Post Office Board Agenda
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24th November 2016
Tim Parker (
I + Tim Franklin
11.15hrs 15.15hrs
i+ Ken McCall
Carla Stent
Room 1.19 Wakefield
i+ Richard Callard
i+ Virginia Holmes
Paula Vennells
Alisdair Cameron
Alwen Lyons
+ Martin Edwards (item 4 & 6)
+ Martin George (item 6)
* Mark Siviter (item 6)
+ Nick Kennett (item 7)
Angela Van Den Bogerd (item 8)
Rob Houghton (item 8)
Chairman)
1. Minutes of previous Board and Decision
i Committee meetings including
i Status Report
CEO Report
For noting
Including IR update and Digital
Christmas Campaign
For noting
Financial Report
Update on Funding Process (verbal)
For noting
Board Effect eness Review
Introduction
For noting
Minutes formally agreed.
CFO to update the Board o on results.
Alwen Lyons
CEO
CEO to update the Board on the report.
CFO to update Board on latest progress CFO / Martin Edwards
To familiarise the Board with the Board
Effectiveness review process.
Alwen Lyons / Ken McCall
11.15 - 11.20
11.20 - 11.50
11.50 — 12.10
12.10 — 12.30
12.30 - 12.50
Mails Update
Report from POMS Board
Back Office Transformation
Transformation Business Case. Rob Houghton
For noting To update the board on progress made since Martin George / Mark 13.20 — 14.20
June on Post Office and Royal Mail joint strategy, Siviter / Martin Edwards
next best alternative, negation preparation and
next steps.
For noting To update Board on half year performance ‘and Nick Kennett 14.20 - 14.35
For approval For Board to review / approve the Back Office Angela Van Den Bogerd / 14.35 — 15.00
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Post Office Board Agenda
15.00 — 15.05
The acquisition of Broadband For ratification
Customers from New Call
To ratify the decision taken by correspondence. Alwen Lyons
Items for noting 15.05 — 15.10
10.1 Sealings For noting Board aware of the affixing of the seal.
10.2 Health & Safety For noting To update Board
10.3 Date of next meetings For discussion
i “". AB ee / 15.10 — 15.15
rr
i CLOSE 15.15
POLB 16(8")
POLB 16/62 — 16/71
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POST OFFICE LIMITED
(Company no. 2154540)
(the ‘Company’)
Minutes of a Board meeting held at 9.30am on 25 October 2016
at 20 Finsbury Street, London EC2Y 9AQ.
Present:
Tim Parker
Richard Callard
Tim Franklin
Virginia Holmes
Ken McCall
Carla Stent
Paula Vennells
Alisdair Cameron
In Attendance:
Alwen Lyons
Martin Edwards
Mark Davies
Nick Kennett
Rob Houghton
Jonathan Hill
Owen Woodley
Chrysanthy Pispinis
Neil Hayward
Natasha Wilson
Apologies:
POLB 16/62
POLB 16/63
Chairman
Non-Executive Director
Non-Executive Director
Non-Executive Director
Senior Independent Director
Non-Executive Director
Chief Executive
Chief Financial Officer
Company Secretary
Director of Strategy (Minute POLB 16/66 and POLB 16/67)
Corporate Affairs Director (Minute POLB 16/66)
Group Financial Services Director (Minute POLB 16/67)
Chief Information Officer (Minute POLB 16/67)
Head of Risk, Banking, Regulation and Strategy, Financial
Services (Minute POLB 16/67)
Sales Director (Minute POLB 16/67)
Financial Services Corporate Development & Governance
(Minute POLB 16/76)
Group People Director (Minute POLB 16/68)
Director of Reward and Pensions (Minute POLB 16/68)
None
INTRODUCTION
(a)
(b)
The Chairman noted that a quorum was present and opened the
meeting.
The Directors declared that they had no conflicts of interest in the
matters to be considered at the meeting in accordance with the
requirements of section 177 of the Companies Act 2006 and the
Company's articles of association.
MINUTES OF THE PREVIOUS BOARD AND COMMITTEE MEETINGS
INCLUDING STATUS REPORT
(a)
(b)
Minutes
The minutes of the Board meeting held on 29" September 2016
were approved as an accurate record and the Chairman was
authorised to sign them.
The Board noted the Action Status Report.
POL Board minutes, 25 October 2016 1 Draft
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(c) The Board discussed Action POLB15/50 (b) and the effect of
classifying the closure of the Supply Chain external work as
discontinued business and therefore an exceptional item in the
accounts. The Board recognised that the work had been discussed
at the time of budget setting and acknowledged that it would have
been inappropriate to include it in any budget before the consultation
with employees had been concluded.
(d) The Chair of the Remuneration Committee stressed the need for
transparency when setting the bonus targets and assessing
performance against those targets. The CFO would continue to
disclose the exceptional charges at the ARC and he assured the
Board that any effect on the EBITDAS would be transparent to the
Remuneration Committee.
POLB 16/64 CEO REPORT
(a) The CEO introduced the CEO Report, focusing on the following key
points:
(b) Period 6 Results: Performance continued to be challenging and
although the CEO remained reasonably confident that the full year
EBITDAS target would be delivered, the gross income trend
remained a concern.
(c) Pensions: The CEO updated the Board on the decision of the
Pensions Trustee to accept the proposal to close the Post Office
Section of the RMPP on the 31* March 2017. She thanked Virginia
Holmes for her support.
(d) Industrial Relations: The CEO reported that the CWU and Unite
unions had called for strike action on the 31% October. The Board
was assured that contingency plans were in place to ensure there
would be as little adverse effect on customers as possible. The CEO
explained that discussion continued with the unions but that there
would likely be further strikes in the run up to Christmas.
(e) POca: The CEO explained that the details of the supplier contract
would be presented at the November Board meeting. The Board
asked the CEO to ensure that a wide range of options for payment
provider be considered.
(f) Apprentices and Graduates: The CEO updated the Board on the
presentations she had received from the apprentices and graduates
who had recently joined the Business. The standard was excellent
and she was excited by both their enthusiasm and their focus on the
commercial and social purpose.
(g) Mails: The CEO explained that the Mails team was continuing to
engage with the RMG whilst looking at the next best alternative
strategy. The Board was nervous about the RMG delaying the
discussions and the CEO assured them that should deadlines be
missed she would escalate the matter with the CEO of the RMG.
Ken McCall reported his meeting with the Mails team and the need
POL Board minutes, 25 October 2016 2 Draft
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to test the viability of alternative solutions. It was understood that the
Mails strategy would be discussed at the next Board meeting.
Transformation Report
(h) I The Board noted the Transformation Report. Transformation risk
would now be included as a standard agenda item for the ARC and
the Board asked that the ARC specifically consider:
ACTION: e The aggregated cost and burn rate compared with
David Hussey business cases and budgets; and
e The impact of IR35, ‘off payroll’ working, the impact and
risk mitigation.
(i) The Board noted the CEO report.
POLB 16/65 FINANCIAL REPORT AND UPDATE ON THE DEVELOPMENT OF THE
P6 RESULTS.
(a) I The CFO introduced the Financial Performance Report for Period 6,
September 2016. The CFO was forecasting that the Business would
hit the EBITDAS target for the year, but good Christmas trading
would be key to delivering the £-10 million.
(b) Cash flow headroom had not improved as predicted in P6 as
additional cash had remained in the network after the strike
contingency planning. However this position had been recovered
during P7.
(c) The Board discussed the Working Capital Facility and the
opportunity to reduce the cash strain on the Government as part of
the funding negotiation. The CFO explained that the most difficult
areas to manage were coin distribution and Foreign Exchange cash.
However if postmasters were incentivised to change their behaviour
this could facilitate another change in supply chain demand and free
up cash to use elsewhere.
(d) The CFO explained the additional pressure on the 2017/18 target of
£28m, which would flow into the baseline for the strategy and funding
plan. The Board agreed that it was important to have a realistic
ACTION: CFO baseline for the plan, and asked the CFO to provide trend income
analysis in the Financial Reports to enable the Board to monitor
the income streams. The Board recommended that the 2017/18
budget should be realistic and based on flow through from the
2016/17 operational outturn, with initiatives to deliver the
contingency to get back to the £28m target.
(e) The Board approved the P6 Income Statement, Balance Sheet,
Cash, Headroom and Forecast positions
(f) The Board noted that external supply chain activities have been
reclassified as discontinued operations subject to Ernest Young’s
(EY) agreement.
(g) The Board agreed that from P7 Actuals v Forecast comparisons
would be monitored.
POL Board minutes, 25 October 2016 3 Draft
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POLB 16/66 STRATEGIC PLAN TO 2020/21 AND FUNDING REQUEST
(a) The Chairman welcomed Martin Edwards, Director of Strategy and
Mark Davies, Corporate Affairs Director, to the meeting.
(b) Martin Edwards presented an overview of the 2020/21 strategy,
explaining the financial consequences of the counterfactual case as
opposed to achieving commercial sustainability through funding a
major cost base restructure.
(c) The Board discussed the proposals and stressed the need to
strengthen the explanation and narrative behind the counterfactual
case and to include ranges within the projections.
(d) The CEO recognised that because of the good work done to date in
delivering Network Transformation, and the current stability of the
network, it would potentially be difficult to persuade Ministers that
there was still a cost base crisis which needed to be addressed.
(e) I The Board asked for assurance that the necessary evidence was
available to support the funding case. The CFO explained that the
Group Executive had worked though and agreed the assumptions in
the plan, which were supported by market analysis and business
cases. The BEIS team had employed KPMG to review the funding
request and Martin Edwards would work closely with Richard Callard
and his team to present the case.
(f) The Board discussed the revenue projections and agreed that the
business had to aim to be sustainable without relying on FS growth.
ACTION: The Board asked Martin Edwards to consider how the size of
Martin Edwards the network could be used to deliver income through an access
fee, similar to that for paid for the banking framework or identity
products.
(g) I The Board recognised the uncertainty within the income projections
included in the plan, but stressed that the cost base remained more
in the control of the business. The funding narrative needed to make
it clear that it would be impossible to change legacy IT systems and
reduce the cost base without funding support from the Government.
(h) The Board discussed the segmentation of the network into
commercial and social branches and possible changes to how these
could be funded. It recognised that product simplifications and a
reduction in postmaster remuneration would put pressure on some
postmasters, but believed that there could be an opportunity to
restructure the franchise to sell it more as a footfall generator.
POL Board minutes, 25 October 2016 4 Draft
ACTION:
Martin Edwards
ACTIONS:
Martin Edwards
POLB 16/67
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(i) The Board agreed with the four success criteria set out in the
narrative document, namely that by supporting funding the
Government would secure:
e Agrowing, flourishing network — although not with any binary
network number to hit;
e Permanently lower funding;
e Indispensable service to customers and communities; and
e Options on ownership — without referring to a mutual option.
(j) It was recognised that there would need to be more detail in the
funding request with analysis on £320m investment and the resulting
deliverables. The Board advised that the funding request had
different audiences and would require different explanations to align
with their priorities accordingly. The Board recommended that
greater focus be given to SME customers.
(k) The Board supported the direction and funding proposal and
asked for more information on the investment and returns to be
presented at the next Board meeting.
(I) The CEO suggested that Martin Edwards could provide
additional information on a one to one basis if any Board
member required.
(m) The Board approved the strategic plan to 2020/21 and funding
request prior to submission to the Government in early November.
(n) Mark Davies left the meeting.
FINANCIAL SERVICES GROWTH STRATEGY
(a) The Board welcomed Nick Kennett, Group Financial Services
Director, Jonathan Hill, Head of Risk, Banking and Strategy
Financial Services, Chrysanthy Pispinis, Financial Services
Corporate Development and Governance, Owen Woodley, Sales
Director, and Rob Houghton CIO to the meeting.
(b) Nick Kennett reminded the Board of the strategic direction for Post
Office Money (POM) approved at the June meeting, with the
interdependent key components of:
« The New Normal customer proposition;
* The ‘Strong Integrator’ business model; and
e The re-negotiation with the Bol
(c) Nick Kennett stressed that the FS strategy meant a change to focus
on the customer relationship and lifetime value, and a move away
from the primary delivery in branch to a digital channel. He added
that the delivery of the strategy required a significant change in how
the business was run, with enhanced capabilities, risk management
and governance structures, changed relationships with suppliers
and partners, supported by agile technology.
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(d) Nick Kennett explained that investment, which had been included in
the wider 2020/21 strategy plan and funding, would be required for
IT development in support of the new model. The CIO stressed that
the investment should focus on delivering one product at as low a
cost as possible to test the proposition with both customers and
revenue earning protection. Further products could then be added
incrementally. The ClO believed that the initial investment could be
around £8-10m but needed further definition as it depended on the
product chosen and the level of systems integration required with
the product provider. The Board supported this initial investment.
(e) Nick Kennett confirmed that the overall funding request was £72.3m
over five years, of which £37.4 related to capex. This investment was
targeted to deliver gross income in 2020/21 of £156m and EBITDAS
of £68m, an increase of £30m. The overall NPV was £181m over
five years.
