Group Executive Agenda
Remember (a+vei) (otw) (p&o) & (cit) !
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Thursday 17" December 2015 + Paula Vennells (Chair) + Tom Wechsler Other attendees : None
+ Alisdair Cameron + Dave Carter (Items 1 & 5)
. i Performance Session: .
Start Time Finish Time Neil Hayward Tom Moran (Item 3)
+ Nick Kennett Chris B + Amber Kelly (Item 3)
10.30hrs 17.15hrs + Martin George nis Broe + Aidan Alston (Item 4)
a: + Mark Davies -
+ Kevin Gilliland Pete Mark It 7 + Martin Edwards (Item 5)
a . +
+ Jane MacLeod 20) NC NEMST I «Robin Gregor tem 8)
Room 1.19 Wakefield, Finsbury Dials + David Hussey + Allan May (Item 7)
+ Alwen Lyons + Radha Davies (Item 8)
1. Performance - Update 10.30 - 11.50
1.1 Customer (Incl. Complaints) For information Monthly update Pete Markey (20 mins)
1.2 Sales For information Monthly update Kevin (20 mins)
1.3 Financials For information Report P7 Flash Results to GE Dave Carter (20 mins)
1.4 Operations For information Monthly update Al/ Chris Broe (20 mins)
2. GE Minutes & Action log Minutes agreed To review and agree Alwen 11.50 - 12.00
3. Engagement Strategy Brief GE on the new engagement I To agree the future engagement strategy for Tom Moran / 12.00 - 12.30
strategy for review, input and the business. Amber Kelly
sign off
4. SLT Composition Approach agreed Discussion on the composition of the SLT Neil / Aidan 12.30 — 13.00
Alston
LUNCH 13.00 - 13.30
5. Initial discussion on the 2016/17 GE to agree initial direction and Initial discussion on the new year plan, Al/ Martin 13.30 - 14.45
budget and outlook for the 3YP timetable agreeing the programme of work prior to sign- I Edwards /
off with the Board in March Dave Carter &
Robin Gregory
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6. Sales Strategy (including FS) For information To update GE on the Sales Strategy. Kevin 14.45 - 15.15
7. Retail Strategy For information Update GE on Retail Strategy and Performance. I Pete Markey / 15.15 - 15.40
Allan May
BREAK 15.40 — 15.50
8. Innovation
8.1 Digital Martin / Pete 15.50 ~ 16.30
Markey / Radha
8.2 New Crown Office Prototypes Davies
9. Pensions For information To update GE on the Sales Strategy. Neil 16.30 - 17.00
10. AOB 17.00 - 17.15
10.1 Health & Safety For noting Health & Safety report
10.2 RCC Minutes 26/10/15 For noting RCC Minutes from meeting held on 26 Oct 2015
10.3 Prosecutions policy For noting Prosecutions policy
CLOSE 17.15
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GE Performance Report —Customer P8
Author: Andy Viggars Sponsor: Pete Markey Date: 9/12/15
Executive Summary
Context
This is the Period 8 Voice of the Customer report for the Group Executive.
Questions this paper addresses
1. What is our performance vs. target on our key scorecard metrics?
2. What movements have there been in the data vs last period and where relevant, what is
the performance by Network segment?
Conclusions
P8 has been positive overall with continuous improvement across the key customer metrics and
all metrics remain above target year-to-date. The Effort measure is at its highest level so far
this year. However there are indications of a decline in Effort scores for some Mails customers
in Crown, which could pose a risk for P9 performance as footfall in branches increases.
Summary table below:
CURRENT
PERIOD YTD ee couse
TARGET Target
(P8)
Effort (% saying Post Office is
Easy to do business with) voc 69% 68% 66% 64% 64%
[bonus measure]
NPS voc +64 +63 +63 +60 +57
CSAT (Top 3 Box) voc 89% 88% 88% 88% 87%
Walkcime voc 81% 79% 80% 82% 78%
(% served inside 5 minutes)
FS NPS [bonus measure] FS.NPS survey +30 +27 +27 +25 +25
« Ata Network level, there have been improvements across all KPIs this period, with all
metrics ahead of target YTD.
« Effort - performance improved by 1% to 69% in P8 reaching its highest score this year. 7
in 10 customers in P8 said we were ‘Easy to do business with’. The Effort measure remains
ahead of target for both the period and YTD.
o Agency and WHSmith drive this improvement in P8. Both are showing +2pp increases
and Effort is at its highest level yet this year. (72% and 68% respectively)
= Within Agency, Effort scores continue to be higher in Mains branches, +1pp to 72%.
However Locals are closing the gap, increasing scores by +3pp to 69% this period.
* Within WHSmith, both Franchised and Core branches see improvements, by 1pp to
68% for Franchised and by +2pp to 67% for Core.
o Crown is stable in P8 at 67%, maintaining the YTD high score that was achieved in P7.
o Looking at Effort by product, there has been an improvement in all major products
this period:
* Passports continue to be the service with the highest Effort scores. All three branch
segments contributed to this strong performance in P8. Crown is stable, while
WHSmith and Agency both saw +6pp uplifts, albeit from a smaller base for Agency.
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= In Travel Money there was a small uplift (+1pp) this period to 69%, driven by
Agency (+7pp) and Crown (+1pp). However, the overall uplift is held back by a
decline in WHS (-6pp), a trend also seen in the other KPIs.
«Results in Crown could be further improved by addressing wait time
acceptability and ‘Time & Effort’ for Travel Money customers, which declined
in P8.
* For Mails there was a small improvement in P8 of +1pp to 67%.
« Both Agency and WHSmith show small uplifts for Mails: +1pp to 69%
for Agency; +2pp to 67% for WHS.
« Crown scores for Mails declined by 1pp this period to 64% but remain
ahead of target.
« Within Crown, SSK customers’ Effort score is up +4pp. However,
Effort for Mails transactions at counters falls by -3pp.
0° This is aligned to a decline in Personalisation (friendly welcome and
goodbye) for these customers. Verbatim comments show frustrations
with the length of time it took to get served.
o Anumber of customers mention the lack of proactive response to
queues at peak times as well as a perceived lack of staff to man
counters. There is also some frustration with a perceived lack of
activity to cover for increased customer volumes in the lead up to
Christmas.
NPS - At a Network level, NPS increased by 1pp to +64 and is ahead of target by 4pp.
* Crown NPS scores hold at +67, while Agency improved by +4pp to +60, across all products
and there have been improvements across all pillars of customer experience.
o In WHSmith, NPS declined by -2pp to +60, reflecting declining scores in the following pillars
of customer experience: Expectations, Personalisation and Empathy.
o The decline seen in Effort amongst Mails counter customers in Crown is mirrored in NPS for
Mails counter customers (a decline of -3pp).
« CSAT - Customer satisfaction reaches a year-to-date high of 89%, exceeding the P8 target
by 1%. The score in Crown holds for a fourth consecutive period at 92%, ahead of target for the
month and year and Crown continues to be the highest scoring segment for satisfaction. Agency
improved its score by +2pp this period to 89%, driven by improvement in all customer experience
pillars. WHSmith holds at 89% for a second month, exceeding its target by 2%.
« Wait time (% served inside 5 mins) - The percentage of customers served in less than 5
minutes improved by +2pp this period, to 81%.
co WHS performance declined by 2pp this period to 74%, the same level as seen in Crown. Tied
to this, WHS customers are less likely than Crown customers to say that the wait time was
acceptable (87% vs 90% in Crown).
o Crown and Agency % served inside 5 minutes remained stable in P8 (74% and 88%
respectively)
« FS NPS - Positive uplift of 3pp from previous period, continuing an upward trend. The increase this
period is driven by the insurance business, Travel & Home specifically. Sales & service experiences
are being reported slightly more positively (back book customers have remained stable).
Action plans are in place across all three network segments to address underperformance and seek to
improve scores in P9 and beyond.
Input required
For GE to review and note.
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The Report
Looking Back
WHAT HAS GONE WELL?
Performance on key metrics remains positive; all showing uplifts and all above target YTD.
Particularly strong performance on Effort, where we continue to see a long term upward trend
across all segments. (See charts below)
I
I 5 SB La-g pI E7I EBM 09%
5% % OSSD Vo 68% fo
ETHOS WELL ere 6 2% Ange OST = Network]
P6 P7 PB P9 P10 Pil P12 Pi P2
P3 P4 PS P6 P7 PB I
EAT OMe GSISOOM OM 67%
~Crown
a
P9 P10 P11 P12 Pi
—68%58% 9% sega ET 8oN7M% 72% — I
IG OMSL greg COM Ge OOP ET I
I
I ——Agency I
P6 P7 PB PO P10 Pil P12 P1 P2 P3 PA PS PE P7 PB
P6 P7 PB PO P10 Pll P12 Pl P2 P3 P4 PS PE P7 PB
1 in 4 branches are now achieving Effort scores over 90%.
Network continues to show great focus on customer (and Voice of Customer), seeking to drive
improvements in both the experience and the KPIs. For example:
o Detailed, specific customer plans are in place to address underperformers.
o Increase in SSK migration (customers using SSKs) to improve wait time
performance/perception.
© Area Managers monitoring wait time on every visit.
co Sharing of best practice, overall, and by individual branches.
WHAT HAS NOT GONE WELL?
Some declines in KPIs for P8 specifically:
WHSmith wait time performance declined by 2pp this period to 74%.
WHSmith Travel Money Effort declined in P8, tied to a decline in wait time for travel money
customers.
Mails counter customers’ Effort and NPS scores have declined in Crown, relating to
perceptions around wait time and lack of proactive response to queues at key times, as well
as a perceived lack of staff to man counters.
P8 saw a drop in personalisation (friendly welcome/goodbye) being delivered at counters for
Mails customers in Crown,
Frustrations for Mails customers around wait time and perceived lack of action by colleagues
to address wait times have increased in P8 within Crown. This represents a significant risk as
branch footfall increases during P9.
Although improving, there is still an inconsistency for Effort scores across the network. (See chart
below)
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In P8, we see a stable picture in terms of the number of branches achieving the overall network-
level Effort target. We are though, seeing a bigger spread of scores at either end of the spectrum — I
(we are seeing more branches scoring 100%, and more scoring less than 40%
Looking Ahead
OPPORTUNITIES?
. To deliver a great Christmas customer experience: Network aspiration to maintain YTD scores,
rather than accept lower P9 targets, combined with daily reporting in the run up to Christmas is
helping make sure customer (and VOC) is even further up the agenda.
. To further increase Effort scores by focusing on key drivers in branch: Pace, Service, Experience of
Government Services and Environment.
. SSK users reported increased Effort scores in P8. P9 is a critical period to introduce new customers
to SSKs and to manage a positive experience with the support of Christmas Makers in branch.
. Proactive deployment of colleagues and Christmas Makers to show customers how we can help
them. This is also an opportunity to improve customer perceptions that we are responding to
increased volumes of customers and acting to both reduce wait times and improve the customer
experience.
. To increase the proportion of branches achieving targets, by focusing on areas of
underperformance (already being actioned with network colleagues).
. Opportunity to further develop and learn from customer projects (Branded Experience pilot,
Concept Stores).
RISKS OR CONCERNS?
. Scores have historically declined at Christmas so it is important we do all we can to deliver a great
experience at the busiest time of the year, especially for Mails, where Effort scores are lower.
* Queue times historically increase in P9 and we know that ‘Time and Effort’ is the biggest driver of
customer NPS. WHSmith have already seen an increase in queue times in P8.
