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Post Office Board Agenda
Tuesday 30 April 2019* 1.19 Wakefield and by
I 14.30 - 16.30 hrs
: phone
Tim Parker (Chairman) _I ¢ Tim Franklin ‘Veronica Branton (Head of Secretariat)
© Alisdair Cameron * Shirine Khoury-Haq_ I © Jonathan Lewis (Head of Strategy and
(interim CEO) Corporate Development)
Ken McCall Carla Stent
‘* Tom Cooper
Apology: Paula Vennelis
I Age! co : ne oC
1. I Welcome and Conflicts of Interest Noting Chairman 1430-1435
2. I CEO Report Noting and Input Interim CEO 1435-1450
3. I 2019/20 Annual Strategic Plan and Budget Approval Interim CEO/ 14.50 - 15.30
Jonathan Lewis
4. I Succession Planning Noting and Input Interim CEO/ Group I 15.30- 16.20
Director HR
5. I Any Other Business Noting and Input Chairman
6. I Date of next meeting Noting Chairman 16.20 - 16.30
28 May 2019: 11.30 ~ 16.30 hrs
1 This meeting is in addition to the scheduled meetings and ordinary business, such as minutes and matters
arising, have been carried over to the scheduled Board meeting on 28 ™ May 2019.
STRICTLY CONFIDENTIAL
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POST OFFICE LIMITED
THE BOARD OF DIRECTORS DISCUSSION PAPER
CEO Report
Author: Ail Cameron Meeting date: 30 April 2019
The GLO (subject to legal privilege)
Our request for leave to appeal on the recusal and the claimants’ counter-argument
have been submitted to the Court of Appeal.
To ensure we have sufficient, full-time advice, experienced in litigation and capable of
testing the views of advisors, we have asked Herbert Smith to lead the GLO, reporting
to the Board sub-committee. There are no plans to amend the rest of the team other
than standing down Norton Rose.
The sub-committee met on Wednesday and debated the grounds for appeal on the
common issues trial and whether we should accelerate that appeal, requesting that
the two appeals be heard together. On balance and against the QC’s advice, we
decided to proceed with two separate appeals, although ultimately it will be a matter
for the Court of Appeal to determine how it wishes to hear them.
Consequently, POL will first apply for permission to appeal in respect of the common
issues trial on 16 May 2019 before Justice Fraser. On 23 May 2019 it will be
determined how the costs of the common issues trial should be apportioned. The
Horizon issues trial will recommence on 10 June through to the first week of July.
Various workstreams are underway to agree changes to the way we work in line with
the objectives of serving agents better and reducing legal risk in our contractual
relationships. This is already changing the structure in Chesterfield with a Tier 2
contact centre team created to focus on disputes. A full update will be presented to
the Board in May.
The GLO has received limited media attention. For the most part it has escaped the
public’s attention: only around 10pc are aware of having seen or heard something
about Post Office in the media recently. However, within this group, negative
sentiment about the business increased significantly.
Commercial Performance
In our management accounts, we reported a trading profit for 2018-19 of £61.5m,
broadly in line with expectations.
Gross revenue grew 2% year-on-year to £968m, £3m ahead of budget. This included
Mails trading up 6% including some stamp buy-forward ahead of the price rise.
Banking income grew 15% offset by declines in Payment Services, POCA and Postal
Orders. Identity grew its trading profit 33% to £34m, a peak before the changes in
UKVI and Identity pricing flow through. Insurance grew its revenue by 15% but
trading profit by just 1%.
Change spend of £272m exceeded the Q4 forecast by £7.6m, although half of this
related to non-cash onerous lease provisions. Benefits of £37.5m were delivered, in
line with forecast but £2.7m below budget.
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On cash, we ended the year with £747m in use, £135m better than the previous year-
end. £90m of the lower usage was in branch.
Delivery
Network.
Network location numbers grew to 11,638 at year-end, subject to audit. This is an
increase of 91 in 2018-19, a significant achievement. We opened 328 New Network
Locations in areas that didn’t have any Post Office provision, increasing convenience
for customers. We also exited 67 DMBs, leaving 188 remaining.
A team from Post Office attended the recent NFSP conference. The audience and NFSP
leadership recognised that change was underway, including higher sales incentives for
telecoms and insurance, greater ability to sell travel insurance in Locals, higher pay
on banking deposits and we waived the clause preventing the NFSP from criticising us
in public. Our new field leadership structure is also now in place.
The areas we discussed aligned with the results of the survey they had undertaken
with 1,000 Postmasters, prioritising concerns around pay and competition. While our
change of tone was appreciated, it also underlined the extent to which Postmasters
have felt neglected - a typical question was “Do you view us as an asset at all?” - and
how much there is to do in delivering our strategy of “Making it easier for Postmasters
to earn more money for less effort.” We confirmed that we will be undertaking a
review of Postmaster remuneration for the Board in October.
The publication of the survey did generate some press attention and the strap line
that 20% of Postmasters are thinking of handing the keys in will continue to gain
attention. This reinforces our strategy and we should not complain about the NFSP
trying to put us and Government under pressure to do more. We do, however, think
that they are a little naive and the story predictably played into the hands of the CWU.
We challenged the NFSP from the platform to recruit more active members, ensuring
that they remain representative of Postmasters.
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Back Office Transformation.
Progress has been made resolving reconciliation through to our financial system with
failure rates much reduced. Cash depots continue to count physical cash weekly,
confirming a match to Transtrack. The inventory team has reduced excess cash in the
network close to expected levels. The Phase 2 forecasting solution for sterling cash
went live over Easter weekend and is now being tested in parallel run. We continue to
work closely with PwC on the year-end audit.
IRRELEVANT
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We have requested a meeting with Amber Rudd and are writing to her and to DWP
officials. We are recommending that the tender process properly reflects the
vulnerability of these customers many of whom are elderly, resistant to normal
communications and anxious. We also believe that space should be left for a single
solution that could encompass all 0.5m customers.
In addition, it seems appropriate to highlight that although POCA is marginal for our
finances, it is important to some Post Offices. Removing the product from Post Office
may be interpreted as anti-Postmaster by the NFSP and may lead individual
Postmasters to hand the keys in, making Government policy harder to deliver. The
overall impact on remuneration over the next few years is substantial with 200 Post
Offices badly hit and around 20 becoming loss-making, especially in Northern Ireland.
Compliance and regulation:
Select Committee
We have been invited to attend a BEIS Select Committee on the future of Post Office
on 21 May. We will submit evidence by 6 May. This is in draft and will be shared with
Government in advance.
We have also worked with BEIS colleagues to support our minister through a further
House of Commons debate, this time on the sustainability of the branch network.
IRRELEVANT