(f) The Board asked for assurance that the development would not
complicate the IT transformation currently underway. The ClO
assured the Board that the system would be developed separately
and only integrated into the Post Office systems if tests proved it
could be incorporated without causing issues.
(g) I The Board agreed to plan to make the full investment as proposed,
depending on the success of the initial investment, and discussed
the most appropriate structure and governance for its delivery.
(h) Nick Kennett advised that the paper did not include recommended
changes to the organisation structure and regulatory position as this
had not been discussed at GE. CS explained that, based on her
experience with FinTech companies and major banks, for this new
business to work effectively the Board and management should
think in a new way, enabling a separate innovation hub supported
by people and a new governance environment. Ring-fencing the
team working on the business development would assist faster
change, particularly if the project deployed a compartmentalised,
“test and learn” methodology. There was support of this from across
the Board.
(i) The Board discussed the FS sales model and the move from
Financial Specialists in Directly Managed branches to a CRM model
training postmasters’ staff to use a portal and tablet to capture
customer data. Owen Woodley explained that the CRM model was
underway as a trial which would need to prove it was profitable for
the business and the postmaster.
(j) The Board supported the recommended options and direction of
travel principles in relation to technology structure, the distribution
model and the shape of the funding and emphasised to the
executives that it would be important to build momentum into the
change programme.
(k) Nick Kennett, Martin Edwards, Owen Woodley, Jonathan Hill,
Chrysanthy Pispinis and Rob Houghton left the meeting.
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POLB 16/68 PENSIONS VERBAL UPDATE
(a) The Chairman welcomed Neil Hayward, Group People Director, and
Natasha Wilson, Director of Reward and Pensions, to the meeting.
(b) Neil Hayward updated the Board on the decision taken by the
Pension Trustee to accept the proposal to close the DB pension plan
on the 31% March 2017. He reported that the approach to the
consultation had been validated by the Pension Regulator.
(c) Face to face briefings were now planned to explain to DB scheme
members the summary of the consultation; what would happen to
the surplus after the current valuation; what the move to the DC
scheme would mean to members; and the next steps in the process.
A pensions’ website was also being launched where members could
access information.
(d) I Natasha Wilson reported that the scheme valuation should be
available in the first two weeks of November and this would help to
make the position clearer for members.
(e) Natasha Wilson explained that a Governance Committee was being
set up to give oversight to the DC scheme and that she was working
with the Chairman of the DB Trustees to identify an independent
ACTION: trustee to invite onto this committee. Richard Callard asked to be
Natasha Wilson kept updated on the establishment of the Governance
Committee.
(f) The Chairman thanked Natasha Wilson on behalf of the Board.
(g) Neil Hayward and Natasha Wilson left the meeting.
POLB 16/69 UPDATE FROM BOARD COMMITTEE
(a) Remuneration Committee _(RemCo)
The Chair of the RemCo updated the Board on the meeting held on
the 29"" September 2016.
« He reported that PwC had been appointed as the new
Remuneration Committee Advisor.
e The CEO had recommended that the Group Executive
should receive a pay award of 1.9% similar to the rest of the
Business, which the RemCo had noted.
e The STIP target for the CEO and CFO bonuses, which had
been agreed with the last Government Minister, had now
been further delayed by the Ministerial change. Because of
this delay the RemCo had decided that it would not be
advisable to ask for a recalibration of the LTiP target for
2016/17 as it was now too late to do so.
e Neil Hayward would be presenting the timetable for future
bonus target submission at the November Committee.
(b) Nomination Committee (NomCo)
The Chair of the NomCo updated the Board on the meeting held on
the 29'" September 2016, at which the Committee had discussed the
Group Executive succession plan.
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POLB 16/70 ITEMS FOR NOTING
Sealings
(a) The Directors resolved that the affixing of the Common Seal of the
Company to the documents numbered 1451 to 1453 inclusive in the
seal register was confirmed.
(b) Future Meeting Dates
The Board noted the future meeting dates.
(c) Health and Safety
The Board noted the Health and Safety report.
POLB 16/71 CLOSE
(a) There being no further business, the Chairman declared the meeting
closed.
(b) I The Board attended a session presented by Linklaters covering,
‘The changing regulatory environment — The impact of the senior
manager and certification regime, on the Financial Services sector.’
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POLARC 16(6")
POL ARC 16/41 — 16/53 I
POST OFFICE LIMITED
(Company no. 2154540)
(the ‘Company’)
Minutes of a meeting of the AUDIT, RISK AND COMPLIANCE COMMITTEE
held at 2.30 pm on 28" September 2016 at 20 Finsbury Street, London EC2Y 9AQ
Present: I
I
Carla Stent Chair I
Richard Callard Non-Executive Director (RC) I
Tim Franklin Non-Executive Director (TF) I
Ken McCall Non-Executive Director (KM) I
In Attendance:
Paula Vennells Chief Executive, (CEO)
Alisdair Cameron Chief Financial Officer (CFO)
Jane MacLeod General Counsel (GC) . I
Nick Kennett Financial Services Director and CEO of POMS (NK)
Alwen Lyons Company Secretary (CoSec)
Mike Morley-Fletcher Head of Risk and Assurance (MMF) I
Paul Hemsley Financial Controller (PH) I
Peter Mclver Emst & Young (PM) I
Elena Belyaeva Ernst & Young (EB)
Kevin Gilliland Network and Sales Director (KG) (Minute POLARC 16/42 to I
16/44)
Jonathan Hill Head of Risk, Governance and Development (JH) (Minute
POLARC 16/42 to 16/44)
Owen Woodley Sales Director (OW) (Minute POLARC 16/42 to 16/44)
Amanda Bowe POMS, Non-Executive Director and Chair of POMS ARC (AB)
(Minute POLARC 16/42)
Susie Hayward POMS, Head of Risk and Compliance (SH) (Minute POLARC
16/42)
Gordon Gourlay Bol, Managing Director of Post Office Businesses (GG) (Minute
16/43)
Alec Hughes Bol, Head of Post Office JV Compliance (AH) (Minute 16/43)
Rob Houghton Chief Information Officer (RH) (Minute POLARC 16/48)
Tim Parker Post Office Chairman (TP) (Minute POLARC 16/43 to 16/50)
POLARC 16/41 INTRODUCTION
(a) A quorum being present, the Chair opened the meeting. The
directors declared that they had no conflicts of interest in the I
matters to be considered at the meeting in accordance with the I
requirements of section 177 of the Companies Act 2006 and the
Company's articles of association.
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(b) The Chair welcomed attendees from Post Office (POL) and Post
Office Management Services (POMS) who had joined for the
Financial Services discussion.
FINANCIAL SERVICES
IRRELEVANT
(fy) NK explained that the compliance risk of the POL Network was
the highest risk on the POMS Risk Register and rated adverse
to appetite. While there had been no indication of systemic
customer detriment from sales through the POL network, it was
a regulatory requirement that POMS should be able to provide
evidence and quality assurance from POL in relation to POL’s
own compliance with contractual and regulatory requirements
and its conduct risk framework. This included evidence that
agents and those of their staff who sold POMS products had
been appropriately vetted and trained. A new Horizon IT control,
which would enable POL to limit user access, and which had
been anticipated for delivery by POL in January, would be
delivered later.
(g) KG supported the introduction of the user access control.
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(i) The ARC stressed the importance of implementing the new
control to manage user access and the Chair asked the
POMS CEO to provide a report setting out the timeline and
ACTION: NK actions to deliver the requirement.
(i) The Chair thanked AB for her report and assured her that the
ARC would continue to monitor delivery of the AR
accountabilities.
(k) AB and SH left the meeting.
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IRRELEVANT
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POLARC 16/45 MINUTES OF THE MEETINGS HELD ON 25™ JULY 2016
(a) The minutes of the meetings held on 25" July 2016 were
approved as presented and the Chair of the Committee was
authorised to sign them as a true record,
POLARC 16/46 POLICIES FOR APPROVAL
Investigations
(a) The ARC approved the Investigations Policy.
Physical Securit
(b) The ARC approved the Physical Security Policy.
Financial Crime Policy
(c) The ARC approved the Financial Crime Policy subject to the
I
alteration to include ‘possible prosecution’ as an outcome for I
failure to comply.
ACTION: MMF Amend the Financial Crime Policy to include possible
prosecution as an outcome for failure to comply. }
POLARC 16/47 INSURANCE RENEWAL FOR RECOMMENDATION TO - THE
BOARD
(a) PH explained that the cover being proposed included a high
level of deductibles which meant that POL self-insured up to that
level. The ARC asked if consideration had been given to
complete self-insurance. PH explained that this had been
considered and would be considered every year before renewal.
NK suggested that once POMS was more established it could
look at offering insurance to POL.
(b) The Committee recommended the renewal as set out in the
brokers’ report, for submission to the Board for its approval.
BOUNDARY/PERIMETER CONTROLS
POLARC 16/48 FINANICAL REPORTING UPDATE
(a) The Chair welcomed Rob Houghton, Chief Information Officer
to the meeting.
Financial Control Framework (FCF)
(b) The CFO updated the ARC on the progress being made to
develop the FCF. He said that the methodology being deployed
was entirely appropriate to financial reporting and could be
extended to other areas. The CFO explained that the majority
of finance processes had now been mapped and gaps
identified. The ARC asked for priority to be given to remediating
the higher risk gaps disclosed in the CFO report, such as
segregation of duties, and the CFO concurred. By year-end
gaps would have been mitigated, at least on a work-around
basis, controls self-assured and testing undertaken.
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(c) The CFO reported to the ARC that after discussion with the
Chair, the Shareholder and the External Auditors, a decision
had been taken not to produce Interim Accounts for the current
year. The resource saved would be used to focus on ensuring
that relevant controls were in place by the year end. EY audit
work would be accelerated but without duplication. EY and POL
were considering the need to repeat additional year-end
routines as the controls would not have been in place for the full
financial year.
(d) The CFO noted that the controls and assurance of the accuracy
of the declared cash in the Network was under review.
(e) The CFO explained the Finance System upgrade currently
being scoped relied on SAP for income reporting and would
eliminate the need to use multiple spreadsheets and feeder
systems. A detailed paper and business case for this investment
in SAP would be presented to the Board in November. The ARC
recognised the improvement that this change could bring but
were concerned about the time and investment required and I
stressed that the implementation of the new system would be
key.
ACTION: (f) The proposed External Audit plan would be presented to
PM/CFO the November ARC meeting.
(g) The Committee noted the progress made.
Controls Assurance
(h) The CFO reported on the controls in place to give assurance to
the budget and funding requirement. He explained that UKGI
had engaged KPMG to provide assurance as to the funding
application. PM reported that EY had been approached to bid
for the work but that they would decline due to conflicts of
interest.
Risk Management Framework i
(i) MMF presented the Risk Profile and explained the changes
since the last report. The Industrial Action risk had improved
significantly despite the strike called by the unions. The CEO
explained that the effect of the strike had been well managed I
and the Group Executive supported the reduced risk. i
(i) The ARC were surprised that the risk associated with IT
transformation and its effect on the flexibility to change systems
ACTION: and controls was not included in the risk profile.
MMF/RH The ARC requested that this risk be added in the future. I
ACTION: (k) The ARC agreed that Transformation risk needed more I
David Hussey scrutiny and asked that it be included in future agendas
and reports.
() The Committee approved the 2016/17 Half Year Group Risk
Profile.
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POLARC 16/49 IT CONTROLS
End to End Control Framework and Cyber/IT Security
(a) RH explained his plans to create an end to end control
framework for IT and the work underway to map the IT
landscape. This work would map the current state against the
necessary controls and required protections. I
ACTION: Rob A paper would be presented at the November ARC outlining I
Houghton the proposed IT control framework and the plans for its
implementation.
(b) RH recognised the need to strengthen the IT team and
introduce people with expertise in IT security operations. He
assured the ARC that these appointments were underway. This
would bring the skill necessary to develop an IT security
operations centre with the right detection systems and capability
to monitor any IT security issues.
(c) RH recognised that the current status of Cyber Security and
Information Assurance were outside the Board risk appetite in
three key areas as described in the paper. He admitted that he
would remain nervous until he could see the whole IT
environment in one place rather than being fragmented between
suppliers.
(d) The Chair updated RH on the ARC discussion on system
changes required by POMS to introduce controls to limit Horizon
user access. RH assured the ARC that he was aware of the
required IT. changes and was working with the network and I
training team to deliver them as soon as possible.
(e) The ARC noted the paper on Cyber/IT Security.
Horizon Lessons Learned
(f) The CFO explained that Fujitsu and Oracle had been unable to
determine the root cause of the Horizon systems failure but the
same failover/failback exercise which had caused the initial
failure had now been replicated successfully. It was believed I
that the problem had been caused by the memlock processes
which had now been reconfigured.
(g) The ARC was concerned that the root cause of the Horizon
failure had not been identified, and that the business incident
escalation processes had not worked. The GC explained that I
changes had been made to address the deficiencies in business
continuity and a Business Protection team was now in place
with ongoing training and testing for different scenarios. The
incident escalation process would continue to be developed and
tested.