. Customer comments in P8 suggest frustrations for some Crown customers that we are not being
Proactive enough to manage queues, man counters and serve customers quickly at busy times and
ahead of the Christmas period. We need to demonstrate to customers that we are acting to
address and manage wait times during P9, in order to maintain Effort and NPS scores for Mails
customers in December.
. During the peak and busy period, it is critical that counter colleagues continue to deliver a warm
and friendly service for all transactions, when customers reach the counter.
* The daily VOC reporting to the business during December that we have introduced this year, should
be used by Network to monitor and address performance during P9.
. Although there has been a strong performance YTD, there are two points we must consider: It is
really important that we retain focus on customer service in the last few months of the year and we
need to bear in mind our position in the Nunwood CEE Index and that we improve further relative
to other brands.
° There is work in train to address both of these points.
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In Conclusion
If current work continues, we're confident that we
will hit full year targets, especially with the
commitment to maintaining service levels during
the peak period.
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In doing so, we'll be giving a positive platform on
which to build further, strategic improvements in
customer experience and drive profitable growth.
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GE Performance Report
Author: Karl Oliver & Mike Elliott Sponsor: Kevin Gilliland Date: 12/15
Executive Summary
Context
The Period 8 & YTD Sales Performance Report for the General Executive (GE)
Questions this paper addresses
1. How are we trading through a ‘volume’ lens?
2. What are the implications for our outlook and plans?
Conclusion
Mails & Retail performance achieved target in the period (100.5%) compared to the P7
performance of 105%. Our P8 performance has reduced the YTD position against target by
0.3% now at 103.2%. The P8 Mails performance is short of the full year forecast run rate
(+£7.7m against original target) by £0.4m, leaving us £0.3m behind the YTD forecast.
Telecoms continued its strong performance of 115% against target for the period driven by the
strong HomePhone proposition. This brings the YTD vs Target position to 100.5%, positive
against target and last year for the first time this year (103% vs LY).
Financial Services followed the pattern of P7 with P8 improving performance against Travel
Money (101% of target & 105% of LY) and Credit Card, driven by digital performance of
c.900% vs LY, achieving 142% of target. A very strong digital Savings performance in the
period delivered 25k new savings accounts against a target of 10k. Mortgage performance has
declined to 36% of target in P8 from 68% in P7 (P8 vs LY 147%).
Government Services maintained above target performance of 101%. The expected drop back
to target levels of Secure Collect bringing overall performance back from the spike in P7
(108% in P7). We expect to achieve target for Government Services.
In summary, we expect to ‘over achieve’ sales target for Mails & Retail and ‘achieve’ our
Telecoms and Government Services targets. Financial Services sales volumes remain ‘high
risk’.
Input Sought
For GE review and note.
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Looking Back
WHAT HAS GONE WELL?
e Travel Money continued the improvement seen in P7 with P8 performance at 102% of target
and 105% vs Last Year (P7 98% of target, 88% in P6)
> Continued strong digital performance, a stabilisation of FX exchange rates and no
destination capacity issues outside the peak period contributing to improved performance
— Click & Collect - The initial phase of 250 Branches shows performance of 200% against
LY. Expansion to 1500 branches completed on 8" Dec (additional 750 branches). Further
analysis of results is required and will be fed back in the P9 GE report
e Credit Card (Digital)
— Improved proposition delivered in P7 has driven P8 online performance to 175% of target
(900% vs LY). Overall Credit Card performance for P8 is 141% of target (515% vs LY)
bringing the YTD position to 89% (up 12% on the YTD position at the end of P7)
—» SmartSearch on MoneySuperMarket (MSM) went live on 30" October and this has driven
a 10% increase in MSM acceptance rate (56% up from 46%). The 2 weeks of sales data
we have so far shows an additional 250 sales per week
« HomePhone/BB
— Continued strong performance in P8 with all channels achieving target
— 144% against overall target for the period and 107% YTD
> Growth to the base for the last 3 periods of 11k new customers reflecting the success of
the campaign and achieved during the ‘Price rise’ and call centre migration.
e MoneyGram
— We continue to outperform the market with transactions up over 19% YoY (market is
growing at c 6%). The main driver is strong performance to East-European countries
> Launch of New MoneyGram Plus card from the mid October making future transactions
quicker and easier (Originally planned to launch in January 2015)
— Additional functionality including a ‘Delayed send’; ‘Cash direct to Bank Accounts’;
extended ID list; staff discount & ‘Promotional’ code capability. Trials of all of these
features will take place in Q4 to allow quantification of opportunity
WHAT HAS NOT GONE WELL?
e Mortgage Sales
— Application performance in P8 was our lowest YTD with Branch achieving £17.5m vs
target of £90m (19%); Online achieved £22.5m vs £95m (23%); Contact centre £32.8m
vs £40m (82%)
—» Pricing / competition: in July/Aug our product range had c20 products with market leading
rates, some under-cutting the next best lender by 20 basis points driving strong
applications. Our current range includes a number of best buys & performs strongly in
aggregator search results and will be refreshed on 11" December
~— Hub & Spoke - P7 report stated the intention to roll-out to a total of 100 Branches in P8.
We have rolled out to a total of 60 Branches. A software problem (Anti-Virus) has meant a
pause to the roll-out. It is expected that this will be resolved during January allowing us
to move to the planned 100 Branches by the end of Jan/early Feb
¢ Travel Insurance
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« Mot
a
a ;
Looking Ahead
OPPORTUNITIES?
e January Promotional Offers
— 750k ‘Offer’ booklets to be distributed in December with the aim of building
awareness/consideration and revisits in January. The booklets contain either new offers
i.e. MoneyGram discount or highlight our strongest propositions i.e. Credit Card
— Coupled with and to support the Christmas Maker activity, this is a test & learn exercise
with a total print cost of £56k. Unique offers will be tracked and outcome fed back
e Savings Q4 campaign
— Opportunity to capture greater market share by focusing marketing and network staff
around natural churn times when savings are front of mind for many customers
— Looking for compliance agreement to train an additional 500 Product Champions in the
Agency Network to support the primary campaign in Q4
«Credit Card Mobile Application form launched end of November
-» Digital development fully funded by Bank that mitigates an increasing risk
— MSM see 50% of their CC searches come from a mobile device and previously we've not
had a mobile friendly web/app to optimise these searches
e Home Shopping Returns
— Increased opportunity from post-Black Friday week-end, Xmas & shift to e-sales
—» Product added to Self Service Kiosks (SSKs) in November
— Amazon and ASOS branded returns posters in branch (6 brand names including M&S)
RISKS OR CONCERNS?
« Mails Xmas performance
> We have entered the peak period following a drop in overall performance in P8, dropping
£0.4m against forecast (now £0.3m year behind our end forecast)
~ International Standard YTD position is -8.6% vs target. This has continued to be driven by
exchange rate impact, increased competition from MyHermes and eBay’s global shipping
programme (Week 31 expansion to additional 11 countries)
— Timing of Christmas suggests a later start to ‘peak’ volume. Daily tracking of performance
shows some signs of recovery and a clearer picture will be provided at the GE meeting
e Travel Money
— The increasing concern surrounding recent terrorist attacks e.g. Paris, Egypt & London
may result in a downturn in overseas travel in the coming months
e Savings sales
— Following recent product re-pricing, movement has been insufficient to re-cover savings
shortfall. Current performance levels would see Network achieve 53% of volume targets
~ Online Saver and Online Bond removed from sale to new customers on 12/11 as a result
of October sales exceeding volume expectations, resulting in price reductions and
restriction of sales to ‘existing customers’ to temper inflows and avoid tranche breach
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In Conclusion
We expect to hit three of the four product We are looking to overachieve against
pillars with FS missing across a range of opportunity products and channels to
products compensate for the shortfall in FS sales
Period POS YbT POE
Telecoms Vs Target] Vs Vs last vs Target] Vs Vs last
wal I Target I vs Target wal I Tar t
ae ue eae (%) lastYear_I Year (%) nee a ata {%) lastYear_I Year (%)
HomePhone 17350 I 8008 I _3sa2_[aas2mI 3.473 [143.0% I 75610 I 7ino2 I 4508 [a06.a% I 11.686 [118.3%
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POST OFFICE LIMITED
Performance Report
November 2015
Produced By : Financial Control
For Queries & Comments Contact : Robin Gregory or Kam Bassra
CONFIDENTIAL
Commercially Sensitive and not for onward circulation
This document contains commercially sensitive information that is likely to cause damage in the event of unauthorised disclos ure.
It should not be copied or forwarded in its entirety unless for a specific business purpose and only to internal people who understand the
consequences of disclosure or to external people who have signed a non -disclosure agreement.
It is normally only circulated to the Senior Leadership Team and Finance Professionals within the Post Office.
Period 8 Performance Pack - Al Cameron 17th December 2015 Page 1 of 22
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(— >)
Contents
Page
Headlines 3
Profit & Loss Statement Period 4
Profit & Loss Statement YTD 5
Crown Profit & Loss Statement 6
Cashflow Analysis 7
Business Scorecard 8
Appendices
Income Report
Net Income By Pillar vs Budget YTD 11
Cost Report
Staff Cost By Function 13
Non Staff Cost by Type 14
Transformation Expenditure Report
Project Costs (OpEx) 16
Project Costs (CapEx and Exceptionals) 17
Supplementary Information
Cashflow Statement & Balance Sheet Summary 19
Income By Product Groups & Pillar 20
POMS P&L 21
Digital Net Income 22
Period 8 Performance Pack - Al Cameron 17th December 2015 Page 2 of 22
Headlines
November 2015
Headlines
's [eunanfavourable to budget, driven by lower project opex. BAU EBITDAS i
\e.
driven by low
Net income is £(2.6)m adverse to budget, due to adverse variances across all pillars; Financial Services is £(1.3)m
adverse driven by travel insurance, Telecoms is £(0.6)m adverse, Mails is £(0.3)m adverse and Government Services
is also £(0.3)m adverse.
Total expenditure is £2.6m favourable; projects opex is £1.8m favourable due to timing and underlying reduced
costs (Mobile and Invest to Grow), postmaster costs are £1.4m favourable, non staff is £(0.3)m adverse and staff
costs are £(0.2}m adverse.
Below EBIT impairment is favourable due to capex being
behind. Exceptionals are {==
year, was fully utilised by
behind plan, driven primarily by EUC which is f
.ehind budget and the government grant which although budgeted throughout the
YTD
EBITDAS i} hich islitssntI adverse to budget. Ths is due to lower income
income [ini adverse, offset by lower costs favourable.
Net income is £(7.0)m behind budget. Financial Services is £(7.2)m adverse, Telecoms is £(2.8)m adverse, and
Supply Chain is £(3.5)m adverse, partially offset by Mails £4.7m favourable and Government Services £1.0m
favourable.
Total expenditure is £8.2m favourable consisting of postmasters’ costs £8.8m favourable, due to fixed pay savings
as a result of converting more branches through NTP in 2014-15, variable costs favourable as a result of Mains
conversions, product mix and timing, Staff costs £(1.8)m adverse due to the pension rate adjustment, reflecting year
end market conditions. Non staff costs are £(1.4)m adverse with underlying adverse variances from £(1.8)m higher
card transaction costs, £(1.2)m FX losses and £(1.0)m property charges, partially offset by one off benefit of £3.7m
from Fujitsu of compensation, lower IT costs, consultancy charges and marketing costs. £3.0m YTD accrued for the
unbudgeted Mails Segregation penalty. Project One Off Costs are £2.5m favourable, due to the movement of some
costs to capital.
