POLB04(6™)
POLB 04/61 - 04/85
Present:
Sir Michael
Hodgkinson
David Mills
lan Anderson
Peter Corbett
Brian Goggin
Graham Halliday
David Miller
Gordon Steele
Elmar Toime
In attendance:
Jonathan Evans
Neil Owen
David Smith
Simon Broome
Martin Gafsen
David Kennedy
Apologies:
Allan Leighton
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Post Office Limited
(company no. 2154540)
Minutes of the meeting of the Board
held at 148 Old Street, London
on September 1°" 2004
Non-executive Chairman
Chief Executive
Human Resources Director
Finance Director
Chief Executive, Bank of Ireland
Banking & Financial Services Director
Chief Operating Officer
Sales & Marketing Director
Executive Deputy Chairman, Royal Mail Holdings
Company Secretary
Notes
Delivery Director (Acting IT Director)
Programme Director, Crown Office Strategy (for POLB04/66)
Investment Director, Group Finance (for POLB04/71 —
POLB04/73)
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Managing Director, First Rate Travel Services (for POLB04/68) i
Chairman, Royal Mail Holdings
APPOINTMENT OF DIRECTOR POLB(04)48
The Board noted that the Royal Mail Holdings Board of 4”
August 2004, had agreed to the nomination of Brian Goggin,
Group Chief Executive, Bank of Ireland, as non-Executive
Director of the Company and that consent had been obtained
from the Secretary of State. The Board unanimously agreed to
the appointment of Brian Goggin as non-Executive Director of
the Company, with effect from 1 September 2004.
MINUTES OF PREVIOUS MEETING POLB(04)5™
The Board approved the minutes of the Board meeting of 16"
June 2004.
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STATUS REPORT POLB(04)49
The Board noted the report, and in addition:
(i) Gordon Steele reported that Michael Keegan
would join Post Office Ltd on 13 September as a
consultant to assist with the Passports and
Identity Cards work. A trial in Leicester was now
underway, although it had been slightly delayed
for technical reasons;
(ii) Jonathan Evans reported that a paper setting out
a revised system of Delegated Authorities would
shortly be considered by the Royal Mail Audit
Committee;
(iii) Gordon Steele reported that a Paper had been
written for consideration by the Royal Mail
Remuneration Committee which proposed a
balanced customer service index measure. DTI
approval would be required for this measure to be
linked to the performance of Executive Directors
of Royal Mail Holdings only.
The Board agreed that a further more detailed update would be
provided on the Supermarket Disengagement issue for the next
Board meeting.
CHAIRMAN’S BUSINESS
Sir Michael Hodgkinson reported that a team had been
assigned to examine the financial relationship between Post
Office Ltd and Royal Mail Group. David Mills would finalise the
arrangements for the meeting.
CHIEF EXECUTIVE’S REPORT
David Mills reported the following matters to the Board:
(i) Camelot: Camelot had appointed Sir Peter
Middleton from Barclays to their Board of
Directors;
(ii) New Product Launches: The media coverage had
been very positive around the launch of Car
Insurance and Savings Stamps, and many articles
had been printed in the National Press. Since the
launch, over £2.5m of Car insurance and £300k of
Savings Stamps had been sold;
(iii) Executive Committee Off-Site: A meeting had
taken place to discuss the build up to the planning
session for 2005/06. Measures to close the
2005/06 gap, timetables and functional reviews
had been agreed, and potential projects identified,
(iv) Card Account Outage: A meeting would take -~
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Action:
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Action:
David Miller,
lan Anderson,
(Peter Corbett)
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place with JP Morgan and EDS today, to discuss
the reasons for the Card Account Outage which
occurred on August 23” 2004 and impacted on
approximately 150,000 customers (190,000
transactions);
(v) Leadership Team Meeting: A stronger emphasis
would be placed on sales and this system would
be trialled for the remainder of the year;
(vi) Call Centre: A visit to the Junction Call Centre had
Tevealed a very professional operation, which
stood in contrast to the Royal Mail Call Centre.
Several areas had been identified where the
relationship with Royal Mail Call Centre needed to
improve;
(vii) Michele Castle: Work was being conducted to
assist Michele Castle from Group with her work
. on re-organising the Group Centre;,
(viii) Prisons: A number of senior managers continued
their commitments to mentoring.