(h) One of the issues highlighted by the Horizon failure was the
inability to communicate quickly with the Network. Standard
communications had now been prepared with a separate
communications channel should the Horizon system become
unavailable. I
POL ARC, 28" September 2016 7
POLARC 16/50
POLARC 16/51
Strictly Confidential
(i) The Committee noted the paper and commented on the lessons
learned.
(i) RH left the meeting.
BRANCH CONTROLS
BCV Lessons Learned
(a) The CFO introduced the lessons learned paper and highlighted
the actions taken since the fraud had been reported to the ARC.
He stressed that management actions had already been taken
concerning the BCV fraud before it was reported to the ARC but
recognised that enhanced reporting was required and was now
in place. Greater transparency would mean more issues would
be reported but these issues were usually caused by non-
compliance or unintentional mistakes. The tighter controls being
put in place would help reduce the losses through early
intervention and, where possible, recovery.
(b) The ARC applauded the transparency and recognised the work
underway to enhance reconciliations and increase
interventions. However they asked if those responsible for the
lack of escalation had been made accountable. The CEO
reported that changes to the senior leadership had taken place.
(c) The Committee noted the paper and the verbal update.
(d) TP left the meeting.
AML/CTF Framework
(e) The GC updated the ARC on the HMRC AML/CTF audit. The
work had been slightly delayed and would be reported to the
November ARC along with finalised actions, dates and
accountabilities.
(f) The Committee noted the status of the HMRC audit and the
initial draft findings of the Risk Assessment work.
Policies for Board Approval (AML and ABC)
(g) The ARC recommended the Anti-Money Laundering and
Counter Terrorist Financing Policy, for submission to the Board
for approval
(h) The ARC recommended the Anti-Bribery and Anti-Corruption
(‘ABC’) Policy, for submission to the Board for approval.
QUATERLY AUDIT REPORT
(a) MMF presented the Quarterly Audit report and explained that
although the audit programme was slightly behind plan it was
expected to catch up during the remainder of the year.
(b) The ARC asked MMF to prioritise the review of IT governance.
POL ARC, 28" September 2016 8
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(c) The ARC noted the paper.
POLARC 16/52 ITEMS FOR NOTING I
(a) The ARC noted the report on Business Continuity planning.
(b) The ARC noted the Contact Management paper. I
(c) The ARC noted the Horizon Scanning paper. i
(d) The ARC noted the Property paper.
POLARC 16/53 ANY OTHER BUSINESS
(a) The CFO reported that Postal Services Holdings Company
Limited (PSH) was planning to sign its report and accounts on
the 3% October. The accounts would contain a subsequent
event note on IRIS and would note that a letter before action
had been received on 22" September in relation to notice of
termination which had been given in respect of a 3% party
contract in Supply Chain.
(b) The GC explained that a letter before action claim had been
received relating to the Supply Chain withdrawal from the
external market. The letter claimed an abuse of a dominant
market position, and alleged that withdrawal could have an
adverse impact on Somali communities. The legal team was
dealing with the letter, however there was a risk of adverse
publicity.
(c) There being no further business the Chairman closed the I
meeting. i
POL ARC, 28" September 2016 9
POST OFFICE
POST OFFICE BOARD
CEO’s Report
Author: Paula Vennelis Meeting date: November 2016
Executive Summary
Context
Our goal for 2016-17 is to achieve
EBITDAS of (£10m).
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Our 3 year goals are:
1. To accelerate the transformation
of Post Office.
2. To secure commercial
sustainability for the long term
3. To establish a business that can
ultimately fund investments and
the social purpose from profits
rather than subsidy.
In summary, our strategy is to secure our position as the UK’s number one
parcels and letters retailer, grow in financial services and protect our network
and social purpose —- all supported by a much leaner central organisation.
Questions this paper addresses
1. What is on my mind? (successes, challenges, opportunities and risks)
2. What are the implications for our outlook and plans?
Conclusion
1. EBITDAS in P7 was £(1.1)m, £1.4m favourable to budget. EBITDAS YTD
was £(14.3)m,£1.6m favourable to budget. However, gross income in P7
was £0.3m adverse to budget reflecting challenging trading conditions.
2. Discussions with Government on our funding proposals continue and we are
seeking ministerial engagement.
3. We are also continuing to discuss the current dispute with our trade unions.
However, it is unlikely that we will be able to resolve the dispute with the
CWU in particular in the near future. We are planning for further industrial
action before Christmas.
Input Sought
The Board is invited to note the report and highlight any issues where a future
discussion would be welcome.
Strictly Confidential
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The Report
Looking Back
(WHAT HAS GONE WELL?
« Financial Performance — P7
— P7 EBITDAS was £(1.1)m; £1.4m favourable to budget. YTD EBITDAS was
£(14.3)m; £1.6m favourable to budget.
— Income in P7 from Mails and Financial Services was £0.5m and £0.8m
favourable to budget respectively.
— Expenditure in P7 of £(82.1)m was £0.5m favourable to budget. YTD
expenditure of £(531.8)m was £4.8m favourable to budget.
« Customer Measures
— All of our customer measures performed at or ahead of target in P7.
Specifically:
o Effort scores continued to perform well achieving 75%, in line with YTD
performance and 7pp ahead of target.
NPS was +66, in line with YTD performance and 1 point ahead of target.
Customer Satisfaction was 84%, in line with YTD performance and target.
Wait Time Acceptability was 93%, 1pp ahead of YTD performance and 4pp
ahead of target.
o FS NPS was +30, 1 point ahead of YTD performance and ahead of target
(+28).
e Supply Chain
— Phase 1 of the implementation of Project Iris progressively covering 10 sites
went live on 24 October.
— The project is on track and on budget with routes and duties agreed;
equipment and vehicles in place; 291 Settlement Agreements signed (15
pending); and work underway on exiting sites due for closure.
— Service performance against revised routes is monitored daily and all depots
are performing well, achieving standards in excess of 90% consistently with
some achieving 100% from the outset.
— Phase 2 covering a further 14 sites will go live on 30th January 2017.
« Industrial Relations
— As previously reported, our contingency plans for the day of industrial action
on 31 October worked well.
— Turnout was again much lower than historical turnout in previous strikes by
either Union (22% of represented employees).
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—» 99% of the Post Office network was open for business. We opened 218 out of
299 Directly Managed Branches (up from 187 on 15 September) and all our
supply chain depots bar one (Glasgow CVIT) were open.
— Media coverage was very low key.
All industrial action is regrettable and we are conscious that changes we are
implementing are difficult for affected colleagues. However, we believe the
rationale for change is understood and that our regular, direct communication
with colleagues is having a positive impact.
+
e Charity Ball
— The 2016 Post Office Charity Ball took place on 3 November. Over 1,000
people attended including suppliers, partners, Post Office heroes, POAC
members and colleagues.
— Weare awaiting the final total but we know that over £140,000 was raised for
BBC Children in Need.
¢ Financial Performance - P7
—» Gross Income in P7 of £88.0m was £0.3m adverse to budget. Gross income
YTD of £560.1m was £7.5m adverse to budget.
— Some long term negative trends continued through P7, including Lottery
which was £1.0m adverse to budget.
e Power Outage (Chesterfield)
—» Our office in Chesterfield - Future Walk - experienced a significant power
failure on Tuesday 8th November and was forced to run on emergency back-
up for over 24 hours; including some loss of service in our contact centres
while the issues were addressed.
-» Our operational response was good and a repair to key components of the
electricity supply to the building (including the 11,000 volt transformer) was
completed on 11 November. An assessment of whether a full replacement is
required is being undertaken.
—» Nonetheless, we are conducting a review of our response and how we could
improve in areas including communication to other parts of the business.
Looking Ahead
e Funding
— Discussions with UKGI on our funding proposal are continuing.
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— An outline timetable for official level discussions has been agreed for the
various stages of the process including conversations with the European
Commission; and discussions with KPMG (covering e.g. the baseline proposition
and strategy overlays) commenced this week and are expected to go on fora
fortnight.
— In addition, I have written to Margot James seeking an early meeting to discuss
our proposals. I will keep the Board informed of progress.
e Christmas Marketing Campaign
— The marketing team have developed an innovative digital marketing campaign
which has been rolled out and will continue through the Christmas peak.
— Ihave invited them to share this with you at the Board meeting.
e Parliamentary Activity
— There is a debate on 17 November in Westminster Hall on the future of the Post
Office. Margot James will be responding for the Government.
— Although the debate is inspired by the CWU, we have been working with the
team in UKGI to turn it into an opportunity to highlight the progress the
business has made since separation; our importance to communities across the
country; and raise awareness of our future strategy.
— In addition, we are planning to hold a drop-in session for MPs in Parliament on
30 November focussed on raising awareness and support for our strategy and
the banking framework in particular.
« Network Consultation
— BEIS launched its ‘Network Consultation’ on 8 November with a request for
responses by 21 December.
— The consultation is designed to assist the Government to ‘understand
consumers’ and businesses’ expectations for what the network should look like’
in order to inform its work on the ‘future funding of the Post Office network’.
Undertaking this exercise now will also assist in ensuring clearance of EU State
Aid requirements for any future funding.
—» The consultation exercise asks whether respondees agree that the current
network access criteria should be generally retained; seeks views on provision
in remote communities; and asks about future service offers together with the
role that communities can play in the Post Office network.
— At the same time, BEIS also published a report from YouGov and London
Economics on ‘The Social Value of the Post Office Network’. This academic
study (based on a 5000 responses from households and 750 from SME’s)
confirms the significant and ongoing social value that these groups ascribe to
the network and its services (the lowest of three valuations calculated yields a
figure over £4bn per year).
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¢ Industrial Relations
~» Although the business managed the last day of industrial action well, there is
little sign that we will be able to resolve the dispute with the CWU in the near
future. We are anticipating further industrial action before Christmas.
~» Nonetheless, we continue to have discussions with both Terry Pullinger and
Andy Furey in an attempt to find a way through the current impasse.
— Ihave also written to Terry Pullinger to invite him and other CWU
representatives to come to the GE meeting on 22 December to talk about our
strategy and vision; and for them to share their vision for the future of the
business. We await a response.
~— More positively, discussions with Brian Scott (Unite) suggest that there may
be scope to resolve the dispute with them. They have presented us with a
broad range of requests that would allow them to settle the dispute. Whilst
we could not agree to them all, there does appear to be scope for negotiation
and compromise without diverting from our strategy. I will keep the Board
informed of progress.
« POca
—> Further to the update in last month’s report, we have continued to investigate
the options for addressing TSB’s withdrawal from the procurement process.
— As part of our working through the detail of the proposed e-money solution
HPE’s banking partner, TrustPay Global (TPG) has recently presented their
solution to the FCA, who have objected to a number of aspects of the
solution.
— They were particularly concerned about the classification of the accounts as
‘payment accounts’. Reclassifying the accounts would require £40m in capital
adequacy to be set aside. HPE are considering other aspects of the FCA’s
response and are due to come back to us shortly with a re-assessment of the
feasibility of the e-money solution.
— It now seems most likely that we will need to contract with JPM to provide the
service to be co-terminus with our contract with DWP. JPM are contractually
obliged to continue to deliver the service and will be under pressure from the
regulator to continue to provide the service to customers.
—> JPM are able to update their prices if we extend. They have agreed to provide
us with detailed pricing for this option in December. We have shared the new
services contract with them, as both parties have agreed that it would be
preferable to update the terms under which the service is delivered. It is likely
that negotiations will continue into the New Year.
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In Conclusion
The business remains ahead of target for
the year. However, trading conditions are
challenging and we will need to carry the
momentum from P7 into the Christmas
Peak.
The business responded well to the latest
day of industrial action and support
amongst colleagues was relatively low.
However, resolution with the CWU
appears no closer. More positively,
discussions with Unite suggest that there
may be scope to resolve the dispute with
them.
Strictly Confidential
Significant challenges lie ahead in
achieving our financial targets especially
given the impact of external factors on
our income projections.
We will also continue to face challenges
in managing our industrial relations.
However, our approach of engaging
colleagues directly and supporting them
through change is working. We will
continue to invest time and resource on
engagement activities.
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October 2016
Financial Performance
Al Cameron
24 November 2016
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P7 and YTD Performance ahead of Budget
Context
. P6 EBITDAS £(2.0)m off budget (YTD £0.2m ahead) highlighting a difficult income trend.
. Forecasting £(10)m EBITDAS for full year
. P6 £235m additional cash in Network, balance sheet headroom £36m.
Questions
. How is our scorecard performance in P7 and YTD?
. What is the financial performance of the business in P7 and YTD?
. Are we forecasting year-end outturn to be on budget?
. Are we appropriately funded?
Conclusions
. EBITDAS was £1.4m ahead of budget in P7 (YTD £1.6m).
. Of this £0.7m was underlying performance, £0.5m was due to one offs mainly Telco and the remaining £0.2m was
related timing.
. We are forecasting to meet our £(10)m) full year EBITDAS target before discontinued operations, subject to
Christmas trading.
. Balance sheet headroom improved in P7 by £107m to £143m, returning half of the contingent cash from the network.
Input Sought
The Board is asked to note the financial performance.