FRES is £(1.4)m behind budget due to timing and this is expected to be close to budget at year end.
Below EBIT impairment i }ehind plan driven by lower capex in Front Office which is sem] behind, NTP which
ia}behind, EUC which “ibehind and replacement capex which is [===!behind. Exceptionals are
overspent, driven primarily by postmasters' compensation, onerous leases and redundancy costs.
YTD vs. PY_
EBITDAS is I
{favourable to last year.
Net income is £3.9m favourable with this time last year (excluding NSP). Telecoms is £5.4m favourable due to the
price increase, Financial Services is £5.5m favourable driven by Insurance, Savings and MoneyGram. Mails is
£(3.9)m adverse driven primarily by the reduced fixed fee from Royal Mail and lower lottery income. Supply Chain is,
£(1.9)m adverse driven by lower warehousing income and lower High Value Mails income from Royal Mail.
Government Services is £(1.4)m adverse due to DVLA income.
Total expenditure is £30.7m favourable consisting of staff costs £9.2m favourable due to lower headcount,
postmasters’ costs £19.3m favourable due primarily to NT impact, non staff costs are £(3.8)m adverse due primarily
to higher IT cost, partially offset by reduced Property and Branding costs. Project costs are £6.0m favourable
reflecting spend management.
Below EBIT higher exceptionals due to higher postmasters' compensation in 2015-16 and lower government grant
if}in line with the Funding Agreement.
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Income: Budget vs. Actual
47
Em —=I Ges
(7.2)
@8) (2.7)
2015-16 YTD Net Mails & Retall Financial Services Government ‘Telecoms Omer 2015-16 YTD Net
Income Budget ‘Services Income Actual
Key/Bonus Scorecard Metrics
Bonus Year to Date
% Act Target
Total Net Income (excl NSP) £m 10% 570.4]. 577.4.
Earnings before ITDA and Subsidy £m IRRELEVANT
Free cashflow £m : (2007 I LZ)
Digital Net Income 10% II 15.2 15.8
Customer Effort 10% II 66% I 64%
Net Promoter score Financial Services 5% 27 25
Engagement Index % (October Pulse) 15% II 60% I 63%
Crown Profit (Loss) £m 10% II (2.6) I (3.7)
NT Branches Transformed In Year 10% 973 1,095
(Scorecard
cashflow
Cashflow is £61m favourable driven by lower levels of cash in cash centres versus budget phasing, [P7 was
£(44)m adverse}.
Digital Net Income
Net income is £(0.6)m adverse driven primarily by Travel Insurance.
Engagement
[Score shown is for pulse completed in October. PY pulse was 59%,
Crown Profit (Loss)
ICrown profit is £1.1m favourable, driven by lower staff and property costs. Crown income is £(0.1)m adverse
Jdriven by FS £(1.9)m below budget partially offset by Mails £0.9m favourable and Government £0.8m
Favourable.
Network Transformation
‘The programme is (122) adverse to Plan, P7 was (74) adverse.
Period 8 Performance Pack - Al Cameron
17th December 2015
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Profit & Loss Statement Period
November 2015
Current Month Prior Year Period
Q2
Em Actual Budget Variance I, 4.07, Variance I Actual Variance
TOTAL GROSS INCOME 76.1 78.7 79.4 G2) 745 16
[Cost of Sales 8.8) (8.8) 8.7) (0.1) 8.2) (0.6)
TOTAL NET INCOME 67.3 69.9 70.7 G4) 66.3 1.0
Staff Costs (18.1) (17.9) (18.9) 0.8 (18.1) (0.1)
Postmaster Costs (32.8) (34.2) (32.9) 0.2 (33.5) 0.7
INon-Staff Costs (22.0) (21.6 (23.1. 12 (12.4) (9.5)
Total Expenditure (pre Project OpEx) (72.8) (73.7) (74.9) 2.1 (64.0) (8.8)
IFRES - Share Of Operating Profits 1,7 15 1.7 0.0 1.4 0.3
IRRELEVANT,
Project OpEx. [0.1 (1.7) 1.5) 1.6 TG?) 1.8
_ __ IRRELEVANT -
[Depreciation (0.0) (0.1) (0.1) 0.0 (0.1) 0.0
Network Payment 10.0 10.0 10.0 0.0 12.4 (2.4)
EBIT pre exceptionals items 6.3 6.0 0.3 5.9 0.4 14.4 (8.4)
interest 0.2 0.0 0.2 0.0 0.4 (0.1)
impairment (13.2) (17.1) (22.5) 9.3 (13.9) 0.8
Exceptionals (incl BT) & Redundancy & Severance Costs (7.4) (8.3) (15.9) 8.5 (6.0) (1.4)
Government Grant Utilisation 0.0 12.5 0.0 0.0 0.0 0.0
Profit/(Loss) On Asset Sale 0.0 (0.0) 0.0 0.0 0.0) 0.0
[Total Profit/ (Loss) Before Tax (4.1) (6.9) (7.1) 2.3) 18.2 (5.2) (8.8)
d vs. Budget
I IRRELEVANT
adverse due to lower Travel Insurance and loss of NS&J income,
adverse due to lower Verify income.
pension rate adjustment.
maintenance and robberies.
Offset by:
offsetting the additional cost of higher Mails.
Eagle.
+ Lower net income of £(2.6)m driven by Financial Services £(1.3)m
Telecoms £(0.6)m adverse due to price increase bill timing, Mails is
£(0.3)m adverse due to lower labels and Government Services £(0.3)m
+ Higher staff costs of £(0.2)m in the month, driven primarily by the
+ Higher non staff costs of £(0.3)m driven by increased property
+ Lower postmaster costs of £1.4m. Fixed lower due to converting
more branches than planned in 14/15, and variable favourable from the
review of postmasters' pay, delay in launching new products, sales mix,
Project costs variance of £1.8m favourable is due to £0.6m lower spend
on Mobile (Wave), £0.7m lower on ‘Invest to Grow’ and £0.3m lower on
Period vs. Forecast
IRRELEVANT I
IRRELEVANT
+ Lower net income of £(3.4)m driven by Financial Services £(0.9)m adverse due to lower Travel
Insurance, Telecoms £(0.8)m adverse due to price increase bill timing, Mails £(1.8)m adverse due to
lower Lottery, Retail and Labels and Government Services £(0.3)m adverse due to lower passport ‘Check
& Send’ income
Offset by:
+ Lower staff costs of £0.8m in the month, driven primarily by the Q2 forecast for pensions being much
higher (FY Budget £7.0m and FYF £13.7m). The period forecast is therefore higher but the actuals are
now coming in lower than Q2 forecast and the year end position is also now expected to be below the Q2
forecast.
+ Lower non staff costs of £1.2m driven by £1.0m in POMS, reflecting capitalisation of costs; closure of
POs; and change in accounting treatment for the Junction contract (offset in income). The FY forecast is,
unchanged. £1.3m VAT rebate for Q2. This is reflected in the FY forecast, but phased incorrectly. £0.4m
lower Marketing spend, as full year plans are under review but FY forecast is still held
Offset by:£(1.7)m within IT & Operations driven by Desktop Services (related to EUC delay); Horizon
Terminal Services (timing related to RPI adjustment); and Website maintenance (timing of spend).
£(0.2)m within Property, relating to timing of planned maintenance spend.
+ Lower postmaster costs of £0.2m. These are close to budget.
Project costs variance of £1.6m favourable due to lower spend on Mobile (Wave), on "Invest to Grow’
and Eagle.
IRRELEVANT
Period 8 Performance Pack - Al Cameron
17th December 2015
Page 4 of 22
Profit & Loss Statement YTD Strictly Confidential
November 2015
YTD Prior Year Full Year Prior Year
lem Actual Budget —_Variance Q2 Variance I Actual Variance Q2 Budget VarianceI Actual
Forecast Forecast
TOTAL GROSS INCOME 642.6 649.9 644.7 (2-4) 638.2 979.0 986.4 975.9
[Cost of Sales (72.3) (72.5) (72.2) 0.1) (71.8) 109.1) 111.5 (105.9)
TOTAL NET INCOME 570.4 577.4 572.5 (2.2) 566.4 869.9 874.8 870.0
Staff Costs (154.8) (153.0) (155.6) 0.8 (164.0) (232.4) (226.4) (234.0)
Postmaster Costs (276.5) (285.3) (276.6) 0.2 (295.7) (415.2) (429.0) (434.9)
INon-Staff Costs (187.2) (185.9) (185.8) (1.5) (183.4) (275.9) (270.9) (273.3)
Total Expenditure (pre Project OpEx) (618.5) (624.2) (618.0) (0.5) (643.2) (923.5) (926.4) (942.2)
FRES.- Share Of Operatina Profits 27.8 29.3 27.9 (9.0) 28.0 36.0 36.4 35.8
IRRELEVANT
Project OpEX I cra) (i7y (1-07 igs 2) aaa is sy 19-3) aT i
a IRRELEVANT.
Depreciation (0.3) (0.4) (0.3) 0.1 (0.3) (0.5) (0.6) (0.4)
Network Payment 87.5 87.5 87.5 0.0 ion? 130.0 130.0 160.0
TRRELEVANT
interest 28 (2-0) 2.7 0.1 3.9 (4.0) 49
Impairment (67.7) (132.3) (100.0) 32.3 on. 3) (202.4) (230.2) (147.0)
lExceptionals (incl BT) & Redundancy & Severance (178.7) (128.6) (188.6) 15.0 (124.4) (393.0) (207.3) (257.4)
Government Grant Utilisation 150.0 100.0 150.0 0.0 170.0 150.0 150.0 170.0
Profit/(Loss) On Asset Sale 0.0 (0.0) 0.0 0.0 (0.0) 0.0 (0.0) 0.3
[Total Profit/ (Loss) Before Tax (5.9) (405.0) (77.4) 46. (2:3) (34.6) I (46.4) (496.6) _(149.8) I" (90.2)
(v1> vs. Budget
IRRELEVANT
+ Lower net income of £(7.0)m driven by Financial Services £(7.2)m adverse, Telecoms £(2.8)m adverse, Supply Chain
£(3.5)m adverse partially offset by Mails £4.7m favourable and Government Services £1.0m favourable.
+ Higher staff costs of £(1.8)m due primarily to a pension rate adjustment, reflecting year end market conditions (not
budgeted)
+ Higher Non staff costs of £(1.4)m driven by higher finance costs of £(4.2)m; [£(1.8)m card transaction costs and £(1.2)m
FX losses], higher property maintenance costs £(1.2)m and unbudgeted Mails Segregation penalty accrual of £(3.0)m, offset
by one off £3.7m relating to Fujitsu Telecoms compensation, Brand and Marketing £2.5m favourable savings and timing and
Vehicles £1.2m favourable (driven by fuel, breakdown and lease savings).
Offset by:
+ Lower postmaster costs of £8.8m favourable, due to fixed pay savings as a result of converting more branches through
NTP in 2014-15, variable costs as a result of Mains conversions, product mix and timing.
+ Project costs £2.5m favourable due to lower than budgeted ‘Invest to Grow’ spend, which is £3.1m behind plan, offset by
higher than budgeted spend for Eagle, Invest to Grow, FS and Transform the Organisation. This is mostly timing.
IRRELEVANT
7
~
(v1D vs. Forecast
IRRELEVANT
+ Lower net income of £(2.2)m driven by Financial Services £(0.1)m adverse,
Telecoms £(0.5)m adverse, Mails £(1.6)m adverse and Government Services
£(0.1)m adverse.