CROWN OFFICE STRATEGY UPDATE POLB(04)50
David Miller introduced Simon Broome to the Board. Simon
Broome circulated a presentation.
The Board noted the paper and presentation, and concluded
that, despite the risks that had been outlined, this.continued to
be a manageable proposition.
The Board agreed that:
(i) the current programme of conversions and
closures should continue and be prioritised
appropriately. A list of actions against various
headings would be produced for consideration at
the next Post Office Ltd Board;
(ii) the programme would tackle the 25 biggest loss
makers first;
(iii) re-sites would be related to property potential;
(iv) further closures would be considered in the light
of likely public and CWU reaction;
(v) an update would be provided at the next Board on
the outcome of the CWU negotiations;
(vi) a risk assessment would be performed against
the list of headings set out in Annex A of the
Crown Office Strategy Paper;
(vii) a contingency plan would be drawn up to contain
the risk.of Industrial Action;
(viii) a final proposal would only be put forward to RMH
Board once the detail of the proposition had been
approved by the Post Office Ltd Board.
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RURAL NETWORK UPDATE POLB(04)51
David Miller circulated a presentation to update the Board on
the future ofthe Social Network Payment and the shape of the
tural network. The Board noted the presentation, and in
particular that:
(i) a two year roll-over had been agreed in principle
until 2008 on similar conditions. There would be
no change in current policy until 2006;
(ii) although the financial position was secure until
2008, the.fundamental rural cost and revenue
problems remained. The Social Network Payment
would need to be used to help deliver a credible
‘cost neutral’ rural network by 2008;
(iii) to date, stakeholder acceptability and concepts
had been tested, the modelling capability had
been developed and the strategy had been -
proven;
(iv) the next stage would be to pilot changes on the
ground and re-engineer solutions.
The Board agreed that the question of regionalising the Social
Network Payment would need to be discussed with DTI.
‘FRTS BUSINESS PLAN POLB(04)52
Gordon Steele introduced David Kennedy, Managing Director
First Rate Travel Services, to the Board. A presentation was
provided, and the Board noted in particular that:
(i) although the Bureau product was conceived in
1993, the focus brought about by FRTS had
ensured the business had substantially grown its
market share over 3 years. Market share was
averaging 17-18%, and had peaked at 28% in
July 2004;
(ii) With its total travel services business, Post Office
Ltd had already become one of the top three
providers for Travel Insurance, with a 10% market
share;
(iii) PBT performance for FRTS had far exceeded
both the original JV business plan and the market
plan;
(iv) the majority of customers were aged 35-65 and
consisted of ‘families’ and ‘post-family groups’.
The challenge ahead to grow sales further was to
appeal to younger ‘pre-families’.
(v) Further opportunities existed to develop new
products and grow revenue streams even further.
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The Board agreed that:
Action: (i) RMH Board would be provided with a similar
Gordon Steele presentation in November 2004 to highlight the
considerable success of FRTS;
(ii) Peter Corbett would provide the Post Office Ltd
Action: Board with an analysis which would illustrate the
Peter Corbett profitability of the travel products on both marginal
and fully costed basis. ©
POLB04/69 POST OFFICE FINANCIAL SERVICES BUSINESS PLAN
POLB(04)53
Graham Halliday presented the Post Office Financial Services
Business Plan to the Board. The Board noted the business
plan.
In addition, it was explained to the Board that the treatment of
Travel-Insurance remained a subject for discussion between
Post Office Ltd and Bank of Ireland with concerns expressed
regarding the tight timetable for resolution of issues around
regulation;
The Board agreed that regulation of Travel Insurance and
Action: negotiations with BOI would be re-presented to the next Board
Graham Halliday for further discussion if the situation could not be-resolved.
POLBO4/70 CALL CENTRE STRATEGY POLB(04)54
David Miller presented the Call Centre Strategy paper to the.
Board.
It was explained to the Board that Post Office Ltd currently
subcontracted two call centre campaigns to Royal Mail UK,
namely Post Office External Customer Helpline, and Post Office
Branch Support line. The relationship had proved difficult, and
although improvements had been made, further opportunities to
existed advance the productivity of the service by investigating
outsourcing opportunities.