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The Executive Scorecard is largely positive notwithstanding
pressures on income, footfall and attendance
. P7 YTD Full Year I 2915-16
Key Performance Indicators Act Target Var. Act Target Var. Target I Audited
Growth
‘Total Gross Income (excl NSP) £m 88.0 88.3 560.1 567.6 (a0 984.0 981.1
EBITDAS £m (100% bonus) (1.1) (2.5) (14.3) (16.0) (10.0) I (24.0)
Headroom £m (vs Board minimum limit)~ 343 200 343 200 200 485
Digital Net Income £m (digital team) 33 3.6 (230 22.4 39.9 I 21.8
Customer
Customer Effort 75% 68% 75% 68% 68% 67%
Net Promoter score 66 65 66 65 65 63
Acceptable Wait Time % 93% 89% 92% 89% 89% 79%
Branch Compliance - Financial Services - basket of 11 measures 20 <=50 21 <=50 <=50 26
Footfall (weekly) m (customer sessions from Horizon) 10.60 11.06 10.52 10.92 11.14 11.14
People
Line Manager Engagement Index % (Once a year March) * YTD Score 68% 68% - 68% 68%
Internal senior manager appointments (3A and above) 63% 50% 38% 50% ie 50% 14%
Representation (Senior Managers) - Gender 35% 37% 35% 37% 37% 35%
Attendance 95.9% 96.7% 96.6% 96.7% 96.7% 96.8%
Modernisation
Number of branches (one month in arrears) Same as YTD 11,645 11,500 11,643
NT Branches Transformed In Year (Bonus Gateway 900) 135 77 848 777 1,904
~ Actuals include £200m retained for prudence.
* Measured annually in March with a ‘Pulse survey' due in September.
Attendance — in period impact across Supply Chain and Crowns
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P7 showed an improved performance £1.4m ahead of budget
P7
£m Period Variance
Actual to Budget
Gross Income 88.0 (0.3)
Cost of Sales (10.2) 1.1
NET INCOME 77.8 0.8
Expenditure (82.1) 0.5
FRES - Share of profits 3.2 0.1
EBITDAS (1.1) 1.4
YTD
Actual
560.1
(66.4)
493.8
(531.8)
237
(14.3)
. Versus prior year, EBITDAS was £1.6m ahead (YTD £11.5m).
° This includes no change of accounting for discontinued operations (slide 7).
. Of the period net £1.4m:
* £0.5m one off, mainly Fujitsu cost of sales rebate,
YTD
Variance
to Budget
(7.5)
4.6
(2.9)
4.8
(0.3)
1.6
Full Year
Budget
984.0
(120.0)
864.0
(909.8)
35.8
(10.0)
* £0.2m is net timing (favourable non staff and agents pay offset by averse staff cost), and
+ £0.7m was therefore period performance and relates to lower agents pay and cost of sales.
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Favourable trading in Mails and Financial Services offset by
weaker Lottery and Supply Chain.
P7 YTD Full Year
Period Variance YTD Variance Budget
Gross Income (£m) Actual to Budget Actual to Budget
Mails 31.0 0.5 189.9 1.7 329.6
Retail & Lottery 4.1 (1.0) 24.5 (4.0) 49.2
Financial Services 27.0 0.8 1771 (2.7) 313.9
Government Services 9.6 (0.3) 70.2 2.7 116.0
Telecoms 13.5 0.2 78.8 (4.7) 141.1
Supply Chain 2.3 (0.8) 16.5 (1.2) 29.8
Other 0.6 0.2 32 0.6 4.3
Total Gross Income 88.0 (0.3) 560.1 (7.5) 984.0
Cost of Sales (10.2) 1.1 (66.4) 4.6 (120.0)
Net Income 77.8 0.8 493.8 (2.9) 864.0
YTD performance continued to be strong in Mails, weak in Retail & Lottery.
Financial Services had a stronger performance in Insurance and Savings, close to budget on an
underlying basis and supported by £0.9m of phasing benefits in banking and payments.
Telco after one-off cost of sales saving, arising from Fujitsu rebate.
Discontinued Supply Chain income starting to show the (unbudgeted) impact of Iris.
(5 \
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Cost favourable overall with headcount reduced by 605
(10%) YTD
P7 YTD Full Year
Period Variance YTD Variance
£m Actual to Budget Actual to Budget Budget
Staff Costs (20.5) (0.9) (135.7) 0.6 (226.4)
Agents Pay (35.3) 0.8 (227.0) 1.2 (391.1)
Non- Staff Costs (26.3) 0.6 (169.1) 3.0 (292.3)
Total Expenditure (82.1) 0.5 (531.8) 4.8 (909.8)
. Staff Cost increases are driven by phasing and the YTD figure remains favourable.
. Agents Pay savings reflect lower income through the network, with lottery shortfalls having a
particular impact and some phasing.
. Non staff Costs — underlying £1.2m favourable, some phasing benefits from Christmas marketing,
offset by additional provisions on losses and HMRC AML issue of £2m.
. Headcount of 6,000 is 257 lower than P6 and 605 lower that the start of the financial year.
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Against forecast we had a good month with favourable phasing
£m Period
Actual
Gross Income 88.0
Cost of Sales (10.2)
NET INCOME 77.8
Expenditure (82.1)
FRES - Share of profits 3.2
EBITDAS (1.1)
Discountinued adjustment 14
(Subject to E&Y) ,
Potential EBITDAS 0.0
P7
Variance
to F'cast
2.5
0.8
3.4
(0.3)
0.1
3.2
1.1
4.4
YTD Full Year
YTD Variance Q2
Actual toF'cast Forecast
560.1 0.6 964.5
(66.4) 1.2 (117.5)
493.8 1.8 846.9
(531.8) 2.2 (892.3)
23.7 (0.3) 35.4
(14.3) 3.7 (10.0)
7.5 7.5 12.9
(6.8) 11.2 2.9
Of the £3.2m, £2.0m was trading largely in Government Services, £0.9m was phasing in Financial
Services and £0.5m is one time Fujitsu credits in Telco, offset by £(0.3)m in net expenditure. Overall
£1.7m trading benefit in the period.
We are on target to meet £(10.m) EBITDAS subject to Christmas trading in particular.
A detailed technical paper has been provided to E&Y to assess the accounting treatment for Iris.
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We continue to underspend on CAPEX and exceptionals
P7 Full Year
£m Period Variance YTD Variance Q2
Actual toBudget Actual to Budget Forecast
EBITDAS (1.1) 1.4 (14.3) 1.6 (10.0)
Depreciation (0.0) 0.1 (0.3) 0.3 (0.8)
Network Payment 7.7 (0.0) 47.7 0.0 80.0
EBIT pre exceptionals items 6.6 1.5 33.1 1.9 69.2
Interest 0.4 (0.0) 0.9 (1.4) 3.8
Discontinued Operations 0.0 0.0 0.0 0.0 0.0
Impairment (7.8) 6.7 (56.0) 51.3 (180.0)
Exceptionals (incl BT & VR) (12.8) 7.7 (85.3) 20.0 (173.0)
Government Grant Utilisation 11.7 0.0 S17 0.0 140.0
Profit/(Loss) On Asset Sale 0.0 0.0 17 1.7 0.0
Total Profit/(Loss) Before Tax (2.0) 15.9 (23.8) 73.6 (139.9)
° Interest costs YTD have increased reflecting the increased levels of network cash.
. We are underspending in period and YTD due to the timing of programme delivery.
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Network cash has reduced by £121m from P6 but remains
£185m higher than year end
Balance Sheet
The P7 Balance Sheet variances to March 2016 year end are:
» Debtor variance of £126m comprises decreases of £62m
in the card account and ATM client debtors.
+ Network cash has increased by £185m since March 2016
but reduced from £959m in P6 to £838m in P7. £121m
of contingency funding has been returned, leaving
c.£110m of contingency and c.£4m seasonal supply in
the Network.
J. Creditor balances have decreased by £36m, client
creditors decreasing by £70m and business creditors
increased by £34m.
* While the agents’ compensation liability has reduced by
payments made, there are new provisions in relation to
the discontinuing of the external Supply Chain business.
« The loan balance movement is consistent with the cash
flow in month, net of bank deposits.
+ Balance Sheet Headroom has reduced from March 2016
due to the Loan balance increasing to fund the
comparatively higher Network cash. Balance sheet
Headroom has improved £107m since P6 from cash
£m Oct 2016 Mah Variance
Fixed Assets 144 120 23
Debtors 294 419 (126)
Cash 850 712 138
Creditors (648) (684) 36
Pension (deficit)/surplus 195 196 (1)
Provisions (162) (167) 5
Other 7 7 ie}
Loan (607) (465) (142)
Net Assets 73 138 (65)
[Capitaland Reserves I 73 138 (65)
Network Cash
£m Sept 2016 Ioct2016I 2" I variance
Retail, Cash Centres 783 689 534 155
Bureau 123 105 74 31
Cheques, debit cards 53 45 45 (0)
Network Cash 959 838 653 185
Cash not in Network 20 12 59 (47)
Total Cash 979 850 712 138
Balance Sheet Headroom
March
Sept 2016 I Oct 2016 2016
Loan facility 950 950 950
Loan drawndown (714) (607) (465)
Headroom 236 343 485
Target minimum 200 200 200
Headroom above target 36 143 285
returned from the network.
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P7 Cash outflow of £(188)m and Net Debt of £595m driven
by higher Network Cash
Cashflow Oct 2016
. March
£m Actual Budget Variance 2017
EBIT after discontinued 41 31 10 (10)
operations
Working Capital (11) 15 (27) 5
Client Balances 1 23 (22) 21
Network Cash (185) (71) (114) (32)
Capital Expenditure (56) (107) 51 (180)
Government funding 172 172 t) 220
Exceptional Items (140) (164) 24 (268)
Other (including interest and tax) (11) 15 (26) 6
Operating Cashflow (188) (85) (104) (238)
Net Debt Audited
£m March
Oct 2016 2016
Net increase /(decrease) in cash and cash equivalents 138 (109)
Add/(deduct) movement in cash in the network (185) 55
Deduct proceeds of borrowing from BIS (142) (155)
Net increase in net debt (189) (209)
Net debt brought forward at the beginning of the year (406) (197)
Total net debt carried forward at the end of the period (595) (406)
Net debt consists of:
BIS loan (607) (465)
Cash (excluding cash in the Post Office network) 12 59
Total net debt carried forward at the end of the period (595) (406)
Cash outflow of £(188)m for P7 is £(104)m adverse to budget
YTD.
« Network cash is £(114)m adverse entirely due to retained
contingency prefunding the network.
« Client balances are £(22)m adverse to budget due to a number
of smaller variances across our client portfolio the largest of
which were Santander, UKPA and Bank of Ireland.
* The £35m FRES Joint Venture dividend was budgeted for P7
but was actually received on 31 October which falls into P8.
This adverse variance is in other items.
* These adverse movements were partially offset by capex which
is £51m favourable and exceptionals £24m as spending plans
track behind budget.
Increase in cash and cash equivalents of £138m equates to the
balance sheet variance on Page 9.
Net debt of £595m is £189m higher than the start of the year,
largely driven by funding higher network cash.
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Nar
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BOARD NOTING PAPER
Board Effectiveness Review (BER)
Author: Alwen Lyons Sponsor: Ken McCall Meeting date: 24 November 2016
Executive Summary
Context
In last year's Annual Report and Accounts, a commitment was made to carry out an
external BER in the financial year 2016/17. This was discussed at the Board and
delegated to the Nomination Committee to deliver.
The work has been procured from Lintstock Ltd., a company recommended by Ken
McCall, Senior Independent Director, and will take place between the November 2016
and January 2017 Board meetings.
Lintstock Ltd., will use an online questionnaire to produce both a quantitative and
qualitative review, which will be available for the January 2017 Board meeting. Each
Board member will receive a customised questionnaire, depending on their Committee
membership and Lintstock will be available to take verbal input if anyone requires.
The questionnaires will be circulated at the end of November 2016, with full
instructions on how to complete.
The questionnaire relevant to the Board is included after this paper for your
information.
The Group Executive will also be asked to complete their own questionnaires, which
will be included in the review.
Input Sought Input Received
The Board members are asked to note the The Chairs of the Board, ARC,
Board Effectiveness Review in which they Nominations and Remuneration
will be asked to participate in December Committees have all signed off the
2017. questions for respective sections of the
review.
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Board Review 2016: Overview
Board Composition
Q1__How appropriate is the Board's composition?
Please comment if you feel there are any additional skills which ought to be added to the
Board.
Excellent - Good - Adequate - Poor
: Q2_ Please describe the key changes that ought to be made to the profile of the Board over the
next 3 years to match the company's strategic goals.
Free Text Question
Board Expertise
Q3 How well does the Board understand the views and requirements of the following key
stakeholders?
Please comment if you feel the Board's understanding of one or more stakeholder group(s)
ought to develop further.
Multiple numeric scale: rate each of the following from 1 (‘Very Poor’) to 5 (‘Very Good’):-
- The Government
~ Customers
- Employees
- Sub Postmasters
Q4 How would you rate the Board's understanding of the company's product pillars?
Please identify any specific areas in which you feel the Board's understanding ought to
develop further.