+ Higher Non staff costs of £(1.5)m driven primarily by software licenses:
£(0.9)m adverse - Timing of licenses earlier than planned in the year, further
risk of c£500k if additional licences cannot be negotiated down. Desktop
Services: £(0.4)m adverse - Overspend is due to the delays incurred moving
towards the EUC towers and separation from Royal Mail. Discussions are
currently underway regarding credit notes due from Computacenter.
Offset by:
+ Lower staff costs of £0.8m. This variance is driven by the Q2 forecast for
pensions being much higher (FY Budget £7.0m and FYF £13.7m). The period
forecast is therefore higher but the actuals are now coming in lower than forecast
and the year end position is expected to be below the Q2 forecast.
+ Lower postmaster costs of £0.2m, which is 0.5% of the cost.
+ Project costs £1.8m favourable due to lower than budgeted Invest to Grow’
spend, offset by higher than budgeted spend for Eagle, Invest to Grow FS and
transform the O1 ion. This is mostly ti elated,
IRRELEVANT
Period 8 Performance Pack - Al Cameron 17th December 2015
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Crown Profit & Loss Statement
November 2015
Strictly Confidential
Period Prior Year Period YTD Prior Year YTD _ I Full YearI Prior Year
£m Actual Budget var. I Actual var. I Actual Budget var. I Actual var. I Budget I Actual
Income and Distributions
Variable income
- Mails 3.3 28 0.5 3.0 0.3 22.1 214 0.9 23.2 (1.4) 32.4 35.7
- Financial Services 23 25 (0.2) 23 0.0 20.5 22.4 (1.9) I 21.6 (1.1) 32.3 30.8
- Government Services 18 14 0.4 14 0.4 14.5 13.7 0.8 14.0 0.5 19.8 20.4
- Telecoms O14 0.1 0.0 O14 0.0 0.7 0.6 0.1 0.6 0.0 0.9 0.9
Fixed income 15 15 (0.0) 1.8 (0.3) I 13.0 13.2 (0.2) I 15.1 (2.0) 19.8 23.4
Gamma/ Other 0.6 0.7 (0.2) 0.7 (0.1) 5.1 5.0 0.1 3.7 14 8.2 7.9
Renewals and Retentions 13 15 (0.2) 2.5 (2) I 12.1 12.1 0.0 12.2 (0.1) 18.2 18.1
Total Income including Gamma/other 10.8 10.6 0.2 11.7 (0.9) I 88.0 88.1 (0.1) I 90.4 (2.4) I 131.5 [ 137.2
Branch costs -
- Staff (6.0) (0.2) I (56.6) (58.2) 1.5 (64.4) 7.8 (85.9) I (91.1)
- Property (1.9) (0.0) I (15.9) (16.5) 0.6 (20.4) 4.4 (23.5) I (28.3)
- Other branch costs (0.4) 0.4 (2) (4) .1) I (2.7) 0.5 (2.4) (2.4)
Infrastructure costs (1.9) 0.7 (9.2) (9.4) 0.2 (15.4) 6.2 (13.5) I (17.9)
Allocated central costs 0.2) (1.4) I 14.3) (13.7) (0.6)_I_ 9.1 (5.2) 19.7 (18.8)
Total Expenditure (10.5) (0.5) I (97.3) (98.9) 1.6 [ (111.0) 13.7 [ (145.0) [ (158.5)
IV Share of Profits 0.4 0.0 67 71 (@.3) 7.6 (0.8) 8.6 97
[Statutory PBIT 17 (4) I @6 G7 14 I @34) 105 I (4.9) I G16)
(Summary
Income Month: £0.2m favourable in the month.
i) Mails £0.5m(f) - Strong performances on standard
mails (Labels/Stamp and International), priority services (Special Delivery,
Recorded and International Priority) along with Retail are the main drivers
behind the Mails uplift, (ii) Financial Services £(0.4)m(a) - Travel outturn
broadly on target in month but mortgage sales fell further behind target at
£(0.2)m(a). Whilst the overall savings position reported an on target
performance Premium Bonds reported a shortfall of £(0.1)m(a) as the product
is no longer on sale. (ili) Government Services £0.4m(f) - resulting from
the reporting correction flagged last month.
Fixed income: On target.
Retention income: £(0.2)m(a). This is driven by a shortfall on Homephone
retention, due to a lower than planned customer base and ARPU (Average
Revenue Per User).
Other income: £(0.2)m(a). Impacted the correction on Government Services
variable income, as flagged last month.
Costs Month: £0.2m lower than budget.
Staff costs: £0.2m(f) primarily due to FS/MS staffing levels continuing to run
below the template/budget level.
: £0.1m(F) due to timing of rent reviews against budget, which
as previously flagged have now started to unwind.
Other branch costs: £0.1m(f) due to timing of a journal for Concept Stores.
(Summary
Income YTD: £0.1m lower than budget.
Variable sales income: (i) Mails £0.9m(f) - Strong performances on standard mails (Labels/Stamp and
International), priority services (Special Delivery, Recorded and International Priority) along with Retail are the
main drivers behind the Mails uplift, (ii) Financial Services £(1.9)m(a) - Travel Money and Travel Insurance
are both falling short of target by £(0.3)m whilst the shortfall on Mortgages rises to £(0.6)m(a). The overall
Savings position YTD is no longer benefiting from the Q1 performance uplift on Premium Bonds and is now
£(0.7)m(a) (iii) Government Services £0.8m(f) - Following the correction to the income reporting groups
Government Services are now reporting a favourable position against target £0.8m(F).
Fixed income: Running slightly behind target £(0.2)m(a) as a result of predicted shortfall against Lottery and
POCA interest payments.
Retention income: In line with budget. Higher retention payment for Savings products offsetting a shortfall on
Homephone retention, due to a lower than planned customer base and ARPU (Average Revenue Per User).
Other income: Running just ahead of target £0.1m(f).
Costs YTD: £1.6m lower than budget.
Staff costs: £1.5m(f) primarily due to FS/MS staffing levels continuing to run below the template/budget level.
Bonuses are also below target.
Property costs: £0.6m(f) due to timing of rent reviews which have started to unwind.
Other branch costs: £(0.1)m(a) due to high losses. These are being reviewed and expected to unwind though the
volatile nature of losses means this does remain a risk for the full year.
Infrastructure costs: £0.2m(f) principally due to one-off underspends on Horizon costs as well as a number of
small underspends across Network.
Central Costs: £(0.6)m(a) which aligns to the business position when other upsides in the Crown P&L are taken
into consideration.
Period 8 Performance Pack - Al Cameron
17th December 2015
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Cashflow Analysis
November 2015
Strictly Confidential
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Tex)
YTD Cashflow
“ EB =
(80)
aa
(300)}
(162)
EBITDAS Client & Working _Capital_‘Redundancy, Cashflow Network Govt Funding Free cash
Network Cash Capital Ine expenditure provisions ‘before Payment Mow
and Subsidy
pensions, exceptionals
£m YTD Cashflow Variances
. a = “
28 iF
(69)
‘YTD Budget Operating prof Network Cash Working Captal lent Galances Capi and YTD Actual
Inelnerest tx, Exceptonols
pensions (ainiy Nt)
Network Cash
£m Prior I_Mar-15 YTD
Year I Opening [- Actual_[ Budget var
Retail, Cash Centres 688 546 526 576 50
Bureau 54 64 60 52 (8)
Cheques, debit cards I _143 98 73 133 60
Network Cash
Headroom (£m
Period 8 Performance Pack - Al Cameron
Cashflow YTD Variances
The £280m of government grant was received on 1st April which is the first
payment of the 2013 funding agreement with BIS.
P8 cash outflow of £(20.0)m was £61.2m favourable to budget of £(81.2)m
outflow. P7 was £(44.1)m adverse.
+ Network Cash was £102m favourable. Within this variance cheque and debit
card balances were £60m favourable (mainly NS&I impact partially offset by
adverse client balances below) and so the underlying cash in Network was
£42m higher than expected in P8. This is due to winter fuel payments being
paid earlier than expected which has a material impact particularly on
branch holdings.
* Capital expenditure was £64m favourable due to underspends and
exceptionals are £(23)m adverse because NT spend is ahead of budget.
Offset by,
* Client balances were £(69)m adverse to budget with £60m due to the
cessation of NS&I products through the Post Office from 1st August and
there will be an adverse full year impact. (This is partially offset by
favourable cheque and debit card variance within Network cash noted
above).
* Working capital was £(21)m adverse due mainly to lower creditors reflecting
lagging transformational activity and lower capital spend than planned. (This
is mostly driven by the lower capital expenditure variance above).
Cashflow P7 to P&
P7 was £(44)m adverse to budget, P8 is £61m.
favourable, a favourable movement of £105m.
By far the biggest reason for this is Network
Cash which was £5m favourable to budget at
P7 and is £102m favourable at P8, a movement.
of £97m towards the overall total. The two
factors behind this are, firstly, machine issues
in P7, which meant less cash could be
demonetarised, were resolved and, secondly,
winter fuel payments in period 8 were made
earlier than expected. Bureau cash is a further
£10m reduced from last month due to
increased management focus on holdings.
Among other categories, working capital
improved by £41m over P8 although remains
adverse to budget; the improvement coming
through lower accrued income and higher
accruals generally. This was offset by a
worsening Client position - £29m adverse in the
month - as the DVLA and Payout creditor
balances have reduced (as expected) due to the
timing of period end.
YTD
Full Year
£m Actual Budget Variance
Forecast
Budget
EBIT
Working Capital
[Client Balances
Network Cash
ICapital Expenditure
lGovernment funding
Exceptional Items
lOther (including interest and tax)
[Operating Cashflow
IRRELEVANT
17th December 2015
Page 7 of 22
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Business Scorecard Strictly Confidential ®
November 2015
. Current Month YTD YTD Full Year I 2914-15
Key Performance Indicators Act Target var. I Act Target var. IPrior YearI Target I Outturn
Growth
Total Net Income (excl NSP) £m (Bonus 10%) 67.3 69.9 570.4 566.4 875.0 870.0
Operating profit £m 6.3 6.0 57.7 43.4 95.0 100.0 .
Earnings before ITDA and Subsidy £m* (Bonus 30%) { i
Free cashflow £m 106.7 1.3 (20.0) (221-4) I (344.6) I
Digital Net Income (measured using Credence) (Bonus 10%) 2.0 1.3 15.2 N/A 21.5 15.2
Customer
ICustomer Satisfaction 89.0% 88.0% 88.0% 88.0% 86.8% 88.0% 87.6%
Customer Effort (Bonus 10%) 69% 66% 66% 64% N/A 64% 63%
Net Promoter score Financial Services (Bonus 5%) 30 25 27 25 N/A 25 N/A
Net Promoter score 64 60 63 57 N/A 57 N/A
Queue time % < 5 minutes - Top 1k branches 81.0% 82.0% 80.0% 78.1% 77.8% 78.0% 76.4%
Branch Compliance - Financial Services - basket of 11 measures 20 <=50 28 <=50 N/A <=50 62
People
Engagement Index % (Once a year April) (Bonus 15%)** (P) 60% 63% 58% 63% 62%
Subpostmaster Engagement Index % (Once a year)** Same as YTD 46% 48% 47% 48% 46%
New Starter Turnover 26.5% 23.0% N/A 23% 26.7%
Representation (Senior Managers) - Gender 35.4% 36.0% N/A 36% 35.6%
Representation (Senior Managers) - Ethnicity 7.5% 6.0% N/A 6% 4.8%
Modernisation
Number of branches (one month in arrears) Same as YTD 11,558 11,500 - >=11,500] 11,634
Crown Profit (Loss) £m (Bonus 10%) 0.3 (0.2) (2.6) (3.7) (13.1) (4.9) (11.6)
NT Branches Transformed In Year (Bonus 10%) 98 146 973 1,095 1,480 1,850 2,039
Bonus worthy metrics
* ITDA Interest, Tax, Depreciation, Amortisation.
