 2 *for *against
*Strike out whichever is not desired
Unless otherwise instructed, the proxy may vote as he thinks fit or abstain from
voting
Signed on 20”
DELIVERY OF PROXIES
The instrument appointing a proxy and any authority under which it is executed may be
delivered:
(A) _ in hard copy form at the office (or such other place in the United Kingdom
as may be specified by the company for the receipt of appointments of proxy
in hard copy form) to be received not less than 48 hours (or such shorter time
as the board may determine) before the time appointed for holding the
meeting or adjourned meeting at which the person named in the appointment
proposes to vote together with (if required by the board) any authority under
which it is made or a copy of the authority, certified notarially or in
accordance with the Powers of Attorney Act 1971 or in some other manner
approved by the board;
(B) by electronic means, to be received at the address specified by the company
for the receipt of appointments of proxy by electronic means not less than 48
hours (or such shorter time as the board may determine) before the time
appointed for holding the meeting or adjourned meeting at which the person
named in the appointment proposes to vote. Any authority pursuant to which
such an appointment is made or a copy of the authority, certified notarially
or in accordance with the Powers of Attorney Act 1971 or in some other
manner approved by the board, must, if required by the board, be received at
such address or at the office (or such other place in the United Kingdom as
may be specified by the company for the receipt of such documents) not less
than 48 hours (or such shorter time as the board may determine) before the
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time appointed for holding the meeting or adjourned meeting at which the
person named in the appointment proposes to vote;
(C) in the case of a poll taken more than 48 hours after it was demanded, to be
received as aforesaid not less than 24 hours (or such shorter tune as the board
may determine) before the time appointed for the taking of the poll;
(D) in the case of a poll taken following the conclusion of a meeting or
adjourned meeting but not more than 48 hours after it was demanded, to be
received as aforesaid before the end of the meeting at which it was
demanded (or at such later time as the board may determine),
and an appointment of a proxy which is not, or in respect of which the authority or copy
thereof is not, received in a manner so permitted shall be invalid. When two or more valid but
differing appointments of a proxy are received in respect of the same share for use at the same
meeting or poll, the one which is last received (regardless of its date or of the date of its
signature) shall be treated as replacing and revoking the others as regards that share, if the
company is unable to determine which was last received, none of them shall be treated as
valid in respect of that share. The appointment of a proxy shall not preclude a member from
attending and voting in person at the meeting or poll concerned The proceedings at a general
meeting shall not be invalidated where an appointment of a proxy in respect of that meeting is
sent in electronic form as provided in these articles, but it cannot be read by the recipient
because of a technical problem.
60. CANCELLATION OF PROXY’S AUTHORITY
A vote given or poll demanded by proxy or by the duly authorised representative of a
corporation shall be valid notwithstanding the previous determination of the authority of the
person voting or demanding a poll unless notice of the determination was received by the
company before the commencement of the meeting or adjourned meeting at which the vote is
given or the poll demanded or (in the case of a poll taken otherwise than on the same day as
the meeting or adjourned meeting) the time appointed for taking the poll. Such notice of
determination shall be received either in hard copy form by the office or such other place
within the United Kingdom as may be specified by the company in accordance with
Article 59(A) or in electronic form at the address (if any) specified by the company in
accordance with Article 59(B), regardless of whether any relevant proxy appointment was
effected in hard copy form or in electronic form.
APPOINTMENT, RETIREMENT AND REMOVAL OF DIRECTORS
61. NUMBER OF DIRECTORS
Unless otherwise determined by ordinary resolution and subject to the articles, the number of
directors (other than alternate directors) shall not be subject to any maximum but shall be not
less than two.
62. ALTERNATE DIRECTORS
(A) Any director (other than an alternate director) may appoint any other
director, or, subject to the articles, any other person approved by resolution
of the board and willing to act, to be an alternate director and may remove
from office an alternate director so appointed by him.
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(B) An alternate director shall be entitled to receive notice of all meetings of the
board and of all meetings of committees of the board of which his appointor
is a member, to attend and vote at any such meeting at which the director
appointing him is not personally present, and generally to perform all the
functions of his appointor as a director in his absence but shall not be entitled
to receive any remuneration from the company for his services as an
alternate director. But it shall not be necessary to give notice of such a
meeting to an alternate director who is absent from the United Kingdom.
(C) An alternate director shall cease to be an alternate director if his appointor
ceases to be a director, but, if a director retires but is reappointed or deemed
to have been reappointed at the meeting at which he retires, any appointment
of an alternate director made by him which was in force immediately prior to
his retirement shall continue after his reappointment.
(D) Any appointment or removal of an alternate director shall be by notice to the
company signed by the director making or revoking the appointment or in
any other manner approved by the board.
(E) Save as otherwise provided in the articles, an alternate director shall be
deemed for all purposes to be a director and shall alone be responsible for his
own acts and defaults and he shall not be deemed to be the agent of the
director appointing him.
63. PERSONS ELIGIBLE AS DIRECTORS
No person shall be appointed or reappointed a director at any general meeting unless:
(A) he is recommended by the directors; or
(B) not less than fourteen nor more than thirty five clear days before the date
appointed for the meeting, notice executed by a member qualified to vote at
the meeting has been given to the company of the intention to propose that
person for appointment or reappointment stating the particulars which
would, if he were so appointed or reappointed, be required to be included in
the company’s register of directors together with notice executed by that
person of his willingness to be appointed or reappointed.
64. NOTICE OF APPOINTMENT OR REAPPOINTMENT
Not less than seven nor more than twenty eight clear days before the date appointed for
holding a general meeting notice shall be given to all who are entitled to receive notice of the
meeting of any person who is recommended by the directors for appointment or
reappointment as a director at the meeting or in respect of whom notice has been duly given
to the company of the intention to propose him at the meeting for appointment or
reappointment as a director. The notice shall give the particulars of that person which would,
if he were so appointed or reappointed, be required to be included in the company’s register
of directors.
65. POWER OF BOARD TO APPOINT DIRECTORS
Subject to the articles, the board may appoint a person who is willing to act to be a director,
either to fill a vacancy or as an additional director, provided that the appointment does not
cause the number of directors to exceed any number fixed by or in accordance with the
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articles as the maximum number of directors. A director so appointed shall hold office only
until the next following annual general meeting. If not reappointed at such annual general
meeting, he shall vacate office at the conclusion thereof.
66. POSITION OF RETIRING DIRECTORS
Subject as aforesaid, a director who retires at an annual general meeting may, if willing to act,
be reappointed. If he is not reappointed, he shall retain office until the meeting appoints
someone in his place, or if it does not do so, until the end of the meeting, or (if earlier) when a
resolution is passed to appoint someone in his place.
67. DISQUALIFICATION AND REMOVAL OF DIRECTORS
(A) Without prejudice to the provisions of the articles and in addition to any
power of removal conferred by the Act, the company may by special
resolution remove any director before the expiration of his period of office
and may (subject to these articles) by ordinary resolution appoint another
person who is willing to act to be a director in his place.
(B) The office of a director shall be vacated ift
(i) he ceases to be a director by virtue of any provision of the Act or he
becomes prohibited by law from being a director; or
(ii) he becomes bankrupt or makes any arrangement or composition with
his creditors generally; or
(iii) he is, or may be suffering from mental disorder and either:
(a) he is admitted to hospital in pursuance of an application for
admission for treatment under the Mental Health Act 1983
or, in Scotland, an application for admission under the
Mental Health (Scotland) Act 1960; or
(b) an order is made by a court having jurisdiction (whether in
the United Kingdom or elsewhere) in matters concerning
mental disorder for his detention or for the appointment of a
receiver, curator bonis or other person to exercise powers
with respect to his property or affairs; or
(iv) he resigns his office by notice to the company;
(vy) he is removed pursuant to Article 67(A) or 68; or
(vi) he shall for more than six consecutive months have been absent
without permission of the board from meetings of the board held
during that period and the directors resolve that his office be vacated.
If the office of a director is vacated for any reason, he shall cease to be a
member of any committee or sub-committee of the board.
68. APPOINTMENT OF CHAIRMAN AND DIRECTORS
(A) — Chairman
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The Special Shareholder shall be entitled from time to time to appoint and
remove any person as chairman of the company by notice in writing
delivered to the company and signed on behalf of the Special Shareholder
(B) _ Directors
The Special Shareholder shall be entitled from time to time to appoint and to
remove any person as a director of the company by notice in writing
delivered to the company and signed on behalf of the Special Shareholder.
The chairman shall be required to consult with and obtain the approval of the
Special Shareholder in relation to the appointment and the removal of any
person as a director.
POWERS OF THE BOARD
69. GENERAL POWERS OF COMPANY VESTED IN THE BOARD
Subject to the provisions of the Act, these articles and to any directions given by the company
by special resolution, the business of the company shall be managed by the board who may
exercise all the powers of the company. No alteration of these articles and no such special
resolution shall invalidate any prior act of the board which would have been valid if that
alteration had not been made or that resolution had not been passed. The powers given by this
Article shall not be limited by any special power given to the board by the articles.
70. BORROWING POWERS
The board may exercise all the powers of the company to borrow and to mortgage or charge
all or any part of the undertaking, property and assets (present and future) and uncalled capital
of the company, but subject to the restrictions contained in the articles
71. APPOINTMENT OF AGENT
The board may, by power of attorney or otherwise, appoint any person to be the agent of the
company for such purposes and on such conditions as it determine, including authority for the
agent to delegate all or any of his powers.
72. POWER TO PROVIDE FOR EMPLOYEES
The board may by resolution exercise any power conferred by the Act to make provision for
the benefit of persons employed or formerly employed by the company or any of its
subsidiaries in connection with the cessation or the transfer to any person of the whole or part
of the undertaking of the company or that subsidiary.
73. POWER TO RECEIVE UNCALLED MONEYS
The board may, if it thinks fit, receive from any member willing to advance the same all or
any part of the moneys uncalled and remaining unpaid on any shares held by him
74. DELEGATION OF THE BOARD’S POWERS
The board may delegate any of its powers to any committee consisting of one or more
directors with power to sub-delegate. It may also delegate to any managing director or any
director holding any other executive office such of its powers as it considers desirable to be
exercised by him. Any such delegation may be made subject to any conditions the board may
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impose, and either collaterally with or to the exclusion of its own powers and may be revoked
or altered. Subject to any such conditions, the proceedings of a committee with two or more
members shall be governed by the articles regulating the proceedings of the board so far as
they are capable of applying.
DIRECTORS’ EXPENSES
75. DIRECTORS’ EXPENSES
The directors may be paid all travelling, hotel, and other expenses properly incurred by them
in connection with their attendance at board meetings or committees of directors or general
meetings or separate meetings of the holders of any class of shares or of debentures of the
company or otherwise in connection with the discharge of their duties.
DIRECTORS’ APPOINTMENTS AND INTERESTS
76. MANAGING DIRECTOR AND EXECUTIVE OFFICE
Subject to the provisions of the Act and the articles, the directors may appoint one or more of
their number to the office of managing director or to any other executive office under the
company and may enter into an agreement or arrangement with any director for his
employment by the company or for the provision by him of any services outside the scope of
the ordinary duties of a director. Any such appointment, agreement or arrangement may be
made upon such terms as the directors determine and they may remunerate any such director
for his services as they think fit Any appointment of a director to an executive office shall
terminate it he ceases to be a director but without prejudice to any claim to damages for
breach of the contract of service between the director and the company.
77. CONFLICTS OF INTEREST REQUIRING BOARD AUTHORISATION"
(A) _ The board may, subject to the quorum and voting requirements set out in this
Article, authorise any matter which would otherwise involve a director
breaching his duty under the Act to avoid conflicts of interest (a““Conflict”).
(B) A director seeking authorisation in respect of a Conflict shall declare to the
board the nature and extent of his interest in that Conflict as soon as is
reasonably practicable. The director shall provide the board with such details
of the relevant matter as are necessary for the board to decide how to address
the Conflict together with such additional information as may be requested by
the board.
(C) Any director (including the relevant director) may propose that the relevant
director be authorised in relation to any matter the subject of a Conflict. Such
proposal and any authority given by the board shall be effected in the same
way that any other matter may be proposed to and resolved upon by the board
under the provisions of these articles save that
(i) the relevant director and any other director with a similar interest
shall not count towards the quorum nor vote on any resolution giving
such authority; and
I FF note: To discuss conflicts. Situational conflicts to be approved on appointment.
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(D)
(ii) the relevant director and any other director with a similar interest
may, if the other members of the board so decide, be excluded from
any board meeting while the Conflict is under consideration.