Multiple numeric scale: rate each of the following from 1 ("Very Poor’) to 5 (‘Very Good’):
- Mails and Retail
- Personal Financial Services
- Payments
- Government Services
- Telephony
- FRES
- POMS
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Board Dynamics
Q5 Onascale of 1 to 5 (where 3 is ‘appropriate’) how would you rate the level of involvement of
Non-Executives in the affairs of the company outside Board meetings?
Please comment if you do not feel the balance of Non-Executive involvement is appropriate,
or if you have any suggestions for improving the engagement of the Non-Executives.
Too Little Involvement < 1 - 2 - 3- 4- 5 —» Too Much Involvement
Q6 How would you rate the quality of the relationships between individual Board members?
Excellent - Good - Adequate - Poor
Q7 How would you rate the Non-Executive Directors’ engagement with management in:
Multiple numeric scale: rate each of the following from 1 (‘Very Poor’) to 5 (‘Very Good’):
- Providing effective support
- Providing effective challenge
Q8 How would you rate the quality of the relationship between the Board and the Post Office
Advisory Council?
Please comment if you have any suggestions for improving the relationship or
communication between the Board and the Post Office Advisory Council.
Excellent - Good - Adequate - Poor
Q9__- How, if at all, could the atmosphere in the boardroom further encourage equal contribution,
candid discussion and critical thinking?
Free Text Question
Time Management
Q10 How would you rate the planning of the annual cycle of work of the Board?
Please comment if you do not feel that all important issues are covered during the year.
Excellent - Good - Adequate - Poor
Q11 How would you rate the Board's agenda?
Please comment if you don't think that it covers the key issues and/or that the items are not
well prioritised.
Excellent - Good - Adequate - Poor
Q12 How well does the Board review the effectiveness of past decisions and capture any lessons
or actions required?
Excellent - Good - Adequate - Poor
Q13 What, if anything, do you feel the Board spends too much time focusing on?
Free Text Question
Q14 What, if anything, do you feel the Board spends too little time focusing on?
Free Text Question
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Board Support
Q15 How would you rate the frequency of presentations made to the Board by management?
Too Few 1-2-3-4-5-+ Too Many
Q16 How would you judge the quality of the presentations made by management to the Board?
Please comment if you have any feedback for those presenting at meetings.
Excellent - Good - Adequate - Poor
Q17 How would you rate the following aspects of the Board packs?
Multiple numeric scale: rate each of the following from 1 (‘Inappropriate’) to 5 (‘Appropriate’):-
- Length
- Use of Summaries
~- Structure
- Timeliness
Q18 Please detail any recommendations for improving the content and format of the various
management reports contained in the Board packs.
Free Text Question
Board Committees
Q19 How would you rate the performance of the Committees of the Board?
Please comment if you feel that the performance or reporting of one or more Committee(s)
ought to improve.
Multiple numeric scale: rate each of the following from 1 ('Very Poor’) to 5 (‘Very Good'):-
- ARC
- NOMCO
- REMCO
- POAC
Strategic Oversight
Case Study: June Strategy Day
Q20 How would you rate the agenda for the strategy day?
Please comment if you don't think that it covered the key issues and/or that the items were
not well prioritised.
Excellent - Good - Adequate - Poor
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Q21 How would you judge the quality of the presentations made to the Board during the strategy
day?
Please detail any recommendations you may have with respect to the quality of the
presentations, or the balance between presentation and discussion during the strategy day.
Excellent - Good - Adequate - Poor
Q22 How would you rate the clarity and articulation of the conclusions reached during the
strategy day?
Excellent - Good - Adequate - Poor
Q23 What would be your top 3 priorities for improving the Board's next strategy day?
Free Text Question
Wider Strategic Oversight
Q24 Ona scale of 1 to 5 (where 3 is ‘appropriate’) how would you rate the involvement of the
Board in determining the strategic direction of the company?
Please comment if you do not feel the Board's involvement in determining the strategic
direction is appropriate, or if you have suggestions for improving engagement in this area.
Not Involved Enough < 1 - 2- 3-4-5 Too Involved
Q25 How effective has the Board been in testing and developing the company's strategy?
Excellent - Good - Adequate - Poor
Q26 In what specific ways do you feel the Board could contribute further to testing and
developing the company's strategy?
Free Text Question
Q27 How good is the Board's understanding of the company's performance relative to its main
competitors in the following areas?
Multiple numeric scale: rate each of the following from 1 (‘Very Poor’) to 5 (‘Very Good'):-
- Mails & retail
- Financial Services
- Telephony
- Government Services
Q28 What do you feel are the top 3 strategic issues facing the company over the next 3 years?
Free Text Question
Risk Management and Internal Control
Q29 How would you rate the Board's focus on risk?
Please comment if you have any suggestions for improving the Board's focus on risk or the
structure of risk discussions at meetings.
Too Granular <— 1 - 2- 3-4-5 Too High Level
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Q30 How would you rate the level of detail provided on risk and reward in papers submitted to the
Board?
Too Little Detail — 1 - 2- 3- 4 - 5» Too Much Detail
Q31 How good is the Board at considering risk when making strategic and operational decisions?
Excellent - Good - Adequate - Poor
Q32_ How can the Board improve its performance in risk management / oversight?
Free Text Question
Succession Planning and Human Resource Management
Q33 How would you rate the appropriateness of the structure of the company at Group Executive
level?
Excellent - Good - Adequate - Poor
Q34 Are there any key positions which you think the company lacks or ought to be strengthened?
Free Text Question
Q35 How effective is the Board's oversight of succession plans for the following members of
management?
Please comment if you have any observations relating to the development or succession
plans for management, or suggestions for improving the role of the Board in this area.
Multiple numeric scale: rate each of the following from 1 (‘Inappropriate’) to 5 (‘Appropriate'):-
- The Chief Executive
- The Chief Financial Officer
- The Group Executive
Priorities for Change
Q36 If there was one practice you could bring to the Post Office Board from another Board upon
which you serve, or have served, what would it be?
Free Text Question
Q37_ In terms of improving the Board's performance, what would be your top 3 priorities for the
coming year?
Free Text Question
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DECISION PAPER
POST OFFICE BOARD
Mails strategy update
Author: Mark Siviter Sponsor: Martin George Meeting date: 24" November 2016
Executive Summary
Context
The crucial exclusivity provisions which underpin our MDA contract with Royal Mail (RM)
expire in Q4 of FY19/20. This is earlier than the horizon of our five year strategic and
financial plan, which we are setting out to Government together with its associated
funding request. Uncertainty around the cost of securing our long-term sustainability in
Mails is the biggest swing factor in the business’ five year profit projections. It is essential
to secure a sustainable long-term model for our Mails business well before the exclusivity
provisions with RM expire but our optionality reduces and our negotiating position
weakens the later we renegotiate.
In June, the GE and Board endorsed our strategy for securing our long-term future with
RM. We set out the plan to engage RM in a joint strategy project this financial year to
reinforce to them why we are better together and why we must act to renew the
relationship for the long-term. Our intent remains to drive a renegotiation with RM next
financial year. In June we also set out how we would develop a business plan for our next
best alternative, as leverage and contingency, and deliver “no regret” moves within the
bounds of the MDA to improve our position.
Questions addressed in this report
1. How have we progressed with Royal Mail since we set out our approach at June’s
Board meeting? What have we learned and how does that impact our plan?
2. What have we done since June regarding development of our next best alternative?
What have we learned and how will this influence our strategy towards Royal Mail?
3. How are we improving the chances of our desired outcomes with Royal Mail? What is
our timeline, when are the key decision points, and what are our next steps?
Conclusions
1. Our Mails business is currently trading ahead of budget and Royal Mail have been
actively engaged with us in a joint strategy project since September. This is the first
collective review of our joint strategy in the Mails market since 2012. It has so far
established a common baseline and by the end of this financial year it will establish a
joint, market-relevant, vision of the future together. This is positive but
simultaneously, and of concern, RM are not committing to renegotiate early on a deal
extending beyond 2022, and have tried to limit focus of any changes in the
relationship to the “second half” of the current MDA term. Our chances of securing an
acceptable long-term (i.e. post-2022) relationship before our self-imposed deadline of
March 2018 are currently low. We lose optionality for implementation of acceptable
alternatives the later we conclude a deal with RM. We are therefore doing everything
we can to increase chances of striking a deal next financial year. This will involve
exploiting the contractual right we have under the MDA to engage RM in a “mid-term
review” of the agreement, commencing in May 2017.
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2. We have assessed in much more detail the two “next best alternative” business models
we set out in June. We are now more confident that there is a viable alternative model
for our Mails business, our customers and our postmasters, without such a close
dependency on RM. This will increase the leverage we need and provide contingency.
We are on a critical path to being able to implement this and we anticipate a major go/
no-go decision in November 2017. A “go” decision would have profound ramifications
for both us and RM and so we must exhaust all opportunities with RM before then.
3. We must use the rest of this financial year to: complete a compelling joint strategy
with RM; keep delivering on “no regret” moves which strengthen our position within
the boundaries or silent areas of the existing MDA; further develop our next best
alternative; gather further intelligence on RM’‘s likely asks in return for a longer term
deal; and model a fully costed negotiating mandate. Our overall timeline remains
unchanged. The next decision point is the March 2017 Board where we will provide a
full progress update on all elements of our strategy, and this is when we expect to
formally recommend a negotiating mandate. Approval of this mandate will involve
choices on the extent of concessions we could be prepared to trade in order to ensure
the long-term security of our Mails business. The position with RM reinforces the
importance of the strategic priorities as set out in the five-year plan to FY20/21 and
the associated funding request. These priorities ensure we keep reducing the costs and
complexity of Post Office Ltd whilst enhancing our distributional capabilities and
strengthening profitable non-Mails income streams.
Input Sought Input Received
Does the Board endorse our GE & Board endorsement of our strategy (June
approach and the next steps as 2016). Ongoing supervision thereafter from the Mails
set out in this paper? Strategy Steering Committee and the GE.
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REPORT TO POST OFFICE LIMITED BOARD
Hi 2016/17 Report to the Shareholder
Presented by: Nick Kennett, CEO POMS.
Executive Summary
Context
Post Office Management Services Limited ("POMS") is a subsidiary of Post Office Limited
(“POL”); it undertakes insurance intermediation and is regulated by the Financial
Conduct Authority. Under its Articles of Association, POMS submits a performance report
every half year to its shareholder. This paper is the report for the first half of 2016/17.
Questions this paper addresses
e What are POMS’ strategic objectives, shorter term goals and Plan?
e Is POMS delivering what it said it would do?
e What are the key constraints in delivering the short and long term plans?
Conclusion
POMS is on track to deliver its long term ambitions and strategies, confirming the
benefits and opportunities of operating as a standalone, regulated business within POL;
there are, however, a number of risks and dependencies:
Financials:
e While EBITDA was £(1.0)m to Plan at £4.9m, mainly due to weak branch travel
insurance sales (income £3.3m behind Plan), margin management and cost
reduction should result in a full year EBITDA of £7.9m (£(1.2)m adverse).
e POMS’ regulatory capital is above that required by the FCA.
e POMS is, however, concerned that changes to POL’s branch sales model, in particular
the removal of Financial Specialists, will impact life assurance sales/income from Q4.
Building the future model:
e In May 2016 the POMS Board approved a five year growth plan aligned to POL FS’
New Normal; it is targeting an EBITDA of £17m in 2020/21 and a contribution to
Group profit of £43m. This is on track against the original POMS business case.
e The achievement of the strategy is depends on POL's delivery of services, including
marketing, digital delivery and data analytics. These are not governed by SLAs or
service contracts; discussions are underway to establish accountabilities, incentives
and delivery requirements.
e The “Hawk” business acquired in 2015 is outperforming the business case.
e The new strategic technology platform (Zeus) is on track for delivery; this is pivotal
for POMS to integrate other general insurances and expand in the value chain.
Governance and compliance:
e Risk and governance structures are in place and being embedded.
e The most significant risk issue remains the operational oversight by POL of its
branches, as discussed at the Post Office ARC in September 2016.
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Input Sought
The Board is requested to note the report.
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3. Risk management
Risk management framework and governance structures are in place and are
being embedded.
The relationship with POL as both AR and service provider is in place; the most
significant issue, however, remains the operational oversight of branches, as
discussed at the Post Office ARC in September 2016.
Significant progress has been made to improve the systems and controls. Actions
are being developed by POL and POMS to improve the levels of conduct risk.
At its meeting in January, the POMS Board will assess the progress made, or
anticipated, and will assess whether it is comfortable to allow POL to continue to
sell POMS’ products in agency branches.
There have been no notifiable issues to the FCA in the period.