** Measured annually with some additional 'Pulse surveys’.
(P) October Pulse Survey Result
5% Tolerance for amber.
Period 8 Performance Pack - Al Cameron 17th December 2015 Page 8 of 22
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Strictly Confidential ®
Appendices
Period 8 Performance Pack - Al Cameron 17th December 2015 Page 9 of 22
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Strictly Confidential ®
Income Report
Period 8 Performance Pack - Al Cameron 17th December 2015 Page 10 of 22
Net Income By Pillar vs
November 2015
Budget YTD
Strictly Confidential
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Period Prior Year Period YTD Prior Year Full Year Prior Year
Actual Budget — Var. ka var. I Actual Var. I Actual Budget Var. a2 var. I Actual — Var. Q2 , Budget Var. I Outturn var.
Net Income (£m) I Forecast a - + I Forecast «I Forecast a :
Mails & Retail 305 308 (03) I 323 (18) I 315 (09) I 2453 2406 47 I 2468 (16) I 2492 (3.9) 379.2 3702 9.0 I 3835 (43)
Financial Services 23.1 24.4 © (1.3) I 24.0 (0.9) I 21.6 1s I 200.4 2076 (7.2) I 2005 (0.1) I 1949 55 302.3 312.6 (10.3) I 289.3 © 12.9
IGovernment Services 68 7a (0.3) I 74 0.3) I 74 (0.2) I 673 66.3 1.0 674 = (0.1) I 68.6 (1.4) 98.8 98.6 0.2 I 1130 © (14.1)
[Telecoms 39 45 (06) I 46 (08) I 3.2 07 345 37:3 (2.8) I 35.0 (0.5) I 29.4 5.4 55.0 559 (0.9) I 47.2 78
lother 3.0 3.1 0.1 27 0.3 3.0 0.0 229 25.6 2.7 22.8 o.1 24.5 1.7) 34.8 37.5 2.7, 37.0 2.2
TOTAL NET INCOME
870.1
IFRES - Share Of Operating Profits 1.5
0.0) 36.0
35.8
Mails & Retail Services
0.9 0.9 07
2015-16 YTD. RM Signed
Net Income
Budget
Home
‘shopping
Returns
Other Mails Special
very
PEW Labels (1st 8 2015-16 YTD.
2nd Class) Net Income
‘Actual
Financial Services
(0.3)
2015.18 YTD. MoneyGram ATMS
(0.4) (0.5) (0.5) (1.0) (1.0)
(5.4)
‘ong
‘Insurance (net 2015-16 YTD
‘rave Honey Fons)
Government Services
05 ot
(0.1)
2015-16 YTD Net
Tacome Budget
corner
Services
AEL(DVIA & Check and Send Motoring Services2015-16 YTD Net
wea Kea) u
Em
2015-16 YTD Net Income
Buaget
Telecoms
0.2
(a)
other Telecoms
HomePhone/Dval & broadband 2015-16 YTD Net Income
Mails & Retail Services - £4.7m Fav
Special Delivery £0.7m fav due to increased
volumes.
HSR £0.9m fav due to higher volumes.
RM Signed For £1.1m fav due to higher
volumes.
Other Mails £0.9m fav. This is driven by back
billing Certificate of Posting income.
Retail & Lottery - flat with budget.
Financial Services - £(7.2)m Adv
Insurance (incl POMS) £(5.4)m adv due to
lower travel insurance volumes.
Bureau & TravelMoney Card €(1.0)m adv
due to lower bureau volumes.
Offset by:
MoneyGram £1.7m fav due to higher
volumes.
Government Services - £1.0m Fav
ID Assurance (ID Verify) & Verification
£0.5m fav due to higher ID Verify volumes
than budgeted.
‘Other £0.8m fav due to Rod & Game licences
and other ID services.
Telecoms - £(2.8)m Adv
Homephone £(3.1)m adv due to lower ARPU
and timing of bills with increased charges,
Other - £(2.7)m Adv due to Supply Chain
challenging growth target now at risk.
FRES Profit Share - £(1.4)m Adv due to
timing. This is expected to be close to budget
at year end.
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17th December 2015
Page 11 of 22
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Strictly Confidential
@
Cost Report
Period 8 Performance Pack - Al Cameron 17th December 2015 Page 12 of 22
Staff Cost By Function
November 2015
Strictly Confidential
Period Prior Year YTD Prior Year Full Year Prior Year Headcount
[staff Cost by Function ém ‘Actual Budget Var. I, o22,<, Var. I Actual var. I Actual Budget var. I,,2., var. I Actual var. I,,02., Budget var. I outturn o% I Actual
entrar ao Gt 01] aa o4I or Od] O8 68) Go I O3) 5) I 9) Oo) I (50) (28 (22 I OD 0% 3
Commercial (0.7) (06) (0.1) I (0.7) 04 I (0.7) 01 I (51) (5.2) on I 5.2) (0.0) I 0) ©. I (7.9) 7-9) I (8.4) 2% 104
People & Engagement (0.6) (0.5) (0.1) I (0.6) (0.0) I (0.6) 0.0 I (4.3) 4.) (0.2) I 4.3). I (4.5) 0.2 I 6.6) (6.1) (0.5) I (6.3) 2% I 104
IHR - Centrally Held Bonus Payments a2) 4.2) 00 I 2) 00 I @9) @.2)I 2) 2) 00 I @2) 00 I (5) 7) I 038) (3.8) 00 (7.2) - -
Finance (4.2) (4.2) (0.0) I (4.2) (0.0) I (4.8) 0.6 I (38.3) (38.2) (0.1) I (38.3) (0.1) I (42.3) 3.9. I (54.7) (55.0) 0.3 I (62.2) 22% I 1,456
‘Supply Chain (4.0) (4.0) (0.1) I (4.0) (0.0) I (4.3) 0.3 I (36.1) (36.0) (0.0) I (36.2) 0.1 I (38.3) 22 I (51.9) (52.0) 0.1 I (56.6) 21% I 1,393
Finance (central and Procurement) (02) (0.3) 0.2 I (0.2) (0.0) I (0.5) 03} (23) (2.2) (0.1) I (24) (0.2) I (4.0) 47 I (29) (3.0) 0.2 I (5.7) 1% 63
Property (1) (0.1) 0.0 I (0.1) 0.0 I (0.2) o1 I (10) (0.7) (0.2) I (09) (oo) I 8) 09 J 3 ay 2] 27 0% 27
Service Centres (9) (0.9) (.0)I (0.9) 0.1) I (2.0) 04 I (7.7) 4) (0.2) I 7-6). I BS) 88 I Gt) Gta) 0.0 I (12.7) 4% I 201
TT& Operations 5) (0.4) 1) I (05) (0.0)} 5) (o] 5) G7) o4 I G7) of I Ge of I G7 5) C2] 63) 2% I 103
Financial Services (0.3) (0.3) (.0)I (0.4) 0.1 I (0.3) (0.0)] (28) (26) 2) I (29) 0.0 I (24) oa) I 4) = 39) 5) I 3.6) 1% 62
POMS (0.2) 3) 01 I (2) 06 I oo 0.2)I (5s) (os) 03 I 6) o1 I oo cos) J as) 9) 04 I (0.0) 0%
Network (7) 7-5) (0.2)I (7:9) 02 I (7.5) (0.2)I (65.0) (65.4) (0.6) I (66.7) 0.8 I (73:4) 7.4 I (99.8) (96.9) (2.9) I (105.5) 56% I 3,704
Crowns (6.3) (6.3) (0.0) I (6.4) 0.1 I (6.0) (0.3) I (55.5) (56.3) 0.7 I (56.0) 0.5 I (63.9) 84 I (83.3) (83.1) (0.2) I_ (91.4) 49% I 3,228
Other Network aa 4.2) (02)I a5) 04 I 5) 012 I G04) (9.1) 4.3) I 40.7) 0.3 I (94) 4.3) I 465) 03.8) (2.7) I (24.1) 7% I 476
IcrP and wTP Heads (Costs in exceptionals) 10% I 659
corporate Services (os) (0.5) 0.0 I (0.6) 0.1 I (0.6) 01 I 43) (45) of 4.5) 0.2 I (46) «0.3 I G8) (6H) (0.2) I (6.9) 1% 88
[Transformation (Change Management) 0.2) (0.3) 01 I 03) 01 I 03) 01 I 2) 25 0.4 25) 03 I 29 0.7 37) 37, - 4.) 1% 36
[Total Staff Costs (48.1) 47.9) (0.2)I (48.9) 0.8 I(48.1) (0.0)I (454.8) (453.0) (4.8) I(155.6) 0.8 [(164.0) 9.2 I (232.4) (226.4) (6.0) I (234.0) I I 95% I 6637
FY Actual] 7,192
PY Variance 555
YTD vs. Budget are £(1.8)m adverse.
This variance is driven by the unbudgeted £(3.5)m adverse variance for the
pension rate, reflecting year end market conditions, partially offset by lower
staff costs due to lower headcount, specifically Financial Specialists and
Mortgage Specialist churn,
YTD vs Forecast are £0.8m favourable.
‘This variance is driven primarily by the Q2 forecast for pensions being much higher (FY
Budget £7.0m and FYF £13.7m). The period forecast is therefore higher but the actuals are
now coming in lower than Q2 forecast and the year end position is also now expected to be
below the Q2 forecast.
YTD Vs. Prior Year
The staff costs are £9.2m favourable to prior year driven by the lower
headcount (555 lower), specifically in the Network.
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17th December 2015
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Non Staff Cost by Type
November 2015
Strictly Confidential
Period Prior Year ID Prior Year Full Year
Q2 Q2 Qz
Non- Staff Cost by Function em I Actual Budget var. I-,22,.. var. [outtun var. I Actuat Budget var. I,,2%., var. [outtun var. I 2%, pudget var.