Where the board gives authority in relation to a Conflict:
(i) the board may (whether at the time of giving the authority or
subsequently) (a) require that the relevant director is excluded from
the receipt of information, the participation in discussion and/or the
making of decisions (whether at meetings of the board or otherwise)
related to the Conflict, and (b) impose upon the relevant director such
other terms for the purpose of dealing with the Conflict as it may
determine;
(ii) the relevant director will be obliged to conduct himself in accordance
with any terms imposed by the board in relation to the Conflict;
(iii) the board may provide that where the relevant director obtains
(otherwise than through his position as a director of the company)
information that is confidential to a third party, the director will not
be obliged to disclose that information to the company, or to use or
apply the information in relation to the company’s affairs, where to
do so would amount to a breach of that confidence;
(iv) the terms of the authority shall be recorded in writing (but the
authority shall be effective whether or not the terms are so recorded);
and
(vy) the board may revoke or vary such authority at any time but this will
not affect anything done by the relevant director prior to such
revocation in accordance with the terms of such authority.
78. OTHER CONFLICTS OF INTEREST
(A)
(B)
If a director is in any way directly or indirectly interested in a proposed
contract with the company or a contract that has been entered into by the
company, he must declare the nature and extent of that interest to the
directors in accordance with the Act.
Provided he has declared his interest in accordance with Article 78(A) a
director may:
(i) be party to, or otherwise interested in, any contract with the company
or in which the company has a direct or indirect interest;
(ii) hold any other office or place of profit with the company (except that
of auditor) in conjunction with his office of director for such period
and upon such terms, including as to remuneration, as the board may
decide;
(iii) act by himself or through a firm with which he is associated in a
professional capacity for the company or any other company in
which the company may be interested (otherwise than as auditor);
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(iv) be or become a director or other officer of, or employed by or
otherwise be interested in any holding company or subsidiary
company of the company or any other company in which the
company may be interested; and
(v) be or become a director of any other company in which the company
does not have an interest and which cannot reasonably be regarded as
giving rise to a conflict of interest at the time of his appointment as a
director of that other company.
(C) A director shall not, by reason of his office or of the fiduciary relationship
thereby established be liable to account to the company for any remuneration,
profit or other benefit realised by reason of his having any type of interest
authorised under Article 77(A) or permitted under Article 78(B) and no
contract shall be liable to be avoided on the grounds of a director having any
type of interest authorised under Article 77(A) or permitted under
Article 78(B).
DIRECTORS’ GRATUITIES AND PENSIONS
79. DIRECTORS’ GRATUITIES AND PENSIONS
Subject to the articles, the board may exercise all the powers of the company to provide
benefits, either by the payment of gratuities or pensions or by insurance or in any other
manner whether similar to the foregoing or not, for any director or former director or the
relations, connections or dependants of any director or former director who holds or has held
any executive office or employment with the company or with any body corporate which is or
has been a subsidiary of the company or with a predecessor in business of the company or of
any such body corporate and may contribute to any fund and pay premiums for the purchase
or provision of any such benefit. No director or former director shall be accountable to the
company or the members for any benefit provided pursuant to this Article and the receipt of
any such benefit shall not disqualify any person from being or becoming a director of the
company.
PROCEEDINGS OF DIRECTORS
80. BOARD MEETINGS
Subject to the provisions of the articles, the board may regulate its proceedings as it thinks fit.
A director may, and the secretary at the request of a director shall, call a meeting of the board
81. NOTICE
Notice of a meeting of the board shall be deemed to be properly given to a director if it is
given to him personally or by word of mouth or sent in writing to him at his last known
address or any other address given by him to the company for this purpose, or by any other
means authorised in writing by the director concerned. Notice shall be given in this manner to
all directors including any director who is for the time being absent from the
United Kingdom. A director may waive notice of any meeting either prospectively or
retrospectively.
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82. ‘VOTING
Questions arising at a meeting shall be decided by a majority of votes. A director who is also
an alternate director shall be entitled in the absence of his appointor to a separate vote on
behalf of his appointor in addition to his own vote.
83. QUORUM
The quorum for the transaction of the business of the board may be fixed by the board and
unless so fixed at any other number shall be two. A person who holds office only as an
alternate director shall, if his appointor is not present, be countedin the quorum.
84. DIRECTORS BELOW MINIMUM THROUGH VACANCIES
The continuing directors or a sole continuing director may act notwithstanding any vacancies
in their number, but, if the number of directors is less than the number fixed as the quorum,
the continuing directors or director may act only for the purpose of filling vacancies or of
calling a general meeting.
85. CHAIRMAN
The chairman shall be the person appointed pursuant to Article 68(A). In the absence of such
appointment the directors may appoint one of their number to be the chairman of the board
and may at any time remove him from that office. Unless he is unwilling to do so, the
chairman shall preside at every meeting of the board at which he is present But if there is no
director holding that office, or if the director holding it is unwilling to preside or if the
chairman is not present within five minutes afier the time appointed for the meeting, the
directors present may appoint one of their number to be chairman of the meeting.
86. VALIDITY OF ACTS OF BOARD OR COMMITTEE
All acts done by the board, or by a committee of directors, or by a person acting as a director
or member of a committee shall, notwithstanding that it be afterwards discovered that there
was a defect in the appointment of any director or member of a com mittee or person so acting
or that any of them were disqualified from holding office, or had vacated office, or were not
entitled to vote, be as valid as if every such person had been duly appointed and was qualified
and had continued to be a director or member of the committee and had been entitled to vote.
87. RESOLUTION IN WRITING
A resolution in writing signed by all the directors entitled to receive notice of a meeting of the
board (if that number is sufficient to constitute a quorum) or by all the members of a
committee of directors shall be as valid and effectual as if it had been passed at a board
meeting or (as the case may be) a committee of directors duly convened and held and may
consist of several documents in the like form each signed by one or more directors, but a
resolution signed by an alternate director need not also be signed by his appointor and, if it is
signed by a director who has appointed an alternate director, it need not be signed by the
alternate director in that capacity.
88. PARTICIPATION IN BOARD MEETINGS BY TELEPHONE
All or any of the members of the board or any committee of the board may participate in a
board meeting or that committee by means of a conference telephone or any communication
equipment which allows all persons participating in the meeting to hear each other. A person
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sO participating shall be deemed to be present in person at the meeting and shall be entitled to
vote or be counted in a quorum accordingly. Such a meeting shall be deemed to take place
where the largest group of those participating is assembled, or, if there is no such group,
where the chairman of the meeting then is.
89. PERMITTED INTERESTS AND VOTING
(A) I Save as otherwise provided by the articles, a director shall not vote at a
meeting of the board or of a committee of directors on any resolution
concerning a matter in which he has, directly or indirectly, an interest or duty
unless that interest or duty cannot reasonably regarded as likely to give rise to
a conflict of interest or his interest or duty arises only because the case falls
within one or more of the following paragraphs:
(i) the resolution relates to the giving to him of a guarantee, security, or
indemnity in respect of money lent to, or an obligation incurred by
him for the benefit of, the company or any of its subsidiaries; and/or
(ii) the resolution relates to the giving to a third party of a guarantee,
security, or indemnity in respect of an obligation of the company or
any of its subsidiaries for which the director has assumed
responsibility in whole or part and whether alone or jointly with
others under a guarantee or indemnity or by the giving of security;
and/or
(iii) _ his interest arises by virtue of his subscribing or agreeing to subscribe
for any shares, debentures or other securities of the company or any
of its subsidiaries, or by virtue of his being, or intending to become, a
participant in the underwriting or sub-underwriting of an offer of any
such shares, debentures, or other securities by the company or any of
its subsidiaries for subscription, purchase or exchange; and/or
(iv) the resolution relates in any way to a retirement benefits scheme
which has been approved, or is conditional upon approval, by the
HM Revenue and Customs for taxation purposes.
For the purposes of this Article, in relation to an alternate director, an interest of his appointor
shall be treated as an interest of the alternate director without prejudice to any interest which
the alternate director has otherwise.
(B) A director shall not be counted in the quorum present at a meeting in relation to a
resolution on which he is not entitled to vote.
(C) The company may by ordinary resolution suspend or relax to any extent, either
generally or in respect of any particular matter, any provision of the articles
prohibiting a director from voting at a meeting of the board or of a committee of
directors.
(D) Where proposals are under consideration concerning the appointment of two or more
directors to offices or employments with the company or any body corporate in
which the company is interested the proposals may be divided and considered in
relation to each director separately and (provided he is not for another reason
precluded from voting) each of the directors concerned shall be entitled to vote and
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be counted in the quorum in respect of each resolution except that concerning his
own appointment.
(E) If a question arises at a meeting of the board or of a committee of directors as to the
right of a director to vote, the question may, before the conclusion of the meeting, be
referred to the chairman of the meeting and his ruling in relation to any director other
than himself shall be final and conclusive.
SECRETARY
90. APPOINTMENT AND REMOVAL OF COMPANY SECRETARY
Subject to the provisions of the Act, the secretary shall be appointed by the directors for such
term, at such remuneration and upon such conditions as they may think fit, and any secretary
so appointed may be removed by them.
MINUTES
91. I KEEPING OF MINUTES
The directors shall cause minutes to be made in books kept for the purpose:
(A) _ of all appointments of officers made by the directors; and
(B) _ of all proceedings at meetings of the company, of the holders of any class of
shares in the company, and of the board, and of committees of directors,
including the names of the directors present at each such meeting.
DIVIDENDS
92. DECLARATION OF DIVIDENDS
Subject to the provisions of the Act and the articles, the company may by ordinary resolution
declare dividends in accordance with the respective rights of the members, but no dividend
shall exceed the amount recommended by the board. Save in respect of dividends paid
pursuant to Article 9(D), the aggregate dividends paid in any accounting period of the
company shall not exceed the greater of 40 per cent. of the company’s net profits after tax in
such accounting period and any dividend floor set by the Special Shareholder for such
accounting period (as communicated by the Special Shareholder to the company in writing (in
accordance with these articles) for the five financial years commencing with such accounting
period).
93. PAYMENT OF INTERIM AND FIXED DIVIDENDS BY BOARD
Subject to the provisions of the Act and the articles, the board may pay interim dividends if it
appears to it that they are justified by the profits of the company available for distribution. If
the share capital is divided into different classes, the board may pay interim dividends on
shares which confer deferred or non-preferred rights with regard to dividend as well as on
shares which confer preferential rights with regard to dividend, but no interim dividend shall
be paid on shares carrying deferred or non-preferred rights if, at the time of payment, any
preferential dividend is in arrear. The board may also pay at intervals settled by them any
dividend payable at a fixed rate if it appears to them that the profits available for distribution
justify the payment. Provided the directors act in good faith they shall not incur any liability
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to the holders of shares conferring preferred rights for any loss they may suffer by the lawful
payment of an interim dividend on any shares having deferred or non-preferred rights.
94, CALCULATION OF DIVIDENDS
Except as otherwise provided by the rights attached to shares, all dividends shall be declared
and paid according to the amounts paid up on the shares on which the dividend is paid, but no
outstanding amount paid up on a share in advance of the applicable call date shall be treated
for the purposes of this Article as paid up on the share. All dividends shall be apportioned and
paid proportionately to the amounts paid up on the shares during any portion or portions of
the period in respect of which the dividend is paid, but, if any share is issued on terms
provided that it shall rank for dividend as from a particular date, that share shall rank for
dividend accordingly.
95. DIVIDENDS NOT IN CASH
A general meeting declaring a dividend may, upon the recommendation of the board, direct
that it shall be satisfied wholly or partly by the distribution of assets and, where any difficulty
arises in regard to the distribution, the board may settle the same and in particular may issue
fractional certificates and fix the value for distribution of any assets and may determine that
cash shall be paid to any member upon the footing of the value so fixed in orderto adjust the
rights of members and may vest any assets in trustees.
96. PAYMENT OF DIVIDENDS
Any dividend or other moneys payable in respect of a share may be paid by cheque sent by
post to the registered address of the person entitled or, if two or more persons are the holders
of the share or are jointly entitled to it by reason of the death or bankruptcy of the holder, to
the registered address of that one of those persons who is first named in the register of
members or to such person and to such address as the person or persons entitled may in
writing direct. Every cheque shall be made payable to the order of the person or persons
entitled or to such other person as the person or persons entitled may in writing direct and
payment of the cheque shall be a good discharge to the company. Any joint holder or other
person jointly entitled to a share as aforesaid may give receipts for any dividend or other
moneys payable in respect of the share.
97. NO INTEREST ON DIVIDENDS
No dividend or other moneys payable in respect of a share shall bear interest against the
company unless otherwise provided by the rights attached to the share.
98. I AMOUNTS DUE ON SHARES MAY BE DEDUCTED FROM DIVIDENDS
The board may deduct from any dividend or other moneys payable to a member by the
company on or in respect of any shares all sums of money (if any) presently payable by him
to the company on account of calls.
99, FORFEITURE OF UNCLAIMED DIVIDENDS
Any dividend which has remained unclaimed for twelve years from the date when it became
due for payment shall, if the directors so resolve, be forfeited and cease to remain owing by
the company.