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Appendix 1: POMS Balance Sheet
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£k Apr-16 May-16 Jun-16 Jul-16 Aug-16 Sep-16
Non-current assets
Intangible assets 46,008 45,994 46,979 47,089 48,571 48,369
46,008 45,994 46,979 47,089 48,571 48,369
Current assets
Amounts owed by group undertakings 225 386 381 525 0 0
Other debtors 197 73 126 189 150 293
Accrued income 5,386 5,350 4,830 3,845 4,571 4,250
Prepayments 32 27 23 18 155 130
Cash at bank and in hand 15,999 11,497 13,483 17,815 17,928 17,170
21,839 17,333 18,844 22,392 22,804 21,843
Total assets 67,847 63,328 65,823 69,482 71,376 70,212
Creditors: amounts due within one year
Trade creditors (550) (473) (663) (718) (1,101) (1,203)
Amounts owed to group undertakings (7,888) (2,345) (3,231) (4,529) (4,900) (5,853)
Other creditors (4,374) (1,515) (1,859) (2,749) (2,442) ~—(1,880)
Accruals (4,296) (4,305) (5,054) (5,234) (5,912) (3,537)
Provisions (1,033) (1,063) (1,121) (1,125) (1,131) ~~ (1,182)
Tax Creditor (195) (379) (432) (678) (831) (965)
(15,335) (10,079) (12,361) (15,034) (16,317) (14,619)
Total assets less current liabi S 52,512 53,248 53,462 54,447 55,059 55,593
Creditors: amounts due in more than one year
Amounts owed to group undertakings (500) (500) (500) (500) (500) (500)
(500) (500) (500) (500) (500) (500)
Net assets 52,012 52,748 52,962 53,947 54,559 55,093
Capital and reserves
Share capital 50,000 50,000 50,000 50,000 50,000 50,000
Retained earnings 2,012 2,748 2,962 3,947 4,559 5,093
Total equity 52,012 52,748 52,962 53,947 54,559 55,093
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BOARD DECISION PAPER
Back Office Transformation
Authors: Rob Houghton/Angela Van Den Bogerd Sponsor: Alisdair Cameron Meeting date: 24 November 2016
Executive Summary
Context
In 2015, the Board approved a “Transition” project to reduce operational risk and
stabilise Back Office hardware. An update was provided in September, which reminded
the Board that, in line with the IT Strategy, a further stage of development
(Transformation) would be required. The purpose of this paper is to agree the proposal
for that Transformation. The Board has not previously approved funding for this element
of Transformation, although the Three Year Plan has included a place-holder of £11m.
Today our Back Office systems enable POL to run the Supply Chain operation, settle
with clients, pay agents and employees and report financially and operationally. If these
systems fail, we cannot trade. Some £60b of transactions are processed over a year,
affecting all locations and over 50k people.
The September Board paper highlighted that, “We cannot continue to exist in the
transitioned state....” IT cannot commit to appropriate service levels across these key
business processes and we have now received a written confirmation from SAP that its
support for HR SAP and POLSAP will cease permanently in December 2017. This is not
a theoretical risk: that support was used in February to resolve a three day POLSAP
outage, which had Supply Chain working manually while we were unable to report the
Bank of England’s cash position and teams spent weeks re-inputting and reconciling. It
is not been uncommon for the settlements team to pay clients based on estimated
values, adjusting to actuals later.
The legacy complexity of these systems and the processes that work around them
requires manual working, spreadsheets and multiple interfaces. It is hard to maintain
strong control, as evidenced in the financial controls work, and limits our ability to report
and analyse our results. The resultant complexity has led to a prohibitive cost of change,
preventing improvements that should occur in business as usual, and higher run costs.
Questions addressed in this report
1. Which transformation options have been considered?
2. What is our recommended approach?
3. What are the key risks to a successful delivery?
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Conclusions
The back office application estate cannot stay as is. The minimum spend is £8-12m to
upgrade and stabilise the systems, without delivering any improvements in the cost of
change, IT run costs, control or future flexibility.
We have assessed three other options: removing the older systems; incrementally
improving the way we work; and replacing everything with a completely new ERP
system.
We are recommending Option 3 as representing the right balance of financial benefit,
operational control, flexibility and risk. The cost increases to £16-20m to gain £3.5m
lower operating costs and enabling a further £3m to be realised across other programs,
with improvements in controls and ways of working.
The risks are significant, although substantially less than for a full ERP replacement. We
know from experience that any change to Back Office will be a journey of discovery. We
have a 17% contingency in the plans, which had already been adjusted by 7% following
Wipro’s independent review.
More importantly, we have developed the project in stages. We can progress Option 3
while retaining Option 2 as a viable alternative until we have proven the full concept.
The next significant decision date is April 2017. The only spending commitment at this
stage, approved by the Group Executive, is for £1.54m on top of the £0.2m spent to
date.
Input Sought
The Board is asked to:
- Support the preferred Option 3, budgeting for costs of £20m
- Note the approved spend to April 2017
- Require an update and any future funding requests in March-April 2017.
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The Report
Which transformation options have been considered?
4. Four approaches are summarised below.
Enabled OPEX
IT Dept. Business Project
option Cost opex I irisk I opex I npv I Payback Benefit for ‘Audit & Risk &
(£m) Benefit I (inc.DR) I Benefit I (£m) Yrs Controls I Fitto Delivery
(em) (em) Programmes Strategy I Complexity
(em)
new ERP
1. The “No
Medium
Transformation I 8-11 I 04 v o 8.63 26.46 ° x x "ign
Scenario” 8
2-Remove old I i346 3.0 v o -9.0 46 21m x x Medium
systems /Migh
3. Transform 16-20 3.0 v oa I -119 5.74 3.1m v v High
4.Transform to I 54 39 3.0 v 0.4 “28.2 8.62 3.1m v v Very High
5. The first option enables no movement in improving control or flexibility and derives
no benefits. The fourth option is substantially more expensive and riskier with no
guaranteed additional benefit. Neither are therefore recommended.
6. Options 2 and 3 represent more nuanced choices. In both cases, we would remove
POLSAP, HR SAP and our old warehousing systems. Option 3 additionally adopts
industry standard processes, changes ways of working and will give us the flexibility
to support future change quickly and cheaply.
What is our recommended approach?
7. We are recommending option 3 Transform, with a number of checkpoints enabling
a fall back to option 2 - “Remove Old Systems” should costs/risks escalate. Option
3 is in line with the IT Strategy:
> Simplify, Standardise, Reduce Cost:
action
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adopt industry norms;
configure
systems not customise. This makes it easier and cheaper to outsource should
we choose to.
> Build in Traceability: Transact sales in ERP allowing onward transactions and
reporting to flow from a single view of sales. This will give us one version of the
truth; sales data that is accurate and reliably so. Improves auditability, reduces
report creation and validation time, changes employee focus to analysis and
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> Create Capability: Invest internally, ensure end-to-end process knowledge and
technical skills are in-house and enables cheaper change delivered without third
parties.
> Deliver Small, Deliver Regularly: Break down large goals into achievable
pieces of work, build momentum, hit targets.
8. Key building blocks include:
> Designing out POLSAP and HR SAP migrating processes to other existing systems
simplifying the IT landscape
>» Processing sales transactions in ERP, enabling settlements, invoicing, agent
remuneration, profitability analysis and sales reporting to occur using standard
SAP functionality - with auditable linkage.
>» Replacing 3 old warehouse management systems with a single modern solution
enabling process savings and online ordering for all branches.
>» Improving retail cash management, linking directly into our core finance system
and enabling online ordering for Post Masters
3, The diagram below summarises the planned delivery scope for this program.
PROCESSES CHANGE & PEOPLE TECHNICAL
> Sertlements and > joumey from admin & & Product Master & # Online cash & stock
invoicing report creation to Hierarchies ordering for Post Masters
> Agents Remuneration upand > Agent master and > Decommission POLSAP.
® Agent Debt > Cent channel hierarchy &HR SAP
® Cash Processing and standar » Agent Contracts > Implement SAP 5-Retail
Treasury settler vicing, ® Sales Organisation &ICM
> Procurement interaction > Sales trans.
® Co:
ional flows ® New warehousing
counting ® Reduction of statfand > Client Contracts
® Product & Channel overtime > Chant of Accounts, Cost & ate functionality to
Profitability Analy: Profit Centers Transtrack
# Warehousing ® Remove or adapt 56
interfaces
10.Future flexibility: Using more of our ERP’s features requires embedding core
processes in system steps. This can lead to reduced flexibility and the impact on our
business has been considered. The following are core to the system:
> Organisation Structure — Post Office’s divisions and channels will be created
as core structure. These are simple to add to, remove or group, but difficult to
split or completely redesign. Upfront design needs to gauge the level at which
these are created carefully.
> Financial Principles - One challenge currently is that the financial principles
(e.g. what is our definition of a profit centre?) are not consistent. Once these are
established, they are difficult to change.
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> Detail - The detailed list of profit centres (or other elements) can be added to
and modified simply. Multiple product hierarchies can be created and channel
reporting can be available by a number of selection criteria.
11.The highest impact process being tackled is client settlements. KPMG recently
conducted a detailed review of our 440 client contracts detailing our approach to
reconciling and validating each back into our accounts. The settlements team has
been involved setting the high-level direction for our approach and will be
instrumental throughout implementation. Approach to key areas are:
> Client Contact: Clients rely on access to Horizon data for detailed transactional
information, this access will remain. The settlements team daily provide one of
five template word documents with summarised volume and value. These are
emailed (or faxed) to clients alongside the bank transfers. This part of the
process will simply be replicated and improved as the process moves to our CFS
system.
> Settlement Data: Almost 80% of the 440 clients settle based on Post Office
data, hence will successfully migrate into our proposed standard process. Some
of larger clients, by value, require upfront payment (e.g. predicted Santander
account transactions) or using their data (e.g. Camelot); in these cases, our
approach will be to engage and move them to our new process with manageable
exceptions. These are the expected areas of concern as there are some case
where a win-win improved process won't be found and we will have to determine
mitigation plans.
> Fall Back Plan: In all cases it is possible to migrate the current settlement
process as-is. The current process involves creating payments that are not
system-linked to sales then reconciling manually to demonstrate that accounts
are balancing. In the case that we cannot move to a more automated process
for some contracts, they can continue to run on a similar approach in CFS as
they do today in POLSAP.
12.The program will be governed by the Post Offices’ “One Best Way” methodology
and in line with the IT strategy focus on incremental delivery, retaining control,
avoiding large spend commitments and building skills into the retained team.
13.The delivery plan shown below provides an initial view on the projects required and
their timelines.
>» Transformation Base State - up front technical prerequisites, basic master
data and design principles
>» Sales Transaction Related - the transformational changes dependant on
first processing sales transactions: settlements, invoicing, agent
remuneration, profitability analysis and reporting. Planned to be delivered
incrementally over time by business unit / product group / type of sales
process e.g. we may first tackle sales of Mortgages, then bill payments etc
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» Other Projects - projects required to deliver the overall transformation aims
and cost reduction but able to run with minimal dependency on the overall
program including: moving financial processes from POLSAP to CFS (e.g.
agents’ debt), moving cash processing functionality from POLSAP to
Transtrack, refreshing our warehouse systems.
2017 2018
Jan Feb Mar Apr May June July Aug Sept Oct Nov Dec Jan Feb Mar
Seldon Stock Conte Refresh
14.The initial budget drawdown request for 2016/17 is £1.532m (£217k has already
been authorised). Further funds will be requested when the deliverables below for a
project complete and submission is made to move to the next phase.
15.In April 2017 the program will report back on the extent to which we intend to
transform, seeking approval for further funding. Outputs will include the results of a
study into our client agreements and the extent to which we can standardise the
back end processing. And the results of a pilot modelling a truly transformed back
office using SAP to process sales transactions generating settlements, invoices,
Agents’ pay and product profitability. At this checkpoint we will decide whether to
proceed with option 3, or revert to option 2.
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16.Program costs have been modelled with resource and material plans created for each
area of work. In order to validate expected costs Wipro were engaged to provide an
independent view and indicated that the program may cost 5-8% more than our
pre-contingency view: we provided for 25% in the £20m recommended budget.
Cost
Phase (—m)
Transformation Base State 2.5-3
Agents Remuneration 1.5-2.5
Sales Processing 2-2.5
Financial Operations and Procurement 2-25
and Reporting Improvements .
Settlements Re-design 15-2
Supply Chain Cash Systems 3.5-4
Warehouse Refresh 3-3.5
17.Benefits are as set out below:
Benefit Generator Amount Calculation
POLSAP Infra, Support Licence = +£1,890,163
Remove POLSAP £1,167,686 I Increased CFS Infra, Support & Licence = -£475,334
Increased Transtrack Support & Licence = -£247,143
Removal of CSC common services (printing, authorisations, portal)
£1,130,000 I required to manage multiple SAP environments. With only CFS left
these are not required, and there is no additional OPEX to replace.
Remove SAP Common
Services
SAP extended maintenance charge = +£224,529
SAP tended
extended I £359,067 I SAP Active Embedded support = +£269,076 (Partial reduction of
Maintenance Charges
£134,538)
Transtrack moves off £75,000 Remove Citrix licence costs = +£75k
Citrix ’ Microsoft alternative included in current licencing.