[Central - Centrally Held 1.3 (0.5) 1.8 (0.3) 1.6 6.1 (4.8) (1.3) (1.2) (0.2) (2.1) 0.8 5.6 (7.0) (4.1) (3.1) (1.0)
iCommercial (3.0) (2.4) (0.6) (2.7) (0.3) (5.3) 2.3 (18.9) (19.0) 0.2 (17.3) (1.5) (26.4) 75 (25.6) (25.3) (0.3)
Finance (1.5) (1.3) (0.2) (1.5) 0.0 (4.9) 3.4 (12.2) (13.1) 0.9 (12.5) 0.3 (14.5) 2.3 (18.7) (18.6) (0.1)
Supply Chain (1.3) (2.0) (0.3) (1.2) (0.1) I (1.3) 0.1 (10.3) (10.6) 0.3 (10.2) (0.1) (42.1) 1.8 (15.0) (14.9) (0.1)
Finance (central and Procurement) (0.2) (0.3) On (0.3) 0.1 (3.5) 3.3 (1.9) (2.5) 0.6 (2.4) 0.4 (2.4) 0.5 (3.7) (3.7) 0.0
Property (4.6) (3.9) (0.7) (4.4) (0.2) (2.7) (1.9) (37.4) (35.7) (1.8) (37.3) (0.1) (22.0) (15.4) (55.4) (82.1) (3.2)
Service Centres (1.0) (0.8) (0.2) (1.0) 0.0 Li (2.1) (9.1) (7.4) (1.8) (9.4) 0.3 (8.3) (0.9) (14,3) (11.3) (3.0)
Financial Services (0.1) (0.5) 0.4 (0.3) 0.2 (0.6) 0.5 (2.3) (4.4) 21 (2.6) 0.3 (5.8) 3.5 (3.5) (6.5) 3.1
POMS (0.4) (1.4) 1.0 (1.4) 1.0 0.0 (0.4) (5.2) (5.8) 0.7 (6.5) 1.3 0.0 (5.2) (12.1) (10.9) (1.2)
People & Engagement (0.4) (0.7) 0.3 (0.5) 0.2 (0.5) On (6.0) (6.3) 0.3 (6.1) 0.2 (8.4) 25 (8.4) (9.0) 0.6
ICorporate Services (0.6) (0.5) (0.1) (0.6) (0.0) I (0.3) (0.3) (5.0) (4.3) (0.7) (4.3) (0.7) (2.9) (2.1) (7.0) (6.5) (0.4)
[Network (0.8) (0.6) (0.2) (0.8) (0.0) 0.3 (1.1) (6.9) (6.6) (0.4) (6.6) (0.3) (24.4) 17.5 (9.5) (9.2) (0.3)
Crowns (0.1) (0.2) 0.0 (0.2) 0.0 (1.3) 12 (1.7) (1.5) (0.1) (1.7) 0.0 (21.3) 19.6 (2.0) (2.3) 0.3
Other Network (0.6) (0.4) (0.2) (0.6) (0.0) 17 (2.3) (5.3) (5.1) (0.2) (4.9) (0.3) (3.1) (2.2) (7.5) (6.9) (0.5)
jrensormation (Change Menagement) I ‘00 03 o2)I 03 (03) 09 I 21 27 (0s) I 2@ 2) 22 wyI 39 ao (ox
central Other ae 90 os I os I 21 5) I 9) os) I ooo») I 46 (35 I a0 0000
[Total Non Staff Costs (22.0) (21.6) __(0.3)} (23.1) 4.2 I (12.4) (9.5) ] (187.2) (185.9) (1.4) I (185.8) (1.5) I (183.4) (3.8) ] (275.9) (270.9) (5.0)
Period Prior Year ric) Prior Year Fall Your
on- Stat cost by Type ém Actual Budget var. I_,92,,, var. foutturn var. I Actual sudget var. [292 , var. [outtun var. I ,,22., Budget var.
Staff & Agent Related Costs (0.7) (0.9) 0.2 (1.0) 0.2 (0.6) (0.1) (7.8) (8.0) 0.2 (7.7) (0.1) (7A) (0.7) (11.2) (12.0) 0.8
[Brand & Marketing (1.7) (3.3) 1S (2.1) 0.4 (5.5) 3.8 (17.5) (21.5) 4.0 (16.9) (0.5) (22.8) 5.3 (24.1) (30.6) 6.4
Consultancy & Advisory Services (0.1) (0.1) (0.1) (0.1) (0.0) 09 (1.0) 0.0 (1.1) 1a (0.1) 0.2 1a. (1.1) (0.6) (1.2) 0.7
Sls Grovp ohorge toy 03s fo) os to} 03 te sy as So} 30 G8)
Consutoney and Sts Group (00) 3) oo a] ws =a) By el te
Legal Costs (0.0) (0.2) 0.2 (0.3) 0.3 (0.2) 0.2 (1.6) (1.8) 0.2 (1.8) On (1.1) (0.5) (3.3) (2.6) (0.7)
Property & Facilities Management (4.7) (4.1) (0.5) (4.9) 0.2 (3.4) (1.3) I (36.9) (35.8) (1.0) (37.3) 0.4 (40.9) 4.0 (57.9) (53.1) (4.7)
Vehicles (0.4) (0.6) 0.2 (0.5) On (0.6) 0.2 (3.7) (4.8) 1.2 (3.8) 0.2 (4.6) 0.9 (6.0) (7.2) 1.2
iT Infrastructure & IT Services (8.9) (8.4) (0.6) I (8.6) (0.3) } (6.6) (2.3) I (69.5) (73.0) 3.5 (69.4) (0.1) I (59.9) (9.6) I (103.8) (106.0) 21
other Operating Costs G3 fa) om] GS oH] as Gal Gea doo Se I Ga Go I es Seo] tos) Gee Sa
[Non Staff Cost Efficiency Target 0.0 1.6 (1.6) oO 0.0 0.0 0.0 0.0 10.0 (10.0) oO 0.0 0.0 0.0 oO 16.6 (16.6)
[Total Non Staff Costs (22.0) (21.6) __(0.3)] (23.1) __1.2_I (12.4) _(9.5)] (187.2) (185.9) __(1.4)_I (185.8) _(1.5) I(183.4) (3.8) I (275.9) _(270.9) __(5.0)
Period vs. Budget
Period vs. Forecast
Period Vs. Prior Year
costs this year.
Non staff costs are £(0.3)m adverse to budget (including a £1.6m efficiency target).
‘The adverse variance is driven by higher IT costs £(0.6)m, higher property costs £(0.5)m for maintenance
costs and unbudgeted Mails Segregation penalty accrual of £(0.3)m, offset by lower finance costs £1.2m
due to the quarterly VAT rebate, Brand and Marketing £1.5m favourable and Vehicles £0.2m favourable.
Non staff costs are £1.1m favourable to forecast. The variance is driven by lower finance costs £1.0m due
to the quarterly VAT rebate, Brand and Marketing £0.4m favourable due to savings drive and Legal costs
£0.3m favourable due to timing, partially offset by higher IT costs £(0.4)m due to software licences, higher
property costs £(0.2)m for maintenance costs.
Higher non staff costs of £9.5m driven primarily by the £11m higher VAT rebate last year and higher IT
YTD vs. Budget
Non staff costs are £(1.4)m adverse to budget (including a £10.0m efficiency target).
The adverse variance is driven by higher finance costs £(1.8)m card transaction costs and £(1.2)m
FX losses, higher property costs £(1.0)m for maintenance costs and unbudgeted Mails Segregation
penalty accrual of £(2.9)m, offset by one off £3.7m relating to Fujitsu Telecoms compensation, Brand
and Marketing £4.0m favourable savings and timing and Vehicles £1.2m favourable (driven by fuel,
breakdown and lease savings).
YTD vs. Forecast
Non staff costs are £(1.5)m adverse due primarily to IT costs, partially offset by £1.5m lower finance
costs driven by the timing of the quarterly VAT rebate.
YTD Prior Year
Higher non staff costs of £3.8m driven primarily by higher IT costs and also higher finance costs as a
result of higher FX losses and card transaction fees.
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17th December 2015
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Transformation Report
Period 8 Performance Pack - Al Cameron 17th December 2015 Page 15 of 22
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Project Costs (OpEx) Strictly Confidential ®
November 2015
£m Current Month YTD Full Year
TFCG
OpEx IThemes Programmes Actual Budget Var. I Actual Budget Var. I Outlook Budget 4 roved
Other Flow Through O41 0.0 0.1 0.3 0.0 0.3 (0.2) 0.0 0.0
Sparrow (0.4) (0.3) (0.2) (1.9) (2.2) 0.3 (3.3) (3.3) 0.0
Reduce & Variablise Networ NTP (0.0) 0.0 (0.0) (0.0) 0.0 (0.0) 0.0 0.0 0.0
Other R&V (0.0) 0.0 (0.0) (0.2) 0.0 (0.2) (0.1) 0.0 0.0
Commercial Customer Management Programme] 0.0 0.0 0.0 (0.0) 0.0 (0.0) (0.3) 0.0 (0.3)
Digital (0.0) (0.0) 0.0 (0.2) (0.2) (0.1) (1.7) (0.2) (0.6)
Mobile (Wave) 0.4 (0.2) 0.6 (1.0) (1.3) 0.3 (2.1) (1.9) (0.5)
Other Invest to Grow (0.1) (0.5) 0.4 (0.8) (4.3) 3.5 (3.4) (6.2) (2.7)
POCA (Maypole / Iliad) (0.1) (0.1) (0.1) (0.7) (0.4) (0.3) (1.5) (0.6) (0.8)
Reduce Central Costs Other Central Costs O41 0.0 0.1 (0.4) 0.0 (0.4) (0.4) 0.0 (0.4)
Project IRIS (0.0) 0.0 (0.0) (0.1) 0.0 (0.1) 0.0 0.0 (1.4)
Grow Financial Services _IEagle (0.0) (0.4) 0.3 (2.1) (1.9) (0.2) (2.5) (4.0) (2.3)
Hawk 0.2 0.0 0.2 0.4 0.0 0.4 0.0 0.0 (0.7)
Invest to Grow FS. 0.0 (0.3) 0.3 (1.6) (1.4) (0.1) (1.5) (3.0) (3.0)
Replacement CapEx IT Risk & Resilience 0.0 0.0 0.0 0.1 0.0 0.1 0.1 0.0 (0.0)
Property 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Separation 0.0 0.0 0.0 (0.0) 0.0 (0.0) (0.0) 0.0 0.0
Supply Chain vehicles 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0
Transform the Organisation [People & Organisation (0.0) 0.0 (0.0) (0.4) 0.0 (0.4) (0.1) 0.0 (0.8)
Transformation Office 0.0 0.0 0.0 0.1 0.0 O41 0.3 0.0
Opex Total
(9.2) (11.7) 2.5
(17.3)
(19.3) (13.5)
OpEx - £2.5m Under Spend YTD
Headlines:
£3.5m under spend in Commercial Invest to Grow due to transfer
of spend to Capex & Exceptional. This has flowed through to the
FYF.
This is offset by unbudgeted spend;
£0.4m for Reduce Central costs and
£0.4m for Transform the Organisation
OpEx - £2.0m Under Spend FYF vs Budget
Underspends £6m:
£2.9m Invest to Grow - pressure to reduce costs.
£1.5m Invest to Grow FS - pressure to reduce costs.
£1,5m Eagle - moved to capex.
Overspends £4m:
£1.4m Digital - new business case - increased focus on this.
£0.9m POCA - Maypole
£0.4m Other Central - unbudgeted
£0.3m Customer Management - unbudgeted
£0.3m Transformation Office - unbudgeted
£0.2m Flow through - unbudgeted
£0.2m Mobile
£0.3m Others
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17th December 2015
Page 16 of 22
Project Costs (CapEx and Exceptionals)
November 2015
Strictly Confidential
capex
£m Current Month YTD Full Year
TFG
Themes Programmes Actual Budget Var. I Actual Budget Var. [Outlook Budget qyirccgy
lotser Flow Taro a) 00 a) I Of 00 oa I Ga) 00 0.0 ‘Capex - £64.6m Under Spend
Fujitsu extension contingency oo = 00S I 00 SoS J 43.0) YTD (exel Hawk).
lother Replacement Capex 0) 09 (00) I @4 09 (04) I 02) 0.0 (0.3)
Sparrow oo 00 00 I 0) 00 (0.0) I (0.0) 0.0 0.0 Headlines :
Reduce & Variable Network Costs jcrex @s) 00 0.8) I (9) 00 (19) I @5) 00 0.0
crea 1) a0) 08 I 3) 62) 49 I 62) 83) Te eee cn office
Front Office (24) (0.7) (47) I G24) (25.5) 13.1 I (37.9) (39.2) (39.6) and £10.1m due to NTP slippage. £3.0m
NTP (0.9) (2.3) 1.4 (13.8) 23.9) 10.1 (27.3) 37.8) (33.9) ‘over spent in CTP.