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100. RESERVES AND SECTION 72 OF THE POSTAL SERVICES ACT 2000
Upon receipt by the company or any member of the group (other than a subsidiary which is a
USP Listco (and its subsidiaries)) of a direction made pursuant to section 72 of the Postal
Services Act 2000 (a “section 72 direction”) the company shall and shall procure that any
member of the group to whom that section 72 direction applies shall:
(A)
(B)
(Cc)
forthwith comply with the terms of the section 72 direction;
(unless the Special Shareholder shall have expressly consented to the contrary
in accordance with Article 10.1) keep government securities of a value at
least equal to the amount allocated or re-allocated to the reserve in
compliance with the section 72 direction (together with interest accruing from
time to time on such government securities) deposited to be held against and
back such reserve; and
within 3 business days of the latest date specified in the section 72 direction
pursuant to section 72(2) of the Postal Services Act 2000 confirm in writing
to the Special Shareholder that:
(1) it, or the relevant member of the group (as appropriate), has
duly complied with the terms of the section 72 direction;
(ID the allocations or re-allocations to the reserve described in
the section 72 direction have been duly effected; and
(IL) the government securities referred to in Article 100(B) above
have indeed been duly deposited to be held against and back
such reserve,
(IV) _ and the provisions of this Article 100(A) and (C) shall apply
mutatis mutandis in respect of the receipt by the company or
any member of the group (other than a subsidiary which is a
USP Listco (and its subsidiaries)) of a direction made
pursuant to section 74 of the Postal Services Act 2000.
ACCOUNTS
101. RECORDS TO BE KEPT
The board shall cause to be kept accounting records sufficient to show and explain the
company’s transactions, and such as to disclose with reasonable accuracy at any time the
financial position of the company at that time, and which accord with the Act
CAPITALISATION OF PROFITS
102. POWER TO CAPITALISE RESERVES AND FUNDS
The board may with the authority of an ordinary resolution of the company:
(A) _ subject as hereinafter provided, resolve to capitalise any undivided profits of
the company not required for paying any preferential dividend (whether or
not they are available for distribution) or any sum standing to the credit of the
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company’s share premium account or capital redemption reserve (including
retained earnings);
(B) appropriate the sum resolved to be capitalised to the members who would
have been entitled to it if it were distributed by way of dividend and in the
same proportions and apply such sum on their behalf either in or towards
paying up the amounts, if any, for the time being unpaid on any shares held
by them respectively, or in paying up in full shares or debentures of the
company of a nominal amount equal to that sum, and allot the shares or
debentures credited as fully paid to those members, or as they may direct, in
those proportions, or partly in one way and partly in the other, but the share
premium account, the capital redemption reserve, retained earnings, and any
profits which are not available for distribution may, for the purposes of this
Article, only be applied in paying up shares that are then to be allotted and
distributed to members credited as fully paid;
(C) _ resolve that any shares so allotted to any member in respect of a holding by
him of any partly paid shares shall so long as such shares remain partly paid
rank for dividend only to the extent that the latter shares rank for dividend,
(D) _ make such provision by the issue of fractional certificates or by payment in
cash or otherwise as they determine in the case of shares or debentures
becoming distributable under this Article in fractions; and
(E) authorise any person to enter on behalf of all the members concerned into an
agreement with the company providing for the allotment to them respectively,
credited as fully paid, of any shares or debentures to which they are entitled
upon such capitalisation, any agreement made under such authority being
binding on all such members.
RECORD DATES
103. RECORD DATES
Notwithstanding any other provision of these articles, but without prejudice to the rights
attached to any shares, the company or the directors may fix a date as the record date by
reference to which a dividend will be declared or paid or a distribution, allotment or issue
made, and that date may be before, on or after the date on which the dividend, distribution,
allotment or issue is declared, paid or made. Where such a record date is fixed, references in
these articles to a holder of shares or member to whom a dividend is to be paid or a
distribution, allotment or issue is to be made shall be construed accordingly.
NOTICES
104. NOTICES IN WRITING
Any notice to be given to or by any person pursuant to the articles shall be in writing except
that a notice calling a meeting of the board need not be in writing
105. SERVICE OF NOTICES
Subject to the articles, the company may give any notice to a member either personally, by
post in a prepaid envelope addressed to the member at his registered address or by leaving it
at that address or such other means (which may include electronic means) to which the
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member has provided (and not revoked) its written consent for the receipt of such notices In
the case of joint holders of a share, all notices shall be given to the joint holder whose name
stands first in the register of members in respect of the joint holding and notice so given shall
be sufficient notice to all the joint holders. A member whose registered address is not within
the United Kingdom and who gives to the company an address within the United Kingdom at
which notices may be given to him shall be entitled to have notices given to him at that
address, but otherwise no such member shall be entitled to receive any notice from the
company.
106. DEEMED RECEIPT OF NOTICE BY MEMBERS PRESENT AT MEETING
A member present, either in person or by proxy, at any meeting of the company or of the
holders of any class of shares in the company shall be deemed to have received notice of the
meeting and, where requisite, of the purposes for which it was called.
107. SHAREHOLDERS BOUND BY NOTICE
Every person who becomes entitled to a share shall be bound by any notice in respect of that
share which, before his name is entered in the register of members, has been duly given to a
person from whom he derives his title.
108. TIME OF SERVICE
(A) _ Any notice, document or other information, if served, sent or supplied by the
company by post, shall be deemed to have been received on the day
following that on which it was posted if first class post was used or 48 hours
after it was posted if first class post was not used and, in proving that a
notice, document or other information was served, sent or supplied, it shall be
sufficient to prove that the notice, document or other information was
properly addressed, prepaid and put in the post.
(B) Any notice, document or other information not served, sent or supplied by
post but left by the company at a registered address or at an address (other
than an address for the purposes of communications by electronic means)
notified to the company in accordance with these articles by a person who is
entitled by transmission to a share shall be deemed to have been received on
the day it was so left.
(C) Any notice, document or other information served, sent or supplied by the
company using electronic means shall be deemed to have been received on
the day on which it was sent notwithstanding that the company subsequently
sends a hard copy of such notice, document or information by post. In
proving that a notice, document or other information served, sent or supplied
by electronic means was served, sent or supplied, it shall be sufficient to
prove that it was properly addressed.
(D) Any notice, document or other information served, sent or supplied by the
company by any other means authorised in writing by the member concerned
shall be deemed to have been received when the company has carried out the
action it has been authorised to take for that purpose.
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109. SERVICE OF NOTICE ON PERSON ENTITLED BY TRANSMISSION
A notice may be given by the company to the persons entitled to a share in consequence of
the death or bankruptcy of a member by sending or delivering it, in any manner authorised by
the articles for the giving of notice to a member, addressed to them by name, or by the title of
representatives of the deceased, or trustee of the bankrupt or by any like description at the
address, if any, within the United Kingdom supplied for that purpose by the persons claiming
to be so entitled. Until such an address has been supplied, a notice may be given in any
manner in which it might have been given if the death or bankruptcy had not occurred.
WINDING UP
110. DISTRIBUTION OF ASSETS OTHERWISE THAN IN CASH
If the company is wound up, the liquidator may, with the sanction of a special resolution of
the company and any other sanction required by the Act, divide among the members in specie
the whole or any part of the assets of the company and may, for that purpose, value any assets
and determine how the division shall be carried out as between the members or different
classes of members. The liquidator may, with the like sanction, vest the whole or any part of
the assets in trustees upon such trusts for the benefit of the members as he with the like
sanction determines, but no member shall be compelled to accept any assets upon which there
is a liability.
INDEMNITY
111. INDEMNITY OF DIRECTORS
To the extent permitted by the Act the company may indemnify any director, former director
or company secretary of the company against any liability and may purchase and maintain for
any director or former director or company secretary of the company insurance against any
liability. No director or former director or company secretary of the company shall be
accountable to the company or the members for any benefit provided pursuant to this Article
and the receipt of any such benefit shall not disqualify any person from being or becoming a
director of the company.
PROVISIONS RELATING TO ARTICLES 9 AND 10
112. ARTICLES SUBJECT TO RELEVANT LAW
(A) Nothing contained in Articles 9 or 10 shall have effect so as to require the
company or any of the directors to (i) take any action, (ii) omit to take any
action, or (iii) procure that any subsidiary of the company takes or omits to
take any action which action or omission would, in the reasonable opinion of
the board of the company or of such subsidiary, give rise to criminal or civil
liability on the part of the company, such subsidiary or any of the directors of
the company or such subsidiary, or any liability on any of the aforesaid for
breach of any statutory or common law duty or requirement (for the purposes
of this Article 112, a “relevant breach”).
(B) _ If a relevant breach is capable of ratification by the shareholders of the
company or subsidiary concerned, and such ratification would have the effect
of removing or avoiding the consequences of the relevant breach (insofar as
such consequences affect or would affect the company or subsidiary or any of
their respective directors), then subject to the shareholders concerned
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providing a written undertaking to the company or subsidiary, as the case
may be, that the requisite ratification will be provided, the action or omission
which would (but for ratification), have given rise to the relevant breach shall
be effected or, as the case may be, procured by the company as though this
Article 112 did not apply in relation thereto.
(C) _ For the purposes of this Article 112, the “reasonable opinion of the board”
in relation to a matter shall mean the reasonable opinion of the board of
directors of the company or subsidiary concerned, having (i) as soon as is
reasonably practicable taken and having had due regard to appropriate legal
and/or financial advice, (ii) following the receipt of such advice, having
promptly provided the same to the Special Shareholder and consulted with
the Special Shareholder in relation to the said advice, and to the formation of
the board’s opinion on the relevant matter, and having had due regard to the
views (if any) of the Special Shareholder notified to it in relation thereto, and
(iii) where the Special Shareholder gives notice under Article 112(D), having
had due regard to the independent advice consequently received and having
consulted the Special Shareholder in relation thereto.
(D) If in any case where the company or the directors seek to rely upon
Article 112(A) in respect of any matter, the Special Shareholder has within 7
days of receipt of legal and/or financial advice pursuant to Article 112(C)
notified the company that it requires independent advice to be taken in
relation to the relevant matter(s) from an independent legal and/or financial
adviser approved by the Special Shareholder, such advice to be addressed to
the company, its directors and the Special Shareholder, the company shall (i)
obtain such advice, and (ii) subject to Article 112(A) not take any decision or
action in relation to the relevant matter until such advice shelf have been
obtained and the board shall have consulted the Special Shareholder in
relation thereto.
(E) Nothing in this Article 112 shall fetter any statutory power or remove or alter
any obligation imposed on any person by statute.
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CONTENTS
CLAUSE PAGE
EXCLUSION OF MODEL ARTICLES
2. DEFINITIONS
3. LIMITED LIABILITY ....
4. RIGHTS ATTACHED TO SHARES,
5. REDEEMABLE SHARES
6. PAYMENT OF COMMISSION ...
7. TRUSTS NOT RECOGNISED.
8. VARIATION OF CLASS RIGHTS
9. HOLDER OF THE SPECIAL SHARE...........:sccssscscessssseessssecessesessseeesssenssssensssseemassessn
10. VARIATION OF SPECIAL SHARE RIGHTS ..........-:cccsssssssessseesseneeessseesssseesessenssssseeed)
12. RIGHT TO SHARE CERTIFICATES...
13. REPLACEMENT OF SHARE CERTIFICATES .......
14. COMPANY’S LIEN ON SHARES NOT FULLY PAID
1S. ENFORCING LIEN BY SAL!
16. APPLICATION OF PROCEEDS OF SALE
17. CALLS...
18. LIABILITY OF JOINT HOLDERS wld
19. INTEREST DUE ON NON-PAYMENT...
20. SUMS DUE ON ALLOTMENT TREATED AS CALLS .........eescessteesseeseesteeereee dS
21. POWER TO DIFFERENTIATE ...........sccssssseesesseeeees AS
22. NOTICE IF CALL OR INSTALMENT NOT PAID ...0..-.cscescsseesssseessseusseeessseeeesseee dS
23. FORFEITURE FOR NON-COMPLIANCE WITH NOTICE ........:.cc00cseesssseeeeeee ee IS
24. SALE OF FORFEITED SHARES... cee
25. ARREARS TO BE PAID NOTWITHSTANDING FORFEITURE
26. STATUTORY DECLARATION AS TO FORFEITURE ...
27. EXECUTION OF TRANSFER.
28. RIGHT TO DECLINE REGISTRATION
29. NO FEE FOR REGISTRATION
30. RETENTION OF INSTRUMENT OF TRANSFER
31. TRANSMISSION ON DEATH... 16
32. ELECTION OF PERSON ENTITLED BY TRANSMISSION. 17
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33. RIGHTS OF PERSON ENTITLED BY TRANSMISSION...