Mercia Licence = +£55,000
£310,331 I WCS Licence = +£128,375
Galaxy = +£466,956
Warehouse licence and
support reduction
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Benefit Generator Amount Calculation
New WMS system = -£300,000
Front end App = £-40,000
Non staff costs (£30k paper / £20k postage) = +£50k
Fixed staff. costs. «= (2.x PO), = ——sHESB.SK
£443,500 I Variable staff costs (2 x $O1 equivalent) = +£45k
Remove Capricorn engineers = +170k
Increase pick efficiency = +120k
Improved Warehouse
processing
Total I £3,485,584
18.In addition to the benefits above directly attributable to the Back Office
Transformation business case, there is a further £3,089,586 of claimed benefits in
other programs dependent on option 3 being delivered:
» Online Cash Ordering replaces call centre = £400k headcount reduction
> Decommissioning HR SAP = £2,056,586 licence, infrastructure and support
cost reduction
> FSC process simplification = £633,000 headcount reductions
19.The program will be delivered using the contracted Back Office partner (Accenture).
We will also spend on backfilling Post Office resources and supplementing them with
skilled contractors.
- « Appiication Vendor
20.The diagram below shows the proposed program organisation grouped by process
and capability. An early deliverable (in progress) is a resource plan highlighting
capability gaps for discussion on where we should hire, contract or buy-in skills.
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: Vendor
Management
Transformation Director
Client Engagement _ Sales& Product Agent Cash Stock
Client communications, Finance
negotiation, change mart Billing Mgmt Pay Mgmt Mgmt
21.Wipro recently conducted a review of the detailed approach, resource plans and
budget for the program. Their report concludes:
>» The approach for the program, desire to simplify through consolidating into
systems already in our landscape and use standard processes is a good one.
> Internal change management should not be underestimated and requires focus
throughout
> The timelines provided were suitable for the program of this size and
complexity, however Wipro believed they could be accelerated (something we
believe would not be possible within the Post Office for our tasks). However
they recommended some additional technical steps and overall believed costs
may increase by 5-7%, which has been taken into account in our figures.
22.The Post Office has faced significant challenges in recent programs and is
implementing a number of the lessons learned from these in this approach.
Lesson Learned
Costs have been budgeted using current program
Incumbent vendor costs should actuals as a guide.
not be underestimated. Key vendors (inc. Fujitsu, Accenture) have been
involved in the approach and budgeting.
Fixed Price Contracts are not
suitable for large scale change
where Post Office is accountable
for external deliveries
The team will be led by Post Office resources backfilled,
with specific capabilities brought in to support. The
majority of delivery will be time and materials against a
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POST OFFICE
Lesson
delivery plan. Fixed price will be used only for items
work entirely within a single vendor’s control.
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Page 10 of 11
Learned
Large delivery projects are prone
to failure and lack of oversight
Whilst to achieve the overall aims, a number of projects
are required, these are being broken down into their
smallest component parts, with an approach of
incremental delivery.
What are the key risks to a successful delivery?
39.The tables below contain a brief description of the key risks identified and our plans
to overcome them.
Title Description Mitigation Owner
The Post Office currently settles
and invoices clients in a multitude
. . Communicate early, take feedback and consult
of fashions, providing bespoke " ~
. a with client senior stakeholders, to ensure that Angela Van
information in many cases. There
. the operation teams are instructed to work with Den
- is a risk that as we try to .
Client Impact us where possible. Bogerd/Martin
standardise we come into conflict . ‘ ‘
: " Re-negotiate contracts/ways of working with I George/Nick
with client contract, either nm
. . key customers (condition that we need to Kennett
jeopardising our relationships or a .
" : provide clients a decent or better experience).
reducing the effectiveness of the
program.
It is essential to bring core sales
into CFS, this can either be
completed as a big bang (meanin,
P ig bang ( I The Finance team will need to outline a plan for
all contracts and_ settlements . 7 ‘ ‘ i
dealing with this challenge early in the project.
move together) or incrementally. .
naan During project the financial reporting team will
Concurrent Our view is that an incremental " ft
" ‘ . need to demonstrate each month that errors Financial
Financial approach is overall lower risk for
a *T I are not occurring. Controller
Systems our organisation. However, this oo .
. , To ensure the approach is solid there is a plan to
gives a risk that Post Office will be
z . . I engage our auditors early to agree the
running the same financials in h
approach.
POLSAP and CFS, increasing the PP
potential of double reporting
revenue, or mis-settling.
There are multiple Product
pe An entire work stream for the program will be
Master data definitions and -
A dedicated to Product and Branch master data, .
Product Data groupings (e.g. for Horizon, for . James D’Souza
. offshore support for data cleansing and
Stock, for Agents Remuneration, oe
. manipulation is budgeted.
for reporting) and questions
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Title
Description
about the master data quality.
Work will be required in order to.
create a clean Product Hierarchy.
There is a risk that this will be
more challenging and expensive
than planned.
Mitigation
Should the team be unable to tie together all the
product threads in the organisation a fall back is
to revert to receiving values/products/volumes
into SAP from sales systems, with reduced
controls and checks, leaving multiple product
definitions and hierarchies in our organisation.
Product master governance will be updated
alongside the project to ensure on-going
adherence to the updated approach.
Owner
Cost/Time
There is a risk that the budget and
timeline are not accurate.
As outlined in the transformational principles
section the program is delivering where possible
in incremental chunks, hence timeline and cost
slippage will be visible early enabling corrective
action to be taken.
Wipro reviewed our detailed cost estimate and
resource plan of £16m. During the sessions
(workshops with Accenture, SAP, our back office
departments and technology teams) it became
clear that additional technical steps would be
required. Overall Wipro’s view including upsides
and downsides was that our total costs would be
5-8% higher, this is included within our
requested 25% contingency.
Ben Cooke
Resource
capability and
Business
Focus
The Post Office is undergoing
significant change with a high
number of projects going on e.g.
FS Digital Transformation, EUC
Admin etc. There is a risk that the
required the
program are not available, or
focus is distracted.
resources for
The Back Office team & applications are largely
distinct from front office and FS/POMs activity,
hence digital and Horizon related projects are
not considered to be a major threat (pre-
planning has occurred with Fujitsu for the
Horizon interface and resource will be available
Jan-Mar)
Joint planned has occurred with the
departments heavily involved and the other
back office programs (SSTP for FSC and
Successfactors for HR).
In Supply Chain where key resources could
potentially have their roles changed through Iris,
early discussions have occurred to earmark
critical resource & will be picked up once the
program is funded. Currently all essential team
members identified are remaining within the
Post Office.
Alisdair
Cameron
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BOARD DECISION PAPER
Broadband Customer Acquisition
Meeting date: 24 November 2016
Author: Alwen Lyons
Executive Summary
Context
The Board were asked by email on 4 November 2016, to delegate authority to the
Chief Executive and Chief Financial Officer to proceed with negotiations and sign a
contract for the acquisition of 78,000 Broadband customers from New Call, who trade
under “Fuel Broadband”.
The Board approved this request by email response and the negotiations have started.
The Board’s delegation now requires formal ratification.
Input Sought
The Board is asked to ratify the decision by the Board to delegate authority to the Chief
Executive and Chief Financial Officer to proceed with negotiations and sign a contract for
the acquisition of 78,000 Broadband customers from New Call, who trade under “Fuel
Broadband”.
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BOARD
Post Office Limited Sealings
Author: Alwen Lyons Meeting date: 24 November 2016
Executive Summary
Context
The Directors are invited to consider the seal register and to approve the affixing of
the Common Seal of the Company to the documents set out against items number
1454 to 1461 inclusive in the seal register.
Input Sought
For the Directors to resolve that the affixing of the Common Seal of the Company to the
documents set out against items numbered 1454 to 1461 inclusive in the seal register
is hereby confirmed.
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POST OFFICE LIMITED
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Date Register of Sealings Company Number
24.11.2016 21554540
Seal Number Date of Date of Persons Attesting Destination of
/ File Ref. Sealing Authority Description of Document To Document Document
1454 / Deed of 21/10/2016 19/10/2016 Deed of Surrender and Release relating to a lease of premises known as I Jane MacLeod Jean Reynolds
Surrender 9 Higher Road, Urmston M31 1AA. Robert Graham Trustees Limited and
Post Office Limited. I
1455 /TR1 31/10/2016 26/10/2016 TR1 - 35 The Broadway, London, NW7 3DA Jane MacLeod Jean Reynolds
1456 / Licence 31/10/2016 27/10/2016 I License to Install Air Conditioning Equipment relating to Land at the Rear Jane MacLeod Jean Reynolds
of 113 Baker Street London W1
1457 / Surrender 02/11/2016 28/10/2016 Deed of Surrender of Lease: Post Office, Market Place, ChesterfieldS40 Victoria Moss, Deputy Company Jean Reynolds
of Lease - TR1 1TL - TR1 Transfer of whole registered title (Title no. of property Secretary
DY410908) Full title guarantee. Transferor is POL and Transferee is
Trillium (RMF) Limited.
1458 / Lease 02/11/2076 01/11/2016 I Lease Renewal of 72 High Street Hoddesdon, Hertfordshire, between Victoria Moss, Deputy Company Jean Reynolds
Renewal Nicola Trigg and Graeme Ross Atkinson as Executors for Elizabeth Secretary
Fowler (1) and Post Office Limited (2) for a further 5 years. (Underlease)
14597 40/11/2016 08/11/2016 Reversionary Lease by reference to an existing lease relating to Ground _I Victoria Moss, Deputy Company Jean Reynolds
Reversionary Floor and Basement, 354 and 356 Edgware Road, London W2 1BG Secretary
Lease between Simpsons Paints Limited (Landlord) and Post Office Limited
(Tenant).
1460 / Deed of 10/11/2016 08/11/2016 Deed of Variation relating to Ground Floor and Basement, 354 and 356 Victoria Moss, Deputy Company Jean Reynolds
Variation Edgware Road, London W2 1BG between Simpsons Paints Limited Secretary
(Landlord) and Post Office Limited (Tenant).
1461 / Renewal 14/11/2016 11/11/2016 Renewal lease by reference to an existing lease between Makan Alwen Lyons Jean Reynolds
lease
Investments Limited (a company registered in Jersey 76832) (Landlord)
and Post Office Limited (Tenant) in respect of basement and ground floor
premises at 124 Deansgate, Bolton (as per the existing lease dated 9 May
2006). Term: 5 years with effect from 9 May 2016. Rental: £40,000 per
annum exclusive of rates and VAT to be paid quarterly in advance
Register of Sealings
Alwen Lyons
Page 2
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POST OFFICE BOARD
Performance Review — Health
and Safety
Author: Martin Hopcroft Sponsor: Martin Kirke Meeting date: 24% November 2016
Executive Summary
Context
1.1 Keeping our employees healthy and safe is fundamental to Post Office success.
This is reflected in the Post Office Board’s legal responsibilities - directors can be
personally liable when health & safety duties are breached and members of the
board have both collective and individual responsibility for health and safety.
1.2 Our Health & Safety performance has improved significantly in the past 5 years
and we have a rolling 3-year plan to drive health and safety compliance and risk
reduction. The key risks of driving and robberies are the subject of mitigating
activities. Our reporting and safety management system is measured against the
externally recognised health and safety standard - OHSAS 18001. We recognise
the importance that wellbeing can play in creating engaged and motivated
employees and have developed and implemented an extensive wellbeing plan.
1.3 The aim for 2016/17 is to continue the year-on-year improvement by targeting a
reduction in four key safety metrics: accidents; lost time accidents; days lost; and
personal injury claims.
Questions this paper addresses
2.1. What is going well across health and safety and what is not going so well?
2.2 What are we doing to mitigate the key risks, including driving and robberies?
2.3. Are there any significant emerging risks?
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Conclusion
1. Performance continues to remain strong against all four of the key health and
safety metrics, including absence accidents and lost days (see Appendix).
2. There is an appetite from the Group Executive and across the business as a whole
to improve awareness of health and safety performance, management
responsibilities and compliance. The Health & Safety Team and Property
Management Team are attending many meetings and workshops to support and
provide guidance and training.
3. Mitigating actions are working to reduce road risk and the risk of robberies. (see
Appendix)
4. Recent environmental training has highlighted that POL may not be following best
practice in the way we address environmental issues across the business and
that Post Office Environmental Strategy and Policy could be strengthened.
The Head of Health & Safety has set up a focus group, also involving Property
team, the Social, Action and Inclusion Manager, and legal team to address
ownership, governance and best practice. A report, with recommendations, will
be provided to the GE H&S Sub Committee and Risk and Compliance Committee.
5. Following a recent Property Compliance review, it has been highlighted that
additional training is required for ‘Person in Charge’ (PICs) in Directly Managed
branches to improve their competence and awareness. Managers are completing
basic online PIC training with additional training workshops being arranged
between Jan - Mar 2017 by the Head of H&S and Property Compliance Manager.
6. Following a ‘deep dive’ H&S session with the GE, it was agreed that the Director
of Employee Relations & Engagement and Head of H&S provide executive
awareness training to GE Members during Nov and Dec 2016.
Input Sought
We ask that the Board to note the current safety and wellbeing performance, risks
highlighted and mitigating activity.