[Commercial [Customer Management Programme 0.0 (0.1) On (0.6) (1.3) 0.6 (1.3) (2.3) (1.1)
iota ox» 6 05 I a6 (5) 39 I 6) care —_aay_I I £98 underspend in Commerc
IMobite (Wave) (01) (0.0) (0.1) I (0.7) (0.1) (0.6) I (0.2) (0.2) _~—(0.4)_I I Bigtal sctivites being behind plan,
IOther Invest to Grow (0.1) (0.3) 0.2 (1a) (3.1) 2.0 (3.2) (5.5) (1.8)
Winning in Retail goa) 04) 03 I 4) G8) 34 I 0.0 67) 3.4) _I I £21.1m under spend in Lean IT due to
JLean IT [Back Office (0.0) (1.4) 14 (0.1) (4.7) 46 (10.0) (7.0) (0.9) the implementation of all the Towers
JEUC (1.2) (4.9) 37 (9.3) (20.4) iL (45.6) (39.6) (33.4) being behind plan.
Networks (1) (2.8) 07 (35) (8.9) 54 (8.1) (11,7) (8.2) £9.0m under spend in Replacement
lrpom oo 00 00 I oo 00 00 I 00 0.0 (0.5) __I I Capex £6.6m of which isin Other.
Reduce Central Costs JOther Central Costs. 0.0 0.0 0.0 (0.0) 0.0 (0.0) (2.4) 0.0 (0.7) Property is £4.8m under spent. Partly
Reduce Central Costs oo @2) 02 I 00 4) 14 I 00 @ty 0.0 affe by £2.9m overspend in
IGrow Financial Services Eagle (0.0) 0.0 (0.0) (0.4) 0.0 (0.4) (1.7) 0.0 (0.3)
invest to Grow FS 3) 00 3) I as) 00 as) I a) 0.0 (0.8
Replacement Capex (Including Separation) [IT Risk & Resilience (aa) .1) 3.0) I 48) 3a) (7)-I 33.7) 18.7) —(24.8)
lother Replacement Capex (01) 08) 07 I 4) 7.0) 6.6 I 30) 04) (47)
[Property (0.1) (0.6) 05 (0.3) (5.1) 48 (6.2) (7.5) (0.5)
[Separation (0.3) 0.0 (0.3) (2.9) 0.0 (2.9) (3.1) 0.0 (3.0)
[Supply Chain vehicles 0.0 0.0 0.0 (0.1) (2.2) 2.2 3.5) (7.6) (5.8)
[Transform the Organisation People & Organisation 0.00000 I 00 00 0.0 I (08) 0.0 0.0
Lrransformation Orfice 0.) 0.0 0.0) I 0.0) 0.0.0) I (0.0) 0.0 0.1
‘Capex Total (43.2) (17.1) 3.9 (67.7) (432.3) 64.6 (203.1) (230.2) (172.1)
Exceptionals
£m Current Month YTD Full Year
rinemes Programmes Actual Budget var. I Actual Budget Var. [Outlook Budget TPES I
lomer Flow Thro oo 00 00 I 08 00 08 I (00) 00 0.0 Exceptional - £(50.1)m Over
Reduce & Variablise Network Costs icrer (2) 0.0 (0.2) I (44) 0.0 (44) I (6.2) 0.0 0.0 Spend YTD
creo 01) (09) 07 I (6) (140) 134 I 7) (47.7) (2.5)
Front orice (01) (1) 00 I @9) 6 17 I 00 (40) (0.4) Headlines :
Leo 0) 00 0.0) I 7) 00 6.7) I (60) 0.0 0.0 £(28.4)m over spend in Network as
lyre 8) 45) (0.3) I 420.6) (68.t) 625) I (318.2) 449.8) 54.0) _I I Postmasters! compensation charge is
[Commercat Diana 0000 00 I 00 00 00 I (76) 00 0.0 payments basis
JOther Invest to Grow 0.0 0.0 0.0 (0.9) 0.0 (0.9) (3.0) 0.0 (0.1)
Winning in Retail (0.2) 0.0 (0.2) (1.4) 0.0 (4.4) (5.3) 0.0 0.0 £(6.6)m over spend in Reduce Central
een euc 02 00 02 I (0.0) 0.0 (0.0) } (02) 0.0 0.0 _ I I Costs mally due to the Wave 2
Back Office 0.0) 0.0 (0.0) I (0.0) 0.0 (0.0) 0.0 0.0 0.0 Provisions accounted for.
[rpom cos) (0.2) 0.4) I 27) 08) 9) I 27) a5) (2.9) £(14.0)m of Property related onerous
Reduce Central Costs lotner Central Costs (0.0) 0.0 (0.0) I (48.8) 0.0 (10.8) I (21.2) 0.0 (13.7) I I contracts have been provided for earlier
JProject IRIS 0.0 0.0 0.0 0.0 0.0 0.0 (1.7) 0.0 0.0 ~ at point of decision rather than point
Reduce Central Costs. 0.0 (2.2) 2.2 0.0 12.4) 12.4 0.0 21.7) 0.0 of extt.
IGrow Financial Services JEagle 0.0 0.0 0.0 (0.0) 0.0 (0.0) 0.0 0.0 (0.1)
Haw oo oo oo I a2) oo a2) I a4) 00 0.0
Replacement Capex (Including Separation) Other Replacement Capex (1) 0.0 (0.1) I (02) 0.0 (0.2) I (01) 00 (0.9)
[Separation (0.9) 0.0 (0.9) (6.0) (6.4) 0.4 6.1) (6.4) (3.4)
[Transform the Organisation [People & Organisation 0.0 (0.1) On 0.0 (1.0) 1.0 (1.5) (1.5) (1.8)
[rransformation Orfice oa) 04) 0.0) I 7) G2) es I 4a) 8) 4)
ICentrat Exceptional Adjustments central Exceptional Adjustments 0.2) 0.0 00.9) I 13.3) 33.2) I 0.0 0.0 0.0
(7.4) (8.3) 0.9 (178.7) (128.5) _ (50.1) _ (392.4) _ (207.3) __ (184.3)
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17th December 2015
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Strictly Confidential &
Supplementary Information
Period 8 Performance Pack - Al Cameron 17th December 2015 Page 18 of 22
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Cashflow Statement & Balance Sheet Summary
November 2015
Balance Sheet Cashflow Statement
YTD YTD Full Year
£m Mar-15 Actual Budget Var. £m Actual Budget Var. Forecast Budget Var.
Fixed Assets 76 114 114 0 Operating Profit 57.7 57.8 (0.4) 95.0 95.0 0.0
Debtors 245 167 159 8 [Depreciation (0.3) (0.4) 0.1 (0.5) (0.6) 0.1
Cash 708 659 761 (102) Working Capital 717 92.9 (21.2) 66.4 66.4 0.0
Client Balances (293) (164) (233) 69 Client Balances (129.0) (59.7) (69.3) (27.5) (27.5) 0.0
[Trade Creditors (293) (329) (392) 63 Network Cash 48.9 (53.5) 102.4 (135.9) (135.9) 0.0
Pension (deficit)/surplusI 205 182 208 (26) FRES profit share/ dividend 8.5 7A 1.4 0.0 0.0 0.0
Provisions (63) (120) (54) (66) Capital Expenditure (67.7) (132.2) 64.5 (230.4) (230.4) 0.0
Investments, Funding 120 60 51 9 Government funding 150.0 150.0 0.0 150.0 150.0 0.0
Loan (310) (268 (320 52 INSP in advance 42.5 42.5 0.0 0.0 0.0 0.0
Net Asset: 394 302 295 Exceptional Items (162.4) (139.1) (23.3) (207.2) (207.2) 0.0
Pensions & Other 6.6 0.4 6.2 0.0 0.0 0.0
Reserves Mar-15 I Actual I Budget I Var. Proceeds from asset sales 0.0 0.0 0.0 0.0 0.0 0.0
Capital and Reserves (394) (302) (295) (7) Provision movement 0.0 0.0 0.0 (5.4) (5.4) 0.0
(394) (302) (295) (7) Project Hawk (43.9) _ (45.0) 11 (45.0) (45.0) 0.0
Operating Cashflow (17.4) (79.2) 61.8 (340.5) (340.6) 0.4
Interest (2.6) (2.0) (0.6) (4.0) (4.0) 0.0
Tax 0.0 0.0 0.0 0.0 0.0 0.0
Free Cashflow (20.0) (81.2) 61.2 (344.5) (344.6) 0.1
Cash Management Table
£m Prior YearI Mar-15 YTD
YTD Opening I Actual I Budget I Var. \Cashflow budget
Retail, Cash Centres 688 546 526 576 50 The 2015-16 budget was reviewed at £354m outflow, prior to the 2014-15 year end and
Bureau 54 64 60 52 (8) noting the year end outturn may result in changes being required. The budget of £344m
Cheques, debit cards 143 98 73 133 60 shown in this pack reflects the year end outturn impacts.
Network Cash 659 761
Headroom (£m) 785 594
Period 8 Performance Pack - Al Cameron 17th December 2015 Page 19 of 22
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PoL00237262
Income By Product Groups & Pillar Strictly Confidential .