The Board noted the paper and further noted that: forecasting
volumes had been exceptionally difficult because Government
had not been able to share the proper management
information.
Action: The Board agreed that market testing should now take place,
David Miller and the results would be presented at the next Board meeting.
POLBO04/71 IMPACT PROGRAMME BUSINESS CASE POLB(04)55
Peter Corbett made a short presentation to highlight the key
elements of the Impact Programme Business Case:
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(i) The programme had now advanced to the stage
that a detailed specification requirement through
to completion had been produced and costed.
(ii) the programme showed increasing net benefits.
However, there was a modest increase in supplier
and change management costs. The need for
redundancy provision alongside the headcount
reductions, and as a sensible precaution a
contingency requirement for £2m;
(iii) as a result of increased costs, authority was now
sought for the Board to endorse an additional £3m
of spend to deliver the programme. This spend
would feature in 2005/06.
The Board agreed:
Action: (i)
the spend would be authori: ject to an
Peter Corbett ip e authorised subject to ai
ongoing system of Risk Assessment;
(ii) authority to approve the £2m contingency spend
would be delegated to David Mills and Peter
Corbett
(iii) to the approval in principle of £3.1m in severance
costs subject to the actual headcount reductions
meeting Group’s required payback within 3 years,
and compliance to the managing the surplus
policy and the VR governance process;
(iv) due to the strategic importance of realising the
benefits to achieve the NPV income, the
Action: programme will be monitored by Group
Peter Corbett Investment as part of the monthly strategic
programme report to the Holdings Board.
POLB04/72 CLS VEHICLE. REPLACEMENT BUSINESS CASE
POLB(04)56
David Miller presented the CLS Vehicle Replacement business
case to the Board.
The project represented the annual vehicle replacement
schedule for Cash Logistics Services. The original requirement
of replacing 136 vehicles had been reduced to 70 vehicles as a
result of efficiency savings identified by the Service
Specification Programme.
The Board noted that earlier this‘financial year individual
authorities had already been granted to purchase an initial 20
medium value vehicles, followed by an additional 10.
The Board agreed to approve the replacement programme at a
total cost of £2.3m of capital expenditure, of which £1.2m would
be invested in medium value vehicles, £0.5m in low value
vehicles, arid £0.6m in Cat V vehicles. i
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+1 SALES PROMPTS BUSINESS CASE POLB(04)57
Gordon Steele presented the +1 Sales Prompts Business Case
to the Board.
The proposal required modification to the Horizon system to
provide sales prompts for counter staff to increase.sales of
profitable products. As a secondary consideration, this prompts
facility would be used to address money laundering compliance
issues in Post Office Ltd’s counter operations
Subject to concurrence from the Banking & Financial Services
directorate, the Board approved the business case and agreed
to:
(i) development of the Horizon system to provide the
prompts capability;
(it) deployment of the completed programme;
(ili) a total expenditure of £1.9m.
REGULATION FOR INSURANCE. POLB(04)58
Graham Halliday presented a paper which set out'the steps
being taken by Post Office Ltd to meet the requirements arising
from the extension of financial services regulation to include the
distribution of general insurance. products.
The Board noted the paper.
RESTRICTIONS POLB(04)59
David Miller presented a paper to the Board to provide an
update on issues surrounding Post Office Ltd’s policy of
restricting the private business activities of its agents.
The rationale for the current restrictions framework was that it
protected the integrity of the total network by prohibiting
competitors and clients from cherry picking our branches where
they cannot obtain alternative distribution channels and/or
piggyback onto our brand. The current scope of restricted
products included bill payments services, mails lottery and
banking. However, as the Company moved more into financial
services market, it would be increasingly important to ensure
the brand, product portfolio and customer promise was not
diluted by competitor products.
The Board noted that:
(i) Breaches of restrictions had become more
widespread, but enforcement had not been
sanctioned, mainly due to uncertainty concerning
the legal position, and the granting of waivers to
agents because of the need to establish a branch ___«.