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What has gone well across Health & Safety
e ‘Accident’ and ‘lost time’ incidents have reduced at P6 2016/17 when compared
to September 15/16 and are meeting the continuous improvement target of 5%
year on year reduction. (see appendix)
e Current road risk performance has also improved when compared to 2015/16
with ‘at fault’ incidents remaining 32% lower than 2015/16.
e Whilst the number of CViT violent incidents have increased compared to
2015/16, robberies have remained low in August and September (following the
slight increase in July). 2 out of 15 incidents have incurred injury.
e The risk profile of Supply Chain will change due to the current restructure and
changes in workload, delivery routes and relocation will potentially increase risk
through change management activity resulting in distraction. The Health & Safety
team are attending the weekly Iris programme and work stream meetings to
provide support, including risk assessments, training and support visits to sites.
e Accidents involving customers at Crown and hosted branches are investigated,
reviewed to identify any preventative measures and benchmarked. Current volume
remains very low with fewer claims from customers. Analysis is being undertaken
and will be shared at the December GE H&S Sub Committee meeting.
e The volume and value of personal injury claims has reduced with provision for
known unsettled claims also reducing to £602k at Period 7 (October).
. Mental health related conditions are the single most common cause of longer
term absence with 17% of occurrences and 31% of total absence days, a slight
increase at P6 2016/17. Analysis is being undertaken to understand which areas of
the business may benefit from additional ‘mental health awareness’ training. There
has also been an increase in the number of users of the online ‘Help’ Employee
Assistance and Lifestyle Online websites possibly in response to recent increases in
absence but also awareness of resources. (See Appendix)
e Attendance levels have reached 96.8% YTD at P6 (September 2016/17) and
remain on target. However, there has recently been an increase in the level of
absences in Crowns but a decrease in Supply Chain. (See appendix)
e Three Wellpoint™ health check kiosks have been utilised across all largely
populated sites (>25) during the first half of the year with very positive feedback.
Mobile health checks will be offered by the Health & Safety team to Crown branch
and Network Field team colleagues from November.
e Property - Health and safety related risk and facilities management have been
assessed as medium risk, reducing to low by year end. This follows a programme
of checks, inspections and closure of risk assessment actions in accordance with
Health and Safety at Work Act and is now virtually complete.
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Overall property risk has reduced from high to medium and expected to be low by
year end, mainly due to the recent focus on completion of technical risk assessments
by CBRE and completion of actions by the Crown Office and Supply Chain lead and
area management teams, supported by H&S and Property teams. Additional training
will be provided in workshops to Persons in Charge (PICs) from January 2017.
« Hosted Sites - we have a duty of care to our employees working within ‘hosted’
premises eg. WH Smiths. A trial is under way to involve Trade Union H&S Reps in
site meetings prior to transfer date, to support the local managers / project
managers in respect of planning and advice. The Head of Health & Safety is in
contact with the WH Smiths H&S Manager to develop relationships, understanding
of the H&S processes and support available to local Post Office Managers.
What has not gone so well?
e Property - The most significant area requiring improvement has been managing
fire risk, as reported by CBRE to the Property Compliance Board as a finding from
their risk assessments. High risk fire actions have been closed with medium and low
actions planned to be closed by November.
e¢ Customer Harassment - Concern was raised by the Westminster local authority
regarding Post Office Policy for dealing with violence and abuse by customers,
especially in London where there is a growing problem with the homeless population
and their presence in our branches.
Positive recognition has been received from the Environmental Health Officer in
Westminster for the way Post Office has effectively managed this emerging risk in
the London Crown branches. Consideration is currently being given for sharing with
Postmasters and signposting them to the Health & Safety Executive for support and
guidance.
2.2 What are we doing to mitigate the key risks, including
driving and robberies?
e Road Risk: Driving activities have the potential for high impact/loss and
therefore remains one of the more significant residual risk which is successfully
being mitigated through a number of ongoing initiatives. Following a restructure
of the Fleet Management Team, Head of H&S and National Fleet Manager are
continuing to support the Road Risk Consultation Forum to ensure appropriate
plans and actions in place to mitigate emerging trends and risks eg. initiative to
capture signatures from all colleagues who drive for work that they have received
and understood the policy and instruction alongside licence checks.
e Robbery Risk: Robberies have the potential for high impact/loss and remain a
significant residual risk. We are successfully mitigating this through a number of
initiatives and best practice. Ongoing monitoring of the risk profile will inform
the assessment of the need, or otherwise, of body armour.
e Safety Risk: Concern raised with GE at the deep dive session that mobile
phones are being used by Business drivers, including joining conference calls.
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Policy and guidance issued via a communication in August, reiterated by Senior
Management during September. There needs to be strong leadership and
empowerment for employees to challenge anyone on a call who may be driving
and further discussion is planned for the GE Exec Coaching sessions in November.
« Property Risk: Remedial work for all identified high risk items has been
completed and plans for addressing medium risk electrical, asbestos, building
fabric and legionella have been built and are being undertaken.
Health and Wellbeing: We recognise the benefits that wellness can bring to the
organisation and therefore there is an extensive programme of healthcare
interventions to all areas of the business.
e The Health & Safety team are working closely with the Communications team
to support a plan of activity to further raise awareness of the resources available
to colleagues, including comms, blogs, video and face to face workshops.
e A programme of wellbeing activity, including raising awareness of mental
health conditions, symptoms and the support available has been updated.
e The roll-out of a second programme of health checks to all employees via face-
to-face clinics and stand-alone digital wellbeing kiosks will continue from Nov.
e Work is currently being undertaken to evaluate the link between local
engagement scores with Wellbeing, analysing absence data and the
engagement index and wellbeing scores, with focus on mental health related
absence in particular. Conclusions and a proposed plan of action will be shared
with the GE H&S Sub Committee in December.
2.3 Are there any significant emerging risks?
e The Environmental Policy, plan and level of reporting is currently under review.
A Strategy Tactical Group has been set up by the Heads of H&S and Property, the
Compliance Manager and CSR Manager, supported by legal and FM provider
guidance to review strategy. The first group meeting took place on Nov 1%. POL
directors will be made aware of the significance of environmental reporting, how
it is affecting our brand image, the potential for personal liability with further
discussion at the GE H&S Sub Committee in December.
e A significant gap has been identified in the competence of managers to carry out
their Person in Charge (PiC) responsibilities and a revised on-line training product
has been developed and issued by the H&S Team, with a requirement that all PiCs
complete this by September. Follow up H&S training workshops will be provided to
PiCs and deputy PiCs, covering Premises H&S, Site Log Books, Fire Extinguishers.
(Appendix Attached - Performance Charts)
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APPENDIX - Summary of Safety Performance - YTD Period 6 (2016/17)
‘Growin Office Accidents YTD PS
All Accidents - YTD Cumulative at Period 6
250 preneenernen
200 I -
-
g 150 + ~ - -
8 : Ss
£100
50 ~ S
oO Period (Apr - Mar)
P1 P2 P3 P4 PS P6 P7 PB PO P10 P11 P12
2015/16 A 2016017 All 2015/16 Absence = 2016/17 Absence
‘Accident’ and “lost time’ incidents have reduced 13% and 50% respectively at Period 6 YTD (September
2015) compared to 15/16
Network Crown Ofer - Year To Date Pref of Accidents
—
eg es ee
‘Current road tisk performance has
improved by 20.19% compared to 2015/26.
‘at fault’ incidents are also down by
31,58% PG YTD {Sep}.
Lost Time Injury Frequency Rate
‘Supply Chain
YTD P5- 0.636
2015/16 out turn ~ 2.042
2016/27 target ~ 0.990
2015/16 out turn ~ 0.370
PR ee a Fanaa eT] I 2006/27 target 0.350
= z * T = z z z PO Benchmark ~ 0.480
_— “ —_— ~ ~ Post Office CVIT Robberies ~ P6 (Sep16
Incidents ~ 2 (2 successful} vs 1 in 15/26 (1
successful)
Violence YTD ~ 16 vs 3 (15/16 YTD)
900 ™ Injuries YTD ~ 1 vs 0 (15/26 YTO}
800 - ‘Weapons YTO ~ 6 vs 1 (15/26 YTD)
700 - rr : op 2CViT incidents were in Birmingham
00
© 500 : E : : _ Post Office (All branch types) Robberies —
76 (Sepi6}
é
400 oS z z Incidents - 9 (5 successful} vs 7 (5
bed 2 _ : successfl) in 2015/16
. : Violence Y70~0vs 2 (2025/36)
100 + a - a Injuries YTD —0vs 2 (2015/16)
° Weapons YTD - 10(5 firearm) vs 11 (3
Pt P2 P3 PS PS Pé P7 PB PS PIO P11 P12 firearms) last year, One incident in
Period September resulted in a £16k oss, where
I ean the SPMR was forced to open the safe by
three suspects wielding machetes.
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APPENDIX - Summary of Wellbeing Performance - YTD Period 6 (2016/17)
Sick Absence %ge
2016 / 2017
April I May I June I July Aug Sep Gross
Period I Period I Period I Period I Period I Period I y.1.D I Hours
o1 02 03 04 05 06 __I Totals _I Target
FINANCE 3.5% I 3.2% I 3.4% I 3.5% I 2.9% I 2.8% I 3.2% I 3.5%
FIN: SUPPORT SERVICES (ALL) 4.6% I 3.3% I 3.2% I 3.0% I 2.8% I 3.1% I 3.3% I 3.8%
FIN: SS FSC 3.9% I 2.6% I 2.4% I 2.8% I 3.4% I 1.6% I 2.7% I 3.4%
FIN: SS CONTACT CENTRES 8.4% I 4.5% I 4.2% I 3.6% I 2.2% I 3.6% I 4.3% I 6.7%
FIN: SS HRSC 2.4% I 3.4% I 3.8% I 3.1% I 3.9% I 4.8% I 3.5% I 2.6%
FIN: SUPPLY CHAIN 3.4% I 3.4% I 3.6% I 3.9% I 3.2% I 3.0% I 3.4% I 3.7%
SALES & NETWORK 3.3% I 3.0% I 3.1% I 3.6% I 4.0% I 4.2% I 3.5% I 3.2%
SN: CROWN SALES 3.7% I 3.4% I 3.3% I 4.0% I 4.4% I 4.6% I 3.9% I 3.5%
SN: SALES DIRECTOR 3.9% I 2.5% I 3.2% I 3.0% I 2.5% I 2.6% I 3.0% I 2.9%
PEOPLE & ENGAGEMENT 1.6% I 1.7% I 1.3% I 1.1% I 0.6% I 1.9% I 1.6% I_1.1%
PE: COMMUNICATIONS & CORP
AFFAIRS 0.0% I 3.4% I 3.1% I 3.1% I 0.2% I 0.0% I 2.0% I 0.3%
GENERAL COUNSEL 0.3% I 0.4% I 0.0% I 2.9% I 1.3% I 0.6% I 0.8% I 1.8%
GC: SECURITY 0.2% I 0.1% I 0.0% I 2.4% I 2.5% I 1.2% I 1.1% I 1.9%
[ rinancrat services Loee% I 21% I 2.2% I 21% I 1.6% I 1.6% I 1.7% [20% I
[Post office Ltd [3.2% I 20%] 3.0%] 34%] 3.4%] 3.5%] 3.2% I 3.3% I
Trends - Attendance levels have reached 96.8% YTD at P6 (September 2016/17)
and remains on target. However, there has been a recent increase in the level of
absence in Crowns but a decrease in Supply Chain which has helped the overall
business performance. (See chart above)
Network & Sales absence levels have increased over the last quarter and risen above
target (overall sick absence 3.5% v 3.2%). We have seen an increase in Crown Office
long term absences (2.2% LTS up to 3.3% in recent months). Analysis is being
undertaken with the Occupational health partner to understand underlying trend by
geographical areas.
Supply Chain absence reduction is mainly due to a reduction in long term absences
wither by a return to work or exit from the business. (2.2% LTS down to 1.6%).
Activity -
. Mental health conditions remain the single most common cause of longer term
absence with 17% of occurrences and 31% total absence days, a slight increase
at P6 2016/17. Awareness training continues to be rolled out to all teams.
e There has also been an increase in the number of users of the online ‘Help’
Employee Assistance and Lifestyle Online websites possibly in response to
recent increases in absence but also due to improved awareness of resources.
Strictly Confidentiat
Health & Safety Report Oct 2616
POST OFFICE
BOARD
POL00103264
POL00103264
PAGE 1 OF 1
Post Office Limited Board Meetings
Author: Alwen Lyons Meeting date: 24 November 2016
Executive Summary
Context
The Directors are requested to note the future meetings dates scheduled in respect of
Post Office Limited Board meetings.
Input Sought
The Board is requested to note the future meeting dates.
The Report
Tuesday 31 January 2017 09.30 - 14.00
Tuesday 28 March 2017 09.30 - 14.00
Thursday 25 May 2017 11.15 - 15.30
Tuesday 27 June 2017 TBC Board Away Day 1
Wednesday 28 June 2017 TBC Board Away Day 2
Tuesday 25 July 2017 11.15 - 15.30
Tuesday 26 September 2017 09.30 - 14.00
Tuesday 31 October 2017 09.30 - 14.00
Thursday 23 November 2017 11.15 - 15.30
Board November 2016