34. SUB-DIVISION
35. FRACTIONS
36. OMISSION OR NON-RECEIPT OF NOTICE
37. POSTPONEMENT OF GENERAL MEETINGS 17
38. QUORUM ........
39. PROCEDURE IF QUORUM NOT PRESENT ..
40. CHAIRMAN OF GENERAL MEETING.
41. ORDERLY CONDUCT...
42. ENTITLEMENT TO ATTEND AND SPEAK
43. ADJOURNMENTS....
44. AMENDMENTS RULED OUT OF ORDER..
4S. VOTES OF MEMBERS
47. PROCEDURE IF POLL NOT DEMANDED....
48. WITHDRAWAL OF DEMAND FOR POLL....
49. PROCEDURE IF POLL DEMANDED
50. WHEN POLL TO BE TAKEN.
Sl. NO NOTICE OF POLL ....
52. VOTES OF JOINT HOLDERS
53. ‘VOTING ON BEHALF OF INCAPABLE MEMBER
54. NO RIGHT TO VOTE WHERE SUMS OVERDUE ON SHARES
55. OBJECTIONS OR ERRORS IN VOTING ....
56. APPOINTMENT OF PROXY
57. FORM OF PROXY
58. INSTRUCTIONS TO PROXY ..
59. DELIVERY OF PROXIES ..........000-:0000 sess
60. CANCELLATION OF PROXY’S AUTHORITY
61. NUMBER OF DIRECTORS
62. ALTERNATE DIRECTORS .....
63. PERSONS ELIGIBLE AS DIRECTORS
64. NOTICE OF APPOINTMENT OR REAPPOINTMENT
65. POWER OF BOARD TO APPOINT DIRECTORS
66. POSITION OF RETIRING DIRECTORS
67. DISQUALIFICATION AND REMOVAL OF DIRECTORS.....
68. APPOINTMENT OF CHAIRMAN AND DIRECTORS ........:csccsssssseesssseeesseneseeensne 25
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69.
70.
71.
72.
73.
74.
75.
76.
77.
78.
79.
80.
81.
82.
83.
84.
85.
86.
87.
88.
89.
90.
OL.
92.
93.
94.
95.
96.
97.
98.
99.
100.
101.
102.
103.
104.
GENERAL POWERS OF COMPANY VESTED IN THE BOARD
BORROWING POWERS
APPOINTMENT OF AGENT ..... coeeeeseese
POWER TO PROVIDE FOR EMPLOYEES...
POWER TO RECEIVE UNCALLED MONEYS
DELEGATION OF THE BOARD’S POWERS.
DIRECTORS’ EXPENSES
MANAGING DIRECTOR AND EXECUTIVE OFFICE .....
CONFLICTS OF INTEREST REQUIRING BOARD AUTHORISATION
OTHER CONFLICTS OF INTEREST.......
DIRECTORS’ GRATUITIES AND PENSIONS
BOARD MEETINGS.
NOTICE
QUORUM eoeeseneeee
DIRECTORS BELOW MINIMUM THROUGH VACANCIES....
CHAIRMAN ...
VALIDITY OF ACTS OF BOARD OR COMMITTEE
RESOLUTION IN WRITING
PARTICIPATION IN BOARD MEETINGS BY TELEPHONE...
PERMITTED INTERESTS AND VOTING
APPOINTMENT AND REMOVAL OF COMPANY SECRETARY ....
KEEPING OF MINUTES
DECLARATION OF DIVIDENDS ...........ccc:csssesssseesssssnsseeeeeseessenee
PAYMENT OF INTERIM AND FIXED DIVIDENDS BY BOARD
CALCULATION OF DIVIDENDS...........000-000000
DIVIDENDS NOT IN CASH
PAYMENT OF DIVIDENDS
NO INTEREST ON DIVIDENDS
AMOUNTS DUE ON SHARES MAY BE DEDUCTED FROM
DIVIDENDS oe
FORFEITURE OF UNCLAIMED DIVIDENDS
RESERVES AND SECTION 72 OF THE POSTAL SERVICES ACT 2000
RECORDS TO BE KEPT
POWER TO CAPITALISE RESERVES AND FUNDS
RECORD DATES
NOTICES IN WRITING
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105. I SERVICE OF NOTICES
106. I DEEMED RECEIPT OF NOTICE BY MEMBERS PRESENT AT
MEETING
107. SHAREHOLDERS BOUND BY NOTICE
108. TIME OF SERVICE
109. I SERVICE OF NOTICE ON PERSON ENTITLED BY TRANSMISSION
110. DISTRIBUTION OF ASSETS OTHERWISE THAN IN CASH....
111. INDEMNITY OF DIRECTORS
112. ARTICLES SUBJECT TO RELEVANT LAW.
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Post Office Limited — Strictly Confidential
POLARC13 (1st)
POLARC13/1- 13/8
POST OFFICE LIMITED
(Company no. 2154540)
Minutes of a meeting of the AUDIT, RISK AND COMPLIANCE SUB-COMMITTEE held on
Wednesday 13 February 2013 at 1.15pm
at 148 Old Street, London EC1V 9HQ
Present:
Alasdair Marnoch Chairman of Committee
Neil McCausland Senior Independent Director
Susannah Storey Non-Executive Director
In attendance:
Alice Perkins Chairman, Post Office Limited
Paula Vennells Chief Executive (CEO)
Chris Day Chief Financial Officer (CFO)
Susan Crichton HR & Corporate Services Director
Sarah Hall Head of Financial Control and Compliance
Alwen Lyons Company Secretary
Mark Davies Communications Director (item 13/4 only)
Malcolm Zack Head of Internal Audit
Stephen Collins Audit Manager, Royal Mail Group Internal Audit (item 13/5 only)
Apologies for absence: Tim Franklin
POLARC13/1 INTRODUCTION
(a) I A quorum being present, the Chairman of the Committee opened the
meeting and welcomed all those present.
POLARC13/2 MINUTES OF THE LAST MEETING AND MATTERS ARISING
(a) I The minutes of the meeting held on 13 November 2012 were approved
for signature by the Chairman of the Committee.
(b) I The CFO reported that there was one final item to agree before he
ACTION: could confirm the external audit fees payable for 2012/2013 but he was
Chris Day content with the value being offered and would report the final fee to
the Committee once it had been finalised.
(c) I The following minutes were noted:-
Post Office Limited and Bank of Ireland (UK) Regulatory Risk
Committee held on 16 November 2012
Post Office Limited and Bank of Ireland (UK) Regulatory Risk
Committee held on 12 December 2012
Post Office Risk & Compliance Committee held on 21 January 2013.
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(d) I It was agreed that in future, instead of the minutes of the above Risk
Committees being presented to the ARC for noting, Susan Crichton, as
ACTION: Chair of the Risk & Compliance Committee would provide a summary
Susan Crichton of the key issues covered.
(e) I Susan Crichton explained the changes to the Post Office’s Speak Up
Policy (Whistleblowing) and the plan to communicate to Staff in April.
The policy was noted by the Committee who requested a report on the
ACTION: issues raised at the end of 2013-2014, with any significant matters
Susan Crichton highlighted in the interim.
POLARC13/3 RISK MANAGEMENT WITHIN POST OFFICE LIMITED
Risk Management Strategy 2013-2014
(a) I Malcolm Zack presented the Post Office Limited’s Risk Management
Strategy for 2013-2014. The current status of the Enterprise Risk
Management (ERM) framework was noted.
(b) I The next stage of the ERM development was agreed and would be
recommended to the Post Office Limited Board.
(c) I The Committee discussed the Risk Management Strategy for 2013-
2014 and the relationship between the Risk & Compliance Committee,
the Audit and Risk Committee, the Executive Committee and the
ACTION: Board. It was agreed following the completion of the Strategy both the
Susan Crichton/ Business and the Board would identify the key material risks (top 5-10)
Alasdair Marnoch which would be brought back to the ARC in the autumn for
consideration.
(d) I Regulatory Risk Framework and Controls
The Committee considered the Regulatory Risk Framework currently
in place for Post Office Limited and thanked the Business for the
comprehensive list of regulation identified.
(e) I Susan Crichton stressed the need for a clear view on risk appetite and
ACTION: the costs involved with assurance and mitigation. She asked the
Susan Crichton/ Committee to recognise that this was work in progress. The Committee
Alasdair Marnoch endorsed the proposed approach to monitoring, and agreed that the
Committee should review the Regulatory Risk Framework later in the
year once the risk appetite work had been completed.
(f) I Treasury Risk Management
The CFO presented the Treasury risk management framework,
policies and authorities to the Committee. The Chairman thanked him
for the full report and the Committee discussed each principal treasury
risk, as set out below.
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(g) I Foreign exchange Risk
The CFO explained that, although large volumes of currency were held
by the Business, the value at risk was relatively small. Tim Franklin
had asked the Business to consider the effect of reducing the number
of currencies held as this would reduce complexity and cost. The CFO
acknowledged that the ‘long tail’ of currencies with relatively few sales
did add complexity.
The Chairman asked if forward hedging a month was effective. The
CFO explained that the current regime was very risk averse and time
consuming and was an area which he would reconsider.
(h) I Interest Rate Risk
The CFO explained that the Business was affected by both sides of
the interest rate market and that he would only be concerned if the
market became volatile.
(i) I Insurance Risk
The Committee asked the Business to consider the need for
ACTION: Susan Professional Indemnity Insurance cover as it moved into the area of
Crichton financial services advice.
(j) I Counterparty Risk
The CFO presented the list of counterparties and reassured the
Committee that any proposed additions would be presented to the
Committee for approval. The Committee asked that the list be updated
to show the parent company and highlight where a parent company
guarantee existed. The list of counterparties was noted.
The Committee discussed the flow of Government funds and the
ACTION: possible advantage for the Business and the Government of a different
Chris Day approach. The CFO was asked to explore the possibility with ShEx but
ensuring this would not put receiving the agreed funding at risk.
(k) I Governance and Reporting
The governance and reporting explained in the paper was discussed. It
was agreed that policy breaches identified by management and any
ACTION: oversight processes should be notified to internal audit. The Head of
Malcolm Zack Internal Audit would report any significant policy breach to the
Committee.
The Committee noted the treasury risks to which the Post Office was
exposed. It was agreed that the proposed framework of treasury
policies and procedures, including the governance and reporting
ACTION: Chris mechanisms and associated approvals and limits, be recommended to
Day the Post Office Board in March.
POLARC13/4 ANNUAL REPORT AND ACCOUNTS
Mark Davies joined the meeting
(a) I The Committee considered the plans for the publication of the Post
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Office’s Report and Accounts (R&A) for the financial year 2012/2013
which included the key messages, together with a proposed timeline
for clearance of the report. It was agreed that the R&A should aim to
change people’s perception of the Business by being concise and
engaging, showing solid progress but with a sense of realism and
excitement.
The Chairman advised the Business to compare the R&A to those
ACTION: produced by mid-cap or small private limited companies as these were
Mark Davies often more concise than those produced by big corporations.
(b) I Neil McCausland explained the pressure from Government for full
disclosure in the Directors’ Remuneration Report. The Remuneration
Committee had agreed with advice from New Bridge Street
ACTION: (Remuneration Consultants) an appropriate level of disclosure.
Neil McCausland/ Susannah Storey recommended checking with ShEx that we are in line
Susannah Storey with the other companies in which they hold a share.
The Committee stressed the need to be prepared for the questions
ACTION: which would be raised by the disclosures in the Directors’
Mark Davies Remuneration Report.
(c) I The first draft of the Board Chairman’s Foreword had been circulated
ACTION: All and the Committee were asked to provide comments to Mark Davies
and Alice Perkins.
Tim Franklin had asked that the Business consider if there was a
ACTION: subject on which it would want to make a public statement in the R&A.
Mark Davies/ He gave, as an example, the easy way in which customers were able
Alwen Lyons to move their bank current accounts.
The plans for the publication of the Post Office’s Report and Accounts
for the financial year 2012/2013 were noted. The Committee asked for
a high level detailed milestone plan showing when the Board would be
required to input and who was signing off which parts of the document.
Mark Davies left the meeting.
POLARC13/5 INTERNAL AUDIT
(a) I Stephen Collins joined the meeting.
(b) I Malcolm Zack presented the activity report for the internal audit
function, which the Committee noted.
(c) I The Chairman asked that future Internal Audit Reports include the
outcomes required from the Audit and a timeline showing when those
outcomes would be delivered so that they could be tracked. Susan
Crichton explained that this detail was scrutinised by the Risk and
Audit Committee and it would be included in the summary requested
by the ARC. _(POLARC 13/2 (d)).
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@
Malcolm Zack reported the progress in setting up the Post Office
internal audit team and how this would enable a more flexible
approach.