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in some areas;
(ii)
(iii) a structured approach was being developed to
address the current breaches and determine
whether a restrictions policy was tenable after 1*
May 2005. This approach would likely result in a
complaint to the OFT.
The Board agreed that
(i) ° there would be no enforcement of Restrictions
without the formal approval of the Post Office Ltd
Board;
(ii) Post Office Ltd would need to focus:its energies on
tackling the right ones.
CARD ACCOUNT — INTERRUPTION OF SERVICE
David Miller provided the Board with an oral report on the
reasons forthe breakdown of the Card Account service on 23
August 2004.
(i) the total system downtime was 3 hours 50
minutes;
(ii) the reason for the downtime was that JP Morgan
had taken the.system off-line to fix a problem with
double-payments without the consent of Post
Office Ltd;
(ii) I a meeting had been arranged with JP Morgan this
evening to provide a full explanation. Post Office
Ltd would be pressing for compensation, if
appropriate.
The Board agreed that:
(i). the Disaster Recovery Arrangements for genuinely
vulnerable people would be re-examined. A
system to identify these groups would be
considered, together with the use of a paper-based
backup system which could provide emergency
cash during system downtime;
(ii) the contractual obligations with the DWP would be
reviewed and presented to the Board;
(iii) a paper to explain the breakdown of service and
‘the measures taken to ensure there was no
repetition, would be provided for the next RMH.
Board; i
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Action: (iv) David Miller and Graham Halliday would provide
Graham Halliday Chris Pond, the DWP Minister, with the
David Miller appropriate briefing.
POLBO04/77 FINANCIAL SERVICES PAPERS FOR NOTING
The Board noted the Post Office Financial Services paper that
was provided for RMH Beard to note on 4" August 2004.
The Board noted the Bill Payments paper, which would be
provided for noting at the RMH Board on 5" October 2004.
POLB04/78 SUBSIDIARY / ASSOCIATE COMPANY ITEMS FOR
APPROVAL POLB04(60)
The Board noted the minutes of the Post Office Financial
Services Board meetings of 18" May 2004, 18" June 2004 and
21% July 2004.
The Board noted the minutes of the FRTS Ltd and FRTS
Holdings Lid Board meetings of 22"¢ April 2004.
FUNCTIONAL REPORTS
POLBO04/79 FINANCE REPORT POLB(04)64
The Board Noted the report.
POLB04/80 OPERATIONS REPORT POLB(04)65
The Board noted the report. The Board further noted that:
(i) as the Urban Reinvention programme drew to a
close, attention would be shifted to dealing with the
Multiples;
(ii) Postwatch had started to take an interest in the
Directly Managed Branch strategy.
POLBO04/81 SALES & MARKETING REPORT POLB(04)66
The Board noted the report. The Board further noted that:
(i) 50% of the Sales & Marketing Directorate resource
had now been deployed in supporting Financial
Services;
(ii) a major campaign was being planned to sell
Action: Financial Services products to Royal Mail Group
Gordon Steele employees. A report on progress would be
provided for the next Post Office Ltd Board. ;
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BANKING & FINANCIAL SERVICES REPORT POLB(04)67
The Board noted the report.
IT REPORT POLB(04)68
The Board noted the report. The Board further noted:
(i) the Period 4 Delivery Plan Status Report circulated
by David Smith;
(ii) that the Horizon IT Roadmap would be provided
for consideration at the next Board meeting.
HUMAN RESOURCES POLB(04)69
The Board noted the report.
lan Anderson reported that the monthly Have Your Say results
had dropped to 56%, primarily due toa low result in
Chesterfield. It was not yet known for certain whether or not this
was a temporary ‘blip’ or a more permanent trend. Measures
would be taken to ensure those who wanted to leave the
business were identified and helped as plans unfolded. Further
investigations would be undertaken in Chesterfield, but it was
fairly certain that the score was being influenced by people
there. who have asked for VR but were refused.
The Board agreed that lan Anderson would report back to the
Board on this matter.
ANY OTHER BUSINESS POLB(04)70
The Board agreed the revised list of authorised signatories,
namely Neil David Owen and Anna Louise Malley, to
authenticate the Company Seal, in addition to the Directors and
Company Secretary.
CLOSE
There being no further business, the meeting was closed.
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