The proposed internal audit plan for the financial year 2013/2014 was
ACTION: considered and reviewed. The Business was asked to ensure it had
Malcolm Zack enough focus on the major transformation programmes in both
Network and IT.
ACTION: All The Chairman asked that any other comments be forwarded to the
Head of Internal Audit.
It was agreed that
(i) the remaining contracted 100 man days from the Royal Mail
ACTION: Internal audit function be utilised in the first quarter of the
Malcolm Zack 2013/2014 financial year, with a view to exiting from the Royal
Mail support by 30 June 2013 at the latest;
(ii) the Internal audit plan for 2013/2014 be approved subject to an
increased focus on transformation programmes; and
(iii) a copy of the approved Internal Audit plan be circulated to the
ACTION: Risk and Compliance Committee, and the Executive
Malcolm Zack Committee.
Stephen Collins left the meeting
POLARC13/6 MATTERS REFERRED TO ARC BY THE BOARD
Update report on Information Security
(a) I The Committee noted the paper on Information Security. The
Chairman explained that he had already asked Lesley Sewell to focus
ACTION: on the immediate actions required to ensure the matter was
Lesley Sewell progressed to mitigate the significant risks.
ACTION: The Committee asked for an update in the CEO’s Board Report
Lesley Sewell explaining the specific actions being taken.
(b) I Bank of Ireland (UK) pic Capital and Liquidity
The Committee noted Bank of Ireland (UK) plc’s capital and liquidity
position against its regulatory and Eagle contract requirements, which
had met the terms of the joint venture agreement. Tim Franklin had
assured the Chairman that he was comfortable with the current
position and the on-going agreed monitoring.
POLARC13/7 ANY OTHER BUSINESS
None was reported.
POLARC13/8 CLOSE
There being no further business, the meeting was declared closed.
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PC 13/18-13/25 POST OFFICE LTD
PENSIONS SUB-COMMITTEE
Minutes of a meeting of the Pensions Sub-Committee of the Board
held at 148 Old Street, London EC1V 9HQ on Wednesday 1 May 2013
Present: Virginia Holmes (VH) — in the Chair
Chris Day (CD)
Susannah Storey (SS)
In Attendance: Susan Crichton (SC) HR & Corporate Services Director
Sarah Hall (SH) Head of Financial Control and Compliance
Ken Potter (KP) Pensions Adviser
Harpreet Singh (HS) Pensions Adviser
Tim Giles (TG) AON Hewitt (from item 13/23)
Zoe Taylor (ZT) AON Hewitt (from item 13/23)
Gill Catcheside (GC) Secretariat
PC 13/18 OPENING OF MEETING
A quorum being present, VH opened the meeting.
PC 13/19 MINUTES OF PREVIOUS MEETING AND MATTERS ARISING
The minutes of the meeting held on 4 March 2013 were approved for
signature by VH subject to the following amendment:
Minute PC13/08(c) Delete penultimate sentence and insert “It was agreed
that pension risk matters would be a separate item reported by ARC to the
Board as required.”
The minutes of the meeting held on 8 April were approved for signature by
VH.
The actions list as at March 2013 was noted.
The following matters arising from the minutes were discussed:
a) PC13/08(c) — It was noted that the Audit, Risk & Compliance, and
Risk & Compliance, committees had accepted responsibility for
pension risks.
b) PC13/12 - CD reported that the use of equity options had not yet
been explored, and a review of the investment criteria was still
outstanding. It was noted that the issue would be discussed at the
ACTION: CD May meeting of the Investment Working Group. CD undertook to
report back to VH/SS offline.
PC 13/20 PROJECT ROBIN
SC reported that Royal Mail was trying to get Union support for the Project
Robin proposals. Whilst conversations with CMA (Communications
Managers Association) had been broadly positive, the CWU
(Communication Workers Association) was generally not supporting
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Project Robin in RMG or Post Office in the context of other issues. The
CWU was already involved in strike action over pay issues with the Post
Office. SC reported that the consultation document paper had been
delayed as RMG wanted to carry out the consultation with the support of
the unions. There had been problems trying to engage with the unions
(the CWU had not turned up to the last meeting arranged) as to why
Project Robin was broadly a good thing, and the unions wanted
confirmation that all other options had been considered. The Committee
was advised that RMG were planning to issue the warm up letter and
consultation document after the 22 May. The reason for the delay was
that the CWU was sending out a ballot to its members for support with
regards to pay and privatisation, and RMG felt it would prefer that
pensions and Wren were not added to the strike action ballot. It was
noted that if Post Office wanted to consult at a different time from RMG it
would be best to discuss this with the Trustee and RMG in the first
instance. CD/SC would decide whether to engage with the Trustee
regarding the consultation process, with a view to discussing the issue at
Executive Committee and then Board level.
The Committee discussed whether the valuation would be delayed
because of the issues with Project Robin, SC replied it probably would. VH
asked whether the valuation could be signed on the current basis without
ACTION: CD the consultation documents being issued. Chris Day stated that he was
meeting with Chris Hogg and he would discuss valuation and obtain the
Trustee’s view. VH offered to accompany Chris Day if a meeting with
Joanna Mathews was required.
PC 13/21 PENSION IMPLICATION OF POTENTIAL SALE OF RMG
The paper on the pension implications arising from a potential sale of
RMG was considered by the Committee. HS confirmed that should RMG
be sold or privatised, RMG only had to serve three months’ notice to Post
Office to cease its participation in the Scheme. Should this occur Post
Office would need to be ready to establish its own Defined Benefit (DB)
and Defined Contribution (DC) Schemes. On a DB basis, the new
Scheme would have to “mirror” the benefits of the current Scheme.
The Committee was advised that it was difficult to estimate the potential
costs involved in setting up the new Schemes, but that these could be in
the region of £2 million. It was noted that one of the issues that would
need to be examined if the Post Office was allowed to remain in the
existing Scheme what was the basis on which it would it be permitted to
do so. For example, would Post Office cease to be a participating
employer and become an associated employer? If the latter were to
occur, it was envisaged that the Post Office would no longer necessarily
have a legal entitlement to have a say in the pension policy of the
Scheme. It was agreed that a paper should be prepared setting out the
ACTION: KP/HS various scenarios that could occur based upon the sale or partial sale of
RMG.
VH asked that any approaches to potential providers in order to complete
ACTION: KP/HS this initial paper should involve the Post Office procurement team who
would also need to be involved in any subsequent full RFP process
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PC13/22 REPORT ON RECENT INTERACTION WITH THE TRUSTEES
CD reported that he had met with Gerry Degaute and his successor, Chris
Hogg. CD confirmed that Post Office's business aims had been
discussed. CD also stated it had been indicated that the Trustee would
agree to a 17.1% contribution rate from Post Office to the Scheme. The
Committee noted that engagement meetings with the Trustee Executive
had been positive; it was however recommended that CD also endeavour
to meet with Joanna Matthews in the near future.
PC13/23 INVESTMENTS
Tim Giles and Zoe Taylor of AON Hewitt joined the meeting.
(a) The Committee considered the draft letter to Trustee regarding the
investment allocation and hedging strategies for the Post Office section of
the Scheme. It was noted that the extension of the liability hedge had
been reduced from six to three years. The trigger points were discussed.
It was noted that a hard trigger would result in an automatic action when
an event occurred, whereas a soft trigger would result in action only after
consultation between the Trustee and the Post Office. The Committee
noted that all trigger points within the strategy were now agreed as being
soft.
It was agreed that, subject to the last sentence on page one being taken
ACTION: CD out, and the word “any” being taken out of the last sentence of the Return
. Seeking Assets section, the draft letter be approved and sent to the
Trustee. VH queried whether it would be appropriate to state in the letter
what the actual target was. TG stated that it was broadly the same; Post
Office was targeting a 3-4% return above cash, whilst the Trustee was
looking for a return of 1.5% above Gilts. It was noted that the two returns
were comparable so adding to the letter was not necessary.
It was noted that the Trustee would, following receipt of the letter, prepare
the transition plan, and the Committee would be looking for the proposed
transition strategy to be specified/clarified.
(b) The Committee discussed with AON Hewitt whether it was appropriate
for Post Office to seek external validation of the performance reporting
and monitoring carried out by the Trustee as the Committee felt that
current investment reporting was very superficial. It was agreed that a
ACTION: TG qualitative review would be useful, with a commentary on whether the
strategy was delivering what was required.
TG undertook to provide (i) set-up costs of getting the Investment
reporting from the Trustee to a standard acceptable to Post Office and (ii)
on-going costs of providing a qualitative review of the Investment Report.
It was noted that the half year figures would be reported at the September
Committee meeting.
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PC 13/25
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ANY OTHER BUSINESS
(a) IAS 19
SH reported that following the application of the IAS 19 assumptions
agreed at the April meeting, the surplus on the balance sheet was
approximately £97 million. It was noted that the assumptions agreed were
consistent with those used by Royal Mail.
(b) Date of next meeting
It was agreed that the next meeting would take place at 10am on Tuesday
10 September 2013 at 148 Old Street, London EC1V 9HQ.
CLOSE
There being no further business, the meeting was declared closed.
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POLARC13 (3rd)
POLARC13/16-13/22
POST OFFICE LIMITED
(Company no. 2154540)
Minutes of a meeting of the AUDIT, RISK AND COMPLIANCE SUB-COMMITTEE held
on Tuesday 21 May 2013
at 148 Old Street, London EC1V 9HQ
Present:
Alasdair Marnoch Chairman of Committee
Neil McCausland Senior Independent Director
Tim Franklin Non-Executive Director
In attendance:
Alice Perkins Chairman, Post Office Limited
Paula Vennells Chief Executive (13/16 — 13/19 only)
Chris Day Chief Financial Officer (13/16 — 13/19 only)
Sarah Hall Head of Financial Control and Compliance (13/16 — 13/19 only)
Alwen Lyons Company Secretary
Angus Grant Ernst & Young
Jeremy Midkiff Ernst & Young
Apologies for absence:
Susan Crichton HR & Corporate Services Director
POLARC13/16 INTRODUCTION
(a) A quorum being present, the Chairman of the Committee opened the
meeting and welcomed all those present emphasising the that the
Committee had been called to review the first set of Annual Accounts
as a business operating independent of Royal Mail Group, which they
would then recommend to the Post Office Board for approval.
(b) It was noted following the Board meeting on the 20" March Susannah
Storey had relinquished her role on the Audit and Accounts
Committee.
POLARC13/17 PRESENTATION OF DRAFT ANNUAL REPORT AND FINANCIAL
STATEMENTS FOR THE 53 WEEKS ENDED 31 MARCH 2013
(a) The CFO introduced the Post Office Limited Annual Report and
Financial Statements for the 2012-13 financial year and the supporting
briefing book. He explained that the accounts had been prepared as a
stand-alone group to best practice pic reporting standards.
(b) The CFO led the Committee through key points of note in the briefing
book. They discussed the rise in ‘other operating costs’ driven by
investment in brand and future growth and asked the business to
ensure that a clear explanation was included in the document. The
Committee discussed the segmental analysis of product pillar costs
and the possible misunderstanding about the direct allocations of costs
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ACTION: Sarah
Hall
ACTION: Sarah
Hall
ACTION: CFO
ACTION: CFO
ACTION:
Chairman
POLARC13/18
(c)
(d)
(e)
(f)
(g)
(a)
(b)
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to products. It was agreed that the information had to be included but
that the introduction of product P&L reporting would help to make
things clearer in the future although this might take 2-3 years to
complete. The Chairman asked the business to expand on the
explanation of the cost of sales to make it clear that they are directly
attributable costs only.
The increase in headcount was raised and Sarah Hall explained that
this was partly driven by the Network Transformation programme and
that a further disclosure note breaking down the headcount was
required and would be added.
The Quality of Earnings section of the briefing book was discussed and
it was noted that, excluding the increased investment in projects of
£27m, the earnings had improved by £30m. Once adjustments for
timing and other corrections were made the underlying earnings
improvement was reduced to £24m. It was noted that this was internal
analysis for information and was agreed that the Quality of Earnings
would not be included in this year’s Report and Accounts but would be
monitored by the business, along with benefit realisation, for possible
inclusion in a future year’s accounts.
Sarah Hall was asked to include an explanation on the movement in
the client receivables and payables within working capital in the
Financial Review
The Committee discussed the proposed changes to the Going
Concern evaluation in the Corporate Governance Code and the
possible effect on the business in future years. Angus Grant reported
that the changes were still out to consultation. The Chairman asked
that the proposals be brought to a future Committee for discussion.
The Committee agreed the Annual Report and Financial Statements
and agreed that the Chairman of the Committee would give a verbal
recommendation to the Board that:
¢ the Annual Report and Financial Statements should be
approved; and
e authority be delegated for reviewing final amendments and
completing the Annual Report and Financial Statements on
behalf of Post Office Limited to a Sub-Committee, the quorum
for which to comprise any three of Alice Perkins, Paula
Vennells, Chris Day and Alasdair Marnoch, with final signoff
from the Board Chairman.
AUDIT RESULTS REPORT
Copies of the report produced by Ernst & Young, setting out the
external auditor's preliminary conclusions on the financial position and
results of operations of POL for the financial year ended 31 March
2013, had been circulated to all those present at the meeting..
Angus Grant confirmed the independence of the external auditor and
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commented on the approach to the audit and its scope.
(c) The significant audit and accounting issues set out in the report were
discussed in detail, together with the key internal control findings. It
was recognised that despite the significant challenges facing the
business in separating from Royal Mail Group and delivering Network
Transformation, Ernst & Young reported a very smooth audit process
and anticipated that an unqualified audit report would be issued
(d) The auditors had reviewed and agreed the appropriateness of the
Going Concer basis for preparation of the financial statements.
(e) They congratulated the business for the improvements in the IT
controls, stressing that this had been driven by good governance and a
tight control framework. The co-ordinated audit between Finance and
IT was highlighted as a success and Sarah Hall and Lesley Sewell
were to be thanked for their input.
(f) The auditors raised one legacy issue which had been highlighted in the
HRSAP (an RMG system) with in appropriate access available to
individuals. The change had been requested of RMG but would take
some time to deploy, so check controls had been put in place in the
interim.
(g) There was discussion around the classification of accruals and
provisions for Subpostmasters and Crown staff payments. The
business explained that the amounts were measureable and were
intended to be paid after negotiations with the CWU and NFSP were
completed and therefore stood by their classification as an accrual.
(h) Angus Grant summarised that the audit was complete. There would be
a review for post balance sheet events just prior to signing. He
expected the report to show a clean audit. He congratulated the
business on the progress in the last year, with all issues closed off and
tighter controls in place.
(i) The Chairman thanked Ernst & Young for their report, which would
now be made final.
(j) Angus Grant reiterated the independence of the external auditor and
explained that he had contacted the Chairman of the Committee to
report that a different team at Ernst & Young were bidding for work
which might cause a possible conflict. The Chairman was comfortable
with the independence and thanked Angus for the transparency in
highlighting the possible issue.
(k) The Committee noted the report.
POLARC13/19 UPDATE ON VARIOUS FINANCIAL SERVICES MATTERS,
INCLUDING BANK OF IRELAND (UK) PLC CAPITAL & LIQUIDITY
(a) The Committee noted the update on various Financial Services
matters, including Bank of Ireland (UK) plc capital & liquidity.
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ACTION: CFO
ACTION: CFO
POLARC13/21
POLARC13/22
(a)
(b)
(c)
(a)
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The Post Office Limited executives left the meeting.
OPPORTUNITY FOR AUDITOR COMMENTS
The auditors reported that the business always engaged in good
constructive dialogue and was easy to work with. The Committee
asked how the control environment would benchmark against the
market. Angus Grant reported that in his opinion, after the
improvements in the IT controls, both the control environment and
management capability were on the border of 1° and 2" top quartile.
Even whilst managing the separation the controls had remained in
place.
When asked where improvements could be made Jeremy Midkiff
suggested that the business could further develop its skills in the
tax/treasury area. Angus Grant also proposed that the Business focus
on developments in the regulatory landscape, and suggested he brief
the CFO and Susan Crichton (HR & Corporate Services Director).
The Chairman asked the CFO to update the Board in September.
DATE OF NEXT MEETING
Wednesday 5 June 2013 14.00-16.00
CLOSE
There being no further business, the meeting was declared closed.
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POLARC13 (4'")
13/23-13/26
POST OFFICE LIMITED
(Company no. 2154540)
Minutes of a meeting of the AUDIT, RISK AND COMPLIANCE SUB-COMMITTEE held
on Wednesday 5 June 2013
By correspondence
Present:
Alasdair Marnoch Chairman of Committee
Neil McCausland Senior Independent Director
Tim Franklin Non-Executive Director
In attendance:
Alwen Lyons Company Secretary
POLARC INTRODUCTION
13/23
(a) It was noted that a meeting of the Committee was to be held by
correspondence to consider three items of business.
POLARC BENEFITS REALISATION GOVERNANCE
13/24
(a) A Benefits Realisation Governance paper had been circulated to the
Committee on 30 May 2013 for its consideration and input. The Committee
noted the recommended approach for the measurement of financial benefits
and post investment reviews.
(b) Tim Franklin asked that, emphasis be given, through personal objectives, to
ensure individuals understood their responsibility for benefits realisation.
(c) Committee members responded in writing to the Company Secretary
approving the proposed governance approach for managing and reviewing
the delivery of financial benefits derived from business investments.
POLARC INTERNAL AUDIT ACTIVITY UPDATE AND REVISED Q2 PLAN
13/25
(a) The Internal Audit Activity Update and Revised Q2 Plan had been circulated
to the Committee on 30 May 2013 for its consideration and input.
(b) Committee members responded in writing to the Company Secretary noting
the Internal Audit Activity update and revised Q2 plan.
POLARC INTERNAL AUDIT TRANSITION - AUDIT DEFINITIONS AND REPORTING
13/26
(a) The Internal Audit Transition — Audit Definitions and Reporting paper had
been circulated to the Committee on 30 May 2013 for its consideration and
input.
(b) Committee members responded in writing to the Company Secretary noting
the changes of reporting styles from Royal Mail to Post Office Internal Audit.
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PC 13/26-13/27 POST OFFICE LTD
PENSIONS SUB-COMMITTEE
utes of a meeting of the Pensions Sub-Committee of the Board
on Wednesday 5 June 2013
Held by Correspondence
Present: Virginia Holmes (VH)
Chris Day (CD)
Susannah Storey (SS)
In Attendance: Gill Catcheside (GC) Secretariat
PC 13/26 INTRODUCTION
It was noted that a meeting of the Committee was to be held by
correspondence to consider an additional assumption for the Post Office
Limited’s year-end financial statements.
PC 13/27 ADDITIONAL ASSUMPTION FOR FRS 17
A paper on an additional assumption for FRS 17 had been circulated to
the Committee on 3 June 2013 for its consideration and input. It was
noted that, in preparing the Annual Accounts it had emerged that the UK
standard FRS 17 had not been updated to align with the change in IAS
19. It was further noted that the change required a return on assets
assumption which the Committee were asked to consider.
Committee members responded in writing to the Company Secretary
approving the proposed FRS 17 return on assets assumption disclosure as
outlined in the paper.
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POLB 13(6")
POLB 13/47-13/50
POST OFFICE LIMITED
(Company no. 2154540)
(the ‘Company’)
Minutes of a Board meeting held on 24 June 2013
Held by conference call
Present:
Alice Perkins Chairman
Neil McCausland Senior Independent Director
Tim Franklin Non-Executive Director
Virginia Holmes Non-Executive Director
Alasdair Marnoch Non-Executive Director
Susannah Storey Non-Executive Director
Paula Vennells Chief Executive Officer
Chris Day Chief Financial Officer
In Attendance:
Alwen Lyons Company Secretary
Mark Davies Communications Director
Sue Barton Strategy Director
Kevin Gilliland Network and Sales Director
POLB 13/47 INTRODUCTION
(a) A quorum being present, the Chairman opened the meeting.
POLB 13/48 2013/20 STRATEGIC PLAN — CURRENT STATUS
(a) The Board received an update on the progress being made to
obtain Shareholder approval for the 2013/2020 Strategic Plan (the
Strategic Plan). The Board were informed that KPMG’s formal
report was due for submission that day and that the focus was now
on engaging with the Department for Business, Innovation and
Skills (BIS) on outstanding issues.
(b) The Board discussed the negotiating mandate, agreed at the May
Board, and focussing on the key topics which had been circulated
in advance of the meeting. They discussed amendments to the
mandate in relation to the Government's desire to ensure NFSP
support for the Strategic plan; access points; the future of the
NFSP and mutualisation.
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(c) The Board agreed that they would prefer any additional money to
be funded by BIS but accepted that the business may need to find
part of the additional investment, but only to the level agreed in the
original mandate They stressed that any increase in compensation
could not increase the long-term cost base of the business and that
the NFSP would need to show active support for Network
Transformation.
(d) The Board would require a Letter of Understanding to lay out the
NFSP commitments to get the maximum possible benefit for any
additional investment.
(e) The Board clarified the assumptions in the plan mandate:
1. Any additional funding for NFSP support should be provided
by BIS
2. The Business could commit to growing the Network by 2000
access points by 2020
3. Include the Future of the NFSP ‘low down’ in the
memorandum/ commitment letter with commitments kept to
a minimum
4. Mutualisation timeline as agreed at the away day to be re-
circulated to the Board before it is shared with BIS
(f) The Board agreed that authority would be required from the
Strategy and Funding Board Sub-Committee to move to a position
of:
1. Post Office funding up to a maximum of £40m in 2015/16
and £40m in 2016/17
2. Commitment to a target for additional access points before
2020.
(g) Any changes beyond these assumptions and mandate would need
to return to the Board
(h) The original and amended mandates are show as an Appendix to
these minutes.
(i) The Chairman summarised that the Board position. They were
reluctant to offer more money for compensation and would like to
stick the original strategic plan. If additional Post Office investment
became unavoidable the Board wanted this kept to a minimum
within the mandate agreed with the maximum benefit possible and
the NFSP specific agreement that they would support the process.
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POLB 13/49 NETWORK TRANSFORMATION PROGRAMME
(a) The Board discussed the Business’s capacity to deliver the
scheduled approach to Network Transformation and whether it
could commit to a target of conversions completed for this year, to
give the Board and the Minister more confidence in the delivery of
both contracts signed and branches opened.
(b) Kevin Gilliland explained the danger in pushing sub postmasters to
open too quickly and achieving a suboptimal result. However he
recognised the need to move with pace and was expecting the vast
majority of contracts signed last year to be open by November. The
Board suggested a split of the investment money to encourage the
ACTION: sub postmaster to complete the project more quickly. Kevin
Kevin Gilliland Gilliland was asked to consider different ways to incentivise the sup
postmasters to try to reduce the time from contract signature to the
(c) branch being open.
The Board would have preferred a formal target for branch
openings for the financial year 2013/14 but accepted the difficulty of
setting such a target. Kevin Gilliland and the CFO were asked to
ACTION: Kevin present the NT scorecard (including value for money) to the
Gilliland/ CFO September Board.
POLB 13/50 CLOSE
There being no further business the meeting was declared closed
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POLB 13(7")
POLB 13/51-13/55
POST OFFICE LIMITED
(Company no. 2154540)
(the ‘Company’)
Minutes of a Board meeting held on 1% July 2013
held by conference call
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Present:
Alice Perkins Chairman
Neil McCausland Senior Independent Director
Tim Franklin Non-Executive Director
Virginia Holmes Non-Executive Director
Alasdair Marnoch Non-Executive Director
Susannah Storey Non-Executive Director
Paula Vennells Chief Executive Officer
Chris Day Chief Financial Officer
In Attendance:
Alwen Lyons Company Secretary
Mark Davies Communications Director
Sue Barton Strategy Director
Kevin Gilliland Network and Sales Director
POLB 13/51 INTRODUCTION
(a) A quorum being present, the Chairman opened the meeting.
POLB 13/52 HORIZON
(a) The CEO apologised for the short notice in keeping the Board
updated but explained that issues had arisen over the last couple of
days. She gave an update on the Horizon review which was being
undertaken by Second Sight and their interim report which was to
be presented at a meeting of MPs on the 8" July. The investigation
to date had found no systemic issues with the Horizon computer
system but had highlighted areas for improvement in support areas
such as training.
(b) The CEO explained that the Horizon, like any large computer
system, would occasionally have anomalies and two were know of
over recent years. The Business had dealt with these anomalies to
ensure no sub postmaster was out of pocket and these anomalies
had not affected any of the cases which Second Sight had
reviewed. Second Sight had been told of these anomalies and they
would include them in their report.
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(c) The CEO was concerned that the report from the independent
forensic accountants was not as factual as expected and could lead
to loose language at the MP meeting.
ACTION: The Board asked the Business to challenge Second Sight to
CEO/ (d) ensure changes were made to the report where possible and asked
Mark Davies the Business to prepare their communication to combat any
inaccuracies.
POLB 13/53
MUTUALISATION TIMELINE
Sue Barton reported that all the changes discussed at the Board
(2) Awayday had been incorporated into the mutualisation timeline and
that it would clearly show that the strategic plan milestones referred
to the year-end dates for 2013-2020. It had been agreed with BIS
that the report would timeline would be an internal document not for
publication.
POLB 13/54
2013/20 STRATEGIC PLAN — CURRENT STATUS
(a) Sue Barton gave an update on the NFSP sessions underway
where she and Kevin Gilliland had shared the strategic plan. It was
clear that their main concern was the enhanced compensation
although the NFSP understood that there was no headroom in the
plan for additional payments.
The Chairman explained that the Secretary of State had agreed to
(b) a meeting and was now getting involved in the process and that
she and the CEO were meeting him and the Minister on the 11”
July. He understands the scheduled approach but wants the
Business to consider a ‘cliff to incentivise the sub postmasters to
convert or loose the opportunity for investment. Sue Barton
explained that this would not persuade Sub postmasters to move
until the date of the ‘cliff’ as they would want to retain their Core
Tier Payment for as long as possible.
The Board discussed the need to move at pace to defend the
(c) position especially in the mails market, and whether the move to
network expansion could be the solution. Sue Barton explained that
although the advantage of Network expansion was speed and cost,
the increasing the network could cannibalise the work from existing
branches and make them even less viable.
Sue Barton was asked to develop an option which incorporated the
ACTION: Sue Barton (qd) idea of a ‘cliff’ as suggested by the Secretary of State but ensuring
that there were levers to ensure sub postmasters were incentives
to leave early. This was to be presented to the Board before the
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meeting with SoS on the 11" July
POLB 13/55 CLOSE
There being no further business the meeting was closed
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POLB 13/56-13/58
POST OFFICE LIMITED
(Company no. 2154540)
(the ‘Company’)
Minutes of a Board meeting held on 9" July 2013
Present:
Alice Perkins
Neil McCausland
Tim Franklin
Virginia Holmes
Alasdair Marnoch
Susannah Storey
Paula Vennells
In Attendance:
Alwen Lyons
Mark Davies
Sue Barton
Kevin Gilliland
POLB 13/56
(a)
POLB 13/57
(a)
(b)
(c)
held by conference call
Chairman
Senior Independent Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Non-Executive Director
Chief Executive Officer
Company Secretary
Communications Director
Strategy Director
Network and Sales Director
INTRODUCTION
A quorum being present, the Chairman opened the meeting.
2013/20 STRATEGIC PLAN — CURRENT STATUS
Sue Barton reported to the Board that after further negotiations it
was clear that the NFSP would not support a mandated approach
to conversion. She explained the current discussions taking place,
which sought to secure NFSP support for a mandated exit
approach.
This scenario, a semi-compulsory approach could deliver the same
outcome as the strategic plan albeit at a higher cost.
The Mandated Exit comprised, incentive conversion with enhanced
compensation and short term protection of Core Tier Payment, but
with a ‘cliff where conversion becomes mandatory towards the end
of 15/16
Sue Barton explained that comparing the profile of the two options,
highlights a small shortfall in the number of conversions through to
April 2018, however the Business believed this could be addressed
through network expansion activity.
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(d) The Board asked for a summary page to explain the mandated exit
ACTION: approach and its effect on investment cost and timing. This
Sue Barton summary is shows as An appendix to these minutes.
e) The Board agreed that the Business should present two
alternatives to the Secretary of State and the Minister, at their
meeting on the 11" July.
1. The preferred Board option as laid out in the strategic plan,
with enhanced compensation.
2. A second approach of mandatory exit including the ‘carrot
and cliff’ for conversion as discussed.
The presentation should be as short as possible but with two slides
articulating the different outcome for cost and timing and stressing
the need for a solution which enables the Transformation to be
completed at pace, because of the rapid changes in the market.
POLB 13/58 CLOSE
There being no further business the meeting was closed
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POLB 13(6"")
POLB 13/47-13/63
POST OFFICE LIMITED
(Company no. 2154540)
(the ‘Company’)
Minutes of a Board meeting held on 16 July 2013
at 148 Old Street, London EC1V SHQ
Present:
Alice Perkins Chairman
Tim Franklin Non-Executive Director
Virginia Holmes Non-Executive Director
Alasdair Marnoch Non-Executive Director
Susannah Storey Non-Executive Director
Paula Vennells Chief Executive Officer
Chris Day Chief Financial Officer
Apologies for Absence:
Neil McCausland Senior Independent Director
In Attendance:
Alwen Lyons Company Secretary
Sue Barton Strategy Director (items 13/49-13/50)
Lesley Sewell Chief Information Officer (13/49 only)
Nick Kennett Director of Financial Services (13/52)
POLB 13/47 INTRODUCTION
(a) A quorum being present, the Chairman opened the meeting.
POLB 13/48 BOARD EFFECTIVENESS REVIEW
(a) The Board received the report of the Board Effectiveness review
carried out in June/July 2013.
(b) The Chairman thanked the Board for their time and explained the
process for one to one feedback. The Board discussed the balance
between challenge, rigour and support and the CEO stressed that
the Business expected to be challenged. She would be
disappointed if the Board did not support through challenge while
being open to the Executives challenging back where they thought
appropriate.
(c) The Board discussed the papers received from the Executive
Committee members and agreed that in future the content of the
papers would not be presented at the Board meeting so as to free
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up time for discussion. The papers needed to be clear, not overly
optimistic, and commercially focussed so questions of fact would
ACTION: not be necessary. They should also arrive in good time. The
The Board Chairman asked the Board to contact the ExCo member
responsible for a paper before the meeting if they were unclear or
didn’t have the necessary detail. The Board also asked for earlier
warning when risks and issues arise to ensure that they were not
‘blindsided’.
(d) The Board thought that it would be valuable to have some
discussions with the minimum of paperwork where the NEDs
shared their own thinking rather than reacting to the Executives’
proposals e.g. on strategic risk.
(e) The Board discussed the use of their time and agreed that the
frequency and length of Board meetings was right and where
possible Sub Committees should not be held on the same day as
Board meetings.
(f) I The focus on risks at the September meeting could help form the
forward agendas for the following year. It was also agreed that the
Board could help with stakeholder engagement, with more
exposure to the unions and the shareholder. The Chairman
reminded the Board that Mark Russell was to return to a meeting in
the autumn and that she had invited Robin Budenberg, Chairman
of UKFI and formerly with UBS where he oversaw the banks’
relationships with HM Treasury, to the November Board.
(g) The Board asked for more exposure to the network and expressed
a need to understand the economics of the different network
models. The Company Secretary was asked to organise individual
branch visits for NEDs if required. The Board agreed that a future
ACTION: meeting would be held at the Camden Branch including a
Company Secretary discussion with the Branch Manager about the economics of
running a Crown Office.
ACTION: (h) The CFO was asked to produce a piece of analysis to explain the
CFO economics of the network models and set up a workshop for those
NEDs who would find it helpful.
(i) The Board discussed the use of advisors and the CFO was asked
ACTION: to provide a paper highlighting the processes in place for
CFO monitoring the use of advisors, procuring advisors and negotiating
their terms.
(j) I The Board’s relationship with the ExCo and the SLT was discussed
and it was agreed that Board members would be advised of the
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ACTION: dates of SLT Quarterly Business Updates and they would be
Company Secretary welcome if they wanted to attend but no other formal SLT
engagement would be put in place.
(k) The Board noted the Board Effectiveness Review and agreed the
actions in the paper along with:
e the Board would continue with 2 away days a year
¢ the Board would be offered opportunities to attend NT
openings or meetings with stakeholders if they were
available
ACTION: ¢ the production of a forward look for future agendas
Company Secretary e the addition of an index for the Reading Room and a log of
decisions taken at the end of the Board minutes.
POLB 13/49 IT SUPPLY CHAIN PROCUREMENT ACTIVITY
(a) Sue Barton, Strategy Director, and Lesley Sewell, Chief Information
Officer joined the meeting.
IT&C Transformation Programme
(b) Lesley Sewell updated the Board on the current status of the
procurements for a Service Integrator (SI) and a Strategic Data
Centre. The Board asked if the proposed solution would enable
further outsourcing in the future. Lesley Sewell explained that the
change would reduce the headcount by 50% whilst giving a
foundation for further outsourcing and enable the Business to move
to more stable suppliers. The Board questioned the timing and
whether the SI could be in place before the sub-contracts are
awarded. Lesley Sewell explained that the Business was being
pushed by RMG separation deadlines and this was the reason that
the SI and sub-contractor had to be done concurrently.
(c) The Board would be asked to approve the award of contracts for
the Data Centre and Service Integrator/Strategic Data Centre to the
Post Office’s selected bidders at the September 2013 meeting. It
was noted that the Service Integrator award would also require
approval from the Shareholder Executive.
Transitional Support Services with Fujitsu
(d) Lesley Sewell presented a paper on the Transitional Support
Services supplied by Fujitsu. She explained that there were few
options apart from remaining with Fujitsu in the short term.
(e) The CEO flagged two risks to the Board - the first around RMG and
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the preparedness for separation and the second the Horizon risk
around Fujitsu. She explained that the legacy contract had to be
normalised through proper public procurement but that there were
short term issues which were difficult to resolve such as IP,
ownership of which was mixed between the two businesses.
(f) I Before it could make a decision on the extension of the contract for
two years the Board asked for more detail on the economics of the
deal being negotiated with Fujitsu, the changes from the current
contract, and its impact on the Strategic plan numbers. Lesley
Sewell and CFO were asked to circulate a paper seeking
ACTION: agreement by correspondence once the Board members were
CFO/Lesley Sewell comfortable.
POLB 13/50 PROGRESS REPORT ON GOVERNMENT FUNDING AND
STRATEGIC PLAN
(a) The Board received a verbal update from Sue Barton and the CEO
on the progress with the Government funding and Strategic Plan.
The CEO explained that the meeting with Secretary of State (SOS)
and Minister had enabled the Business to explain that inaction or
delay was not an option. The feeling was that if the Minister would
support mandated exit the SOS would also do so.
(b) Sue Barton assured the Board that BIS and the Minister realised
that a mandatory approach as set out in the strategic plan was still
the Board's and the Business’s preferred option. She explained that
the alternative approach, which the Business had considered after
pressure from the NFSP and the shareholder, could have some
benefits. Ministers would need to be advised as to whether to
alternative approach has the Board’s backing before their meeting
with officials the following day.
(c) Sue Barton explained the alternative approach as set out in
appendix A of these minutes. The Board agreed to the following
recommendations provided they stayed within the Board mandate
and were positioned as a last resort:
1. To continue to position £218m as the amount necessary to
deliver a mandated exit option
2. That no deferral be offered as part of the solution, as this
would leave the Business exposed in the later years of the
plan and put breakeven back by a year.
3. To position the incremental cost of this alternative option as
investment which BIS would need to fund.
(d) The Board agreed to the principles of the alternative approach
subject to the conditions that:
¢ There is a cliff within the alternative solution. This is
transparent, clearly communicated both at a national and
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individual sub-postmaster level, backed by Government.
Individual letters would be sent out to sub-postmasters
e Cost of the option is covered by additional Government
funding. A shortfall can be covered by the business within
the agreed mandate
e NFSP support must be clearly set out in a MOU and must
include agreement to support openly and unconditionally
¢ Must have a mandate to exit sub-postmasters.
(©) The CFO confirmed that he remained comfortable that the
headroom of £40m in 2015/16 and 2016/17 would be available and
therefore supported the mandate.
(f) Sue Barton would write to BIS setting out the alternative approach
as agreed by the Board. The Chairman offered to write to the SOS
at an appropriate time to explain that while the Board understood
ACTION: the political difficulties, this alternative was not our preferred
Sue Barton approach and the risks it brought to the business.
(9) The Board discussed the protection of community offices and Sue
Barton explained the conflict for the NFSP as some of their
members who run offices which will be designated ‘community’
would be restricted from exiting. This was still being worked
through with the NFSP.
(h) The CEO explained that the Business was working on the proof of
concept for network extensions and that although this was
politically very attractive there were many interdependencies which
needed to be understood and it would be the last quarter of the
year before the Business could sign up to any targets.
(i) The Board asked whether the Business could sign up to a
conversions target by 2014/15, either a number or percentage of
branches converted. Sue Barton said it would be difficult to suggest
a target without NFSP co-operation to the programme. The NFSP.
were calling a special conference to agree any proposal so any
agreement was likely to be at the beginning of September.
() The Board agreed to weekly Board calls over the summer whilst
ACTION: the negotiation continues and requested a paper 24 hours before
Company Secretary any call setting out an update and the substance of any discussion.
ACTION: (k) The Chairman asked for a note setting out the expected timeline
. and milestones over the next two months.
Sue Barton
(!) The Chairman thanked Sue Barton for some excellent work and
Sue Barton left the meeting
(mM) The Chairman asked the CEO to consider additional support for the
Strategy Director during the negotiations. The CEO explained that
things had been moving very quickly but accepted that the
Business needed to be better at anticipating and ‘horizon-
scanning’.
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POLB 13/51 HORIZON UPDATE
(a) The CEO explained that although the Second Sight report had
been challenging it had highlighted some positive things as well as
improvement opportunities. The Business had been praised in
Parliament for setting up the independent review; the
proportionality of the tiny number of cases had been emphasised;
and no systemic issues had been found with the Horizon computer
system. However there were cultural issues which had to be
addressed to improve the support we gave to sub-postmasters.
The CEO stressed that this was now a catalyst to make changes in
the Business.
(b) The Board were concerned that the review opened the Business up
to claims of wrongful prosecution. The Board asked if Susan
Crichton, as General Counsel, was in anyway implicated in the
prosecutions. The CEO reported that, up until eighteen months
ago, Royal Mail Group Limited (RMG) had run the criminal law
team and many of the cases in the review had arisen before
separation. The CEO explained that the Business was a
prosecuting authority and as such brought its own prosecutions.
However since separation the General Counsel had proposed
moving to the more normal position of using the CPS for
prosecutions; this was being explored.
(c) The Board expressed strong views that the Business had not
managed the Second Sight review well and stressed the need for
better management and cost control going forward.
(d) The Board accepted that this was an independent review and
therefore things could happen that were beyond the control of the
Business.
(e) However the things that could be managed by the Business
needed to be well managed with strong leadership and the Board
asked the CEO if she had considered changing the person leading
for the Business.
(f) I The CEO had considered this and recognised that the Business did
not have good governance in place around Second Sight, but that
the independence of the review, and the input from MPs and
Justice for Sub-Postmasters (JFSA) had made this complicated.
ACTION: Susan (g) The Chairman asked for a review, a post mortem, to report to the
Crichton ARC explaining how we awarded and managed the contract. This
should be put in hand swiftly.
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(h) The Board asked the CEO to decide on the way forward in terms of
ACTION: CEO the leadership of this work based on the option which had least risk
for the Business.
(i) The CFO was asked what the insurance position was. He
promised the Board a note on this. He was also asked to ensure
ACTION: CFO the both RMG and the Business’ insurers were given notice of the
review findings.
POLB 13/52 FINANCIAL SERVICES STRATEGY UPDATE
(a) Nick Kennett, Financial Services Director, joined the meeting and
took questions on the Financial Services Strategy update paper.
ACTION: (b) The Board asked for a noting paper setting out the Mercer
Nick K . tt recommendation for the new Financial Services Sales incentive
ick Kenne’ scheme.
(c) The Board congratulated Nick on the pace at which things were
changing and suggested that, because of the scale of the
contributions to the strategic plan and the reputational risk of the
manner of delivery, a Board Sub-Committee be convened to
support the executive team.
(d) Nick Kennett was asked to work with the Company Secretary and
ACTION: the CFO (with input from Tim Franklin and Virginia Holmes) to draw
Nick Kennett up Terms of Reference for the FS Board Sub-Committee.
(e) Nick Kennett explained the work being undertaken to enhance the
Brand and make the Post Office a destination point for FS
products.
(f) IThe Board asked when the Business would know if the strategy to
move up the value chain with its additional benefits, costs and risks
was working. Nick Kennett suggested it would be Autumn 2015
before this was clear.
(g) Nick Kennett was asked for a note to be circulated to the Board
explaining the impact on the strategic plan in 2015/16 and 2016/17
of the transition from Junction for general insurance, and the effect
ACTION: on the bottom line.
Nick Kennett
The Directors noted the Financial Services Strategy update, and
the Success Criteria for Project Polo.
POLB 13/53 FINANCIAL PERFORMANCE UPDATE
(a) The Board received a financial performance update for period 2
2013, and the flash results for Period 3 from the CFO.
(b) The CFO explained that the results for period 3 had seen an
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improvement on period 2, although the greatest risk to the plan
remained in mails income. The Mails team were still comfortable
that they would recover the position after what had been a
significant downturn in small packets after the price rise.
(c) The CFO explained that the risk to income has put more pressure
on cash and the need to reduce the cost of service delivery support
functions by 20% over the next 3 years. He explained that the
ExCo were going through a reforecasting exercise and this would
make it clearer how much pressure would need to be put on
reducing spend.
(d) The Board asked for visibility of the decisions being taken by the
ExCo. The CFO was asked to produce a note to the Board by the
end of July beginning of August showing the reforecast and the list
of optional spend decisions which the Business has taken, or could
take if required. This would be spend which didn’t drive revenue
ACTION: CFO. this year or next year.
POLB 13/54 CHIEF EXECUTIVE’S REPORT
(a) The Board noted the Chief Executive’s report and discussed the
following specific items:
(b) The CWU had called a half day strike on the 17" July and were
holding a rally, with MPs invited at Portcullis House. The feedback
has been that, so far, this is not causing any lasting detriment to
ACTION: Kevin customers or the Business. There will a full report to the September
Gilliland Board with options on the way forward.
POLB 13/55 PENSIONS
(a) Chris Day updated the Board on three Pensions issues.
(b) The pension actuarial valuation has been delayed and the Trustee
has informed the pensions regulator. The final date for the
valuation is set at 30" September.
(c) The formal consultation for changes to the pension scheme started
on the 21° June and will run until the 25" August. To date the CMA
are engaged with the process but do not support the changes, and
the CWU have not engaged with the process.
(d) The Business has agreed the investment allocation with the
Trustee who were rebalancing the asset allocation.
POLB 13/56 GROUP STRUCTURE
(a) The Board received a paper on the planned changes to the
structure of the wider Group to facilitate an IPO of RMG.
. (b) The CFO was asked to check with the corporate insurers to ensure
ACTION: CFO this had no detrimental effect to the cover or cost.
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(c) The CFO was asked for a note to the Board explaining the
ACTION: CFO implications for Tax and VAT of any structure changes and
subsequent total separation
(d) The Board:-
(i) noted the planned changes to the structure of the wider
Group to facilitate an IPO of RMG;
(ii) noted the anticipated changes to the operation of Royal Mail
Holdings plc (RMH);
(iii) noted the additional duties that were likely to become Post
Office Limited’s responsibilities and that they would incur
additional cost; and
(iv) approved delegation of authority to Alwen Lyons, the
Company Secretary, and/or Susan Crichton, HR &
Corporate Services Director (in the form set out in Appendix
1) to approve and execute any documents necessary to
remove the references to the RMG Special Share and the
ACTION: RMH Special Share in the Company's Articles of
Association and to do any act or thing required to be done
by the Company to give full effect to, or in connection with,
the actions outlined in the Board paper.
Company Secretary
POLB 13/57 MINUTES OF PREVIOUS MEETINGS AND MATTERS ARISING
(a) The minutes of the Board meeting held on 21 May 2013 were
approved for signature by the Chairman.
(b) The noted of the discussions and actions from the Board Awayday
held on 18 and 19 June 2013 were noted.
The CFO reported that the work on outsourcing, discussed at the
Awayday, was progressing and the India visit was set for
September. This would be brought back to the September Board.
POLB 13/58 COMMITTEE MEETING MINUTES FOR NOTING
(a) The Board noted the minutes of the Remuneration Committee
meeting held on 1 May 2013.
POLB 13/59 STATUS REPORT
(a) The Status Report, showing matters outstanding from previous
Board meetings, was noted.
POLB 13/60 ITEMS FOR NOTING
(a) The Board noted the Health and Safety report.
The Board asked if there was a reason for the increase in Road
Traffic accidents. The CEO explained that this had already been
identified by the Business and the issue was being reported back to
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ACTION: ALL
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(b)
(c)
(a)
the September ‘Road Forum’ for investigation. Any actions would
be reported to the Board in a future Health and Safety report.
The Board noted the Significant Litigation report.
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 1040 to 1058 inclusive in the
seal register was hereby confirmed.
PROPOSED BOARD DATES 2014 AND Q1 2015
The Company Secretary tabled proposed Board, and some
Committees, dates for 2014 and Q1 2015. The Board members
were asked to feed back any issues by 19" July.
ANY OTHER BUSINESS
The CFO reported that the Report & Accounts had been signed
with a target date of the 7" August for publication.
CLOSE
There being no further business, the meeting was then closed.
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POLB 13(6"")
POLB 13/64
POST OFFICE LIMITED
(Company no. 2154540)
(the ‘Company’)
Minutes of a Board meeting held by Correspondence on 26 July 2013
Alice Perkins Chairman
Neil McCausland Senior Independent Director
Tim Franklin Non-Executive Director
Virginia Holmes Non-Executive Director
Alasdair Marnoch Non-Executive Director
Susannah Storey Non-Executive Director
Paula Vennells Chief Executive Officer
Chris Day Chief Financial Officer
Alwen Lyons Company Secretary
POLB 13/64 Transitional Support Services with Fujitsu
It was noted that a meeting of the Board was to be held by
correspondence to consider more fully the contract negotiations for
Transitional Support Services (“TSS”) with Fujitsu.
It was further noted that at the meeting of the Board held on 16 July
2013, the Board had asked for additional detail on the economics of
the deal being negotiated with Fujitsu, the changes from the current
contract, and its impact on the Strategic plan numbers, before it
could make a decision on the extension of the contract for two
years. Lesley Sewell and CFO had circulated a paper to all
Directors setting out the requested information on 19 July 2013.
Having considered the information, the Board recognised that the
Business had little choice other than to renew.
The Board therefore:
(a) approved the 2 year TSS agreement with Fujitsu valued at up to
£83M; and
(b) noted that approval for authority to contract the TSS agreement
with Fujitsu would need to be sought from the Shareholder
Executive in July, which would allow the Business to conclude
negotiations and execute the TSS agreement with Fujitsu
before 30 September 2013.
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POLB 13(10")
POLB 13/65-13/67
POST OFFICE LIMITED
(Company no. 2154540)
(the ‘Company’)
Minutes of a Board meeting held on 31° July 2013
held by conference call
Present:
Alice Perkins Chairman
Neil McCausland Senior Independent Director
Alasdair Marnoch Non-Executive Director
Chris Day Executive Director
In Attendance:
Sue Barton Strategy Director
Apologies for absence:
Tim Franklin Non-Executive Director
Virginia Holmes Non-Executive Director
Susannah Storey Non-Executive Director
Paula Vennells Chief Executive Officer
POLB 13/65 INTRODUCTION
A quorum being present, the Chairman opened the meeting.
POLB 13/66 2013/20 STRATEGIC PLAN — STATUS UPDATE
(a) The Board noted the Status Update dated 29 July 2013 for the
2013/20 Strategic Plan. Sue Barton advised that it was now clear
that including a commitment around the future of the NFSP would
be essential to securing agreement. It was reported that the team
were progressing on the basis of the negotiating mandate which
had been given by the Board. This was noted by the Board with the
view that being proactive and having some control on this activity
could be beneficial.
(b) The Board discussed the form and timing of the cliff. There was
concern around the extent to which this could impact upon our
ability to deliver the outcome we need on the transformation of the
network. Having heard more detail from the team around the
context, possible alternative approaches and the testing/evaluation
which the team were progressing, the Board agreed the following:
(i) The team can continue to explore alternative options around
conversion.
(ii) The outputs of this analysis activity must be clear for any
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(c)
proposed option:
e The timing and format of any future compulsion
e The impact of the approach in terms of numbers and
profile of conversion (update of red/grey/yellow line
graph)
¢ The impact of the approach in terms of funding
¢ The underlying assumptions and conditions
¢ The conditions we would put in place to ensure we
get ‘bite’ in commitment from NFSP and
Government.
(iii) The realpolitik of securing a NFSP special conference ‘yes’
vote should be considered — testing the reaction of different
populations to the future network transformation proposals.
The Board agreed that the next weekly call should take place on 19
August 2013.
CLOSE
There being no further business the meeting was closed.
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PC 13/28-13/29 POST OFFICE LTD
PENSIONS SUB-COMMITTEE
utes of a meeting of the Pensions Sub-Committee of the Board
on 1 August 2013
Held by Correspondence
Present: Virginia Holmes (VH)
Chris Day (CD)
Susannah Storey (SS)
In Attendance: Larissa Wilson (LW) Secretariat
PC 13/28 INTRODUCTION
It was noted that a meeting of the Committee was to be held by
correspondence to consider an update on the professional fees incurred
since last discussed on 4 March 2013 and to seek authority for new fees
arising.
PC 13/29 PROFESSIONAL FEES
The Committee received a paper on the professional fees for Aon Hewitt
and Towers Watson (the Paper) on 25 July 2013 for its consideration
and input.
Committee members responded in writing to LW. They noted the fees
incurred to date and approved the fees proposed in paragraph 2.2 of the
Paper.
Action: Secretariat) ‘lowever, VH and SS raised concerns over the quantum of fees. It was
Sarah Hall agreed that the approach to professional fees be considered at the next
Pensions Committee in the Autumn. VH recommended that the
Business consider negotiating a fixed fee structure or a fee cap.
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