Gs £1.0m favourable
Prior
Current Month Prior Yes YTD Prior Year Full Year Year
Net Income £m Outturn
Actuals Budget var. I 2,4, var. I period (one I Actual Budget var. Foreast Var I Outturn (rrony) Forcast Budget I it/15
Parcelforce TS L7 ot L7 O14 18 0.0 i336 130 05 13.3 02 13.8 (0.2) 20.6 20.2 214
ISpecial Delivery 3.9 38 0.0 3.9 (0.1) 39 (0.1) 331 324 07 33.3 (0.1) I 33.0 0.2 50.4 49.2 50.1
International Priority & Standard 27 2.9 (0.2) 2.9 (0.2) 3.0 (0.3) 19.6 19.5 O12 19.9 (0.3) 20.6 (1.0) 32.2 31.6 33.2
IStamps (1st & 2nd Class plus other stamps) 2.5 25 (0.0) 25 (0.0) 27 (0.2) 15.3 15.2 On 15.2 O41 16.3 (1.0) 27.0 27.0 28.4
Labels (1st & 2nd Class) 6.9 73 (0.3) 74 (0.4) 7.3 (0.4) 58.0 57.6 04 58.4 (0.3) 57.7 04 88.5, 87.4 87.7
RM Signed For 1.9 17 on 18 0.0 18 0.0 15.0 13.900 1a 15.0 0.0 14.7 0.3 22.3 20.7 22.0
IRM Mail Fixed 3.9 3.9 0.0 3.9 (0.0) 79 (4.0) 34.1 34.1 0.0 34.1 (0.0) 41.9 (7.8) 50.7 50.7 57.1
Retail & Lottery 3.6 3.6 0.0 44 (0.8) 3.4 0.3 28.3 28.2 0.0 28.7 (0.5) 30.0 (1.7) 43.5 43.0 44.0
Home Shopping Returns 0.9 0.8 O41 1.0 (0.0) 0.7 0.2 7S 6.6 0.9 75 0.0 6.0 1S 117 10.2 9.2
Mails Other 2.4 26 (0.2) 2.8 (Ca Me) 3.5 208 19.9 0.9 aus (0.7)_ I 15.3 5.6 32.5 30.3 30.5
[Total Mails & Retail 305 30.8 (O.3) 32.3 (sy 315 (9) 245.3 240.6 a7 246.8 (is) _[ 249.2 (EXD) 379.2 370.2 383.5
JOther Telephony 0.3 0.3 (0.0) 0.3 (0.0) 0.4 (0.1) 27 2.5 0.2 28 (0.0) 3.2 (0.5) 41 3.7 0.0
HomePhone /Dual & Broadband Customers I 3.6 44 (0.6) 43 (0.8) 2.8 0.7 318348 (3.1) I 322 (0.4) _I 25.9 5.9 50.9 52.2 47.2
[Total Telecoms Services EX) 45 (G6) 46 (8) 32 O7 34.5 37.3 (28) 35.0 (0.5) 29.4 54 55.0 55.9 47.2
Motoring Services 0.6 0.5 0.4 0.6 0.7 (0.1) 5.8 6.1 (0.3) 5.8 11.0 (6.2) 0.0 8.3 16.7
ICard Account 4.0 4.0 (0.0) 45 (0.5) 44 (0.4) 33.4 33.5 (0.0) 34.3 (0.9) 34.2 (0.7) S11 49.0 59.8
ICheck and Send 1.0 1.0 (0.0) 1.7 (0.7) 1.0 O1 15.2 15.3 (0.1) 21.6 (6.4) 14.1 1.2 31.9 22.6 22.3
JAEI (DVLA & UKBA) ukbi and dvia Digital 1.0 0.9 on 0.7 0.2 0.6 03 78 77 on 73 os 61 L7 10.6 wa 93
JID - Assurance (Verify) (0.0) 0.2 (0.2) (0.0) 0.0 (0.0) Aa 0.6 05 Aa 0.0 Aa 0.0 24 0.0
IOther Government Services 0.3 0.5 (0.2) On 0.4 (0.1) 3.9 3.1 0.8 41 (0.2) 3.3 0.6 5.2 5.5 4.8
ITotal Government Services. 6.8 FA (0.3) (0.3) 7A (0.2) 67.3 66.3 1.0 67.4 (0.1) 68.6 (1.4) 98.8 98.6 113.0
Bill Payment Services Direct 0.6 08 (0.2) 0.6 0.7 (0.0) 5.2 65 (1.3) 0.6 47 6.3 (a) 0.8 10.0 9.9
Bill Payment Services Reseller 17 17 (0.0) (0.1) 1.9 (0.2) 15.5 14.8 07 15.1 0.3 17.0 (1.5) 22.1 21.2 24.2
Postal Orders 1.6 1.6 (0.0) (0.1) 18 (0.2) 13.4 13.3 On 13.1 0.3 17.5 (4.1) 19.7 19.4 25.7,
Payment Services 1.0 0.6 0.5 05 0.6 0.4 29 2.8 O14 2.6 0.3 2.3 0.7 5.4 5.2 5.9
Personal Banking Clients 25 25 0.0 (0.1) 23 0.2 213° 20.7 06 216 (0.3) I 19.2 24 32.0 30.8 28.7
IDWP Exceptions 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 0.0 (0.0) 0 0.0 0.0
Business Banking 2.2 21 0.1 O12 2.0 0.2 16.5 17.0 (0.5) 16.3 0.2 17.7 (1.4) 23.8 24.6 25.5
IATM 2.6 2.8 (0.2) (0.2) 2.5 0.0 23.4 23.7 (0.3) 23.6 (0.2) 34.7 34.8 33.2
PFS-Savings 46 46 (0.0) 0.0 4.2 0.4 36.6 36.6 0.0 36.5 O14 55.0 55.2 51.0
Insurance (incl POMS) 1.8 2.6 (0.8) (0.9) La 07 19.1 24.5 (5.4) 20.5 (1.4) 34.2 37.1 19.5
PFS-Lending 1.0 1.0 (0.0) 0.0 0.5 0.5 6.6 2a (0.5) 6.4 0.2 11.2 11.2 9.3
Bureau & Travel Money Card 15 1s (0.0) O01 15 0.0 17.3 18.3 (1.0) 17 0.2 23.2 24.9 25.1
MoneyGram 19 1.87 Oo. (0.3) 1.8 0.2 17.8 16.2 1.7 17.6 0.2 26.9 24.0 22.6
sea 0 0.7 (0.2) 0 o 0.7 (0.7) 45° 5.5 (1.0) 45 0 5 45 8.2 85
IOther 0.1 0.1 0.0 0.7 (0.7) 0.0 0.1 O01 0.5 (0.4) 5.0 (4.9) .. 8.6 5.9 O01
[Total Financial Service: 23.1 24.4 (a3) 24.0 (os) 21.6 15 200.4 207.6 (7.2) 200.5 (0.4) 302:3 ane 289.3
lother Income 0.5 0.3 O.1 0.4 4 0.4 0.0 36 28 0.8 F 0.2 49 42 5.4
[Supply Chain. 2.6 2.8 (0.2) 2.3 0.2 2.6 (0.0) 19.3 22.8 (3.5) (0.1) 29.9 33.4 31.6
Net Income 870.1 874.8
Period 8 Performance Pack - Al Cameron 17th December 2015 Page 20 of 22
POMS P&L
November 2015
Strictly Confidential
Period YTD Full Year
£k Actual Budget Var. Actual Budget Var. Budget
[GROSS INCOME 2,028 2589 (i) 13,456 i7,574 (CRED! 30,189
ICOST OF SALES (252) (252) (539) (539)
INET INCOME 1,776; 2,589 (813) 12,917 17,574 (4,657) 30,189
[Staff costs (213) (273) 60 (521) (783) 263 (4,875)
Staff & Agency Related Costs @) ) (163) (163)
IConsultancy & Advisory Services (6) (11) 5 (60) (87) 27 (130)
Brand & Marketing (108) (733) 624 (1,013) (2,455) 1,442 (4,910)
Legal Costs 184 (12) 196 (357) (252) (105) (280)
Property & Facilities Management 10 10 (9) (9)
IT Infrastructure & IT Services (244) (137) (107) (2,890) (1,937) (953) (2,530)
Finance & Losses (51) (8) (43) (349) (67) (283) (100)
loperating Costs (151) (500) 349 (324) (1,000) 676 (3,000)
Projects
[Total Non Staff costs (366) (400) 1,035 (5,167) (5,798) 631 (20,950)
Linterbusiness Costs (579) (737) 138 (5,804) (5,739) (64) (8,609)
FrOTAL EXPENDITURE (4,158) (2,391) 1,233 (41,491) (42,320) 829 (21,433)
[opeRATING PROFIT 618 199 420 1,427 5,254 (3,827) 8,756 ]
Period vs. Budget
Management accounts prepared ona gross income basis for CarVan/Mome products
lncome is (€813k) adverse in the month due to
1) Travel (£17) adveree - due to lower performance in branchlonine channels (£130k), delayed launch of COW product (40K).
2) Calne (43s are ue ler enendisicae.
5 SOs/Lile (£191k) adverse = due to lower than budgeted sales nthe branch
4} Sot ot Ste 22500 asterse- Bulge classaction vance Bes tuded win Brand & Marking ne whereas Aggepto spend is
posted agains! cost of sales,
+ Statteosts:
Sta costs are favourabein the month by £60k due to lower FTE's (20. 23)
Non staff. costs
Gensal arene au) posucte was alosaada fl earn satan bgt fm arate EIn operat cons 3m) Tibet
held centrally and not allocated to inde
Non Sateoes are £1 095 favourable nthe month de fo
1) Stat & Agency cots in ne wih budget-£2k Travel related costs, €2k Payroll senice provider costs offset by (£4 5k reauitment costs due to
PO closures,
2) Constancy & Advisory Services £5k avourable-£5k correction of aP7 posting for Dalesridge costs
5) Brand & Marketing £624k favourable lower PPC spend £548 £150kreversal of costs allocated to POMS h PT, offset by unphnned Doc &
LLteratue spend (£48k) and database management €25K)
3) Legal £196k favourable = anster fo exceptional costs £132k, Zeus legal costs coptalised £107, offset by unplanned egaeosts (E43)
4) nastuctue & IT Serves (€107K) adverse - due to higher WebHelp contact centre costs (£27), offeet by lower and service costs £52k
(ansterto exceptional) and I integration costs £117 (Gus to closure of POs)
Budget for all Juncton operating cots i eld cntally against Other Operaing costs line whereas Junction contact conte actuals are posted
aganst IT hifastuctur line
5} nance & Lanse (3) adere -urplanesGark Charges (627%) and Cantor Bas Des (150)
) Other operating costs £349K avourable- Budget reclasiication varance. see pole
inferbcerees cons (£244 aders- Upland POL commision n General Isirance products and igher MSA costs
BME ETTOAG teunege Seb fnes Tex Depreiton, Amarin o £6 1kisEAROK favourable tothe nt path above
Explor cons C142) adverse tanferof oss tom Legal and
GMS EST ete Dobie Tne E47 7aKtavourable dus o he net mpactot the above
Capital Expenditure
{apex (£56k) adverse - unplanned * expenditure, on Strategic insurance platform project
*Nosapproved busness case for Realtime interface and Strategic insurance platform projets
incomes (€4,657K) adverse du to
1) Travel (£4, 208K) adverse - due to lower performance i branchonine channels (€3,888k) delayed launch of COW product (E313K)
2) CarfVaniBke £115k favourable -dve to higher ncomein oninelcontact cere channels
3) Home E125 avouabe ue te higher come n eineeoint conte chonas
4) Over S0siLfe {£188K) adverse - due to lower than budgeted sales the bat
4) Goat of Sie £390 asherse- Suaget casstoatan avance Budge sniused win Sand & Marketing ine whereas Aggegior spend
posted against cost of sales
+ Siatcosts:
‘Sat cots are favourable by £262k due to lower numberof POMS employees in Hi (budget assumed 5S FTE’).
+ Non stat costs,
General nsurance (Hawk) products was allocated full year non staff cost budget of 8m (Marketing £m, operating costs £3). This budgets
held cerzally and not alloatedto ndhudual product
Non Staff costs are £631k favourable YTD due to
41) Staff & Agency costs (163k) averse unplanned recruitment costs (£162K) forthe Compliance & Insurance team.
2) Conaulney conta £27 avourbie- lower FCA nes FCA eas have only Ben cherged ance
5) Brand & Marketng &1,442k favourable lower PPC spend of £1 7am, ofsetby Doc & Leerture spandof (E350),
4) Legal (E1054) adverse - higher Thistle costs,
5) Infastructure & 7 Servces (E953) adverse - YTD costs are made up of £2.Sm WebHelp contac contre costs (€2.4m totalless £300k reated
235 exceptional in relation to revew of contact centre to ensure FCA complance in readiness for Hawk). £40k of software andapplicaton servces,
oats (most relating to Dalesedge T technical suppor. IPA system, and tim potty admin) £35k f other costs clad £1 16k software and
application ieenses costs (mostly Hala cost)
8) Finance & Losses (€283k)- unplanned Bank Charges (€147K), Profesional Indemnity Insurance (€101k) and Customer Bad Debts (£35K),
1) Other operating costs £676k favourable Busgetreclassieaton variance
“JB.costs,
IB costs are (£64h)- loner POL commigsions on General Insurance products ofeet by higher MSA costs,
+ EBITDAS (excludes Exceptional costs)
POMS EBITDAS of 1427k s (€3,827K) adverse due tothe netimpact ofthe above
‘Exceptional costs,
Exceptonal costs (£1,208k) adverse Peachtree £262k, Geacheroft £20k Thistle contact centre £542k, WebHelp contact centre £286k, JMR £52k
+ EBT includes Exceptional costs)
POMS EBT (Earnings before Tax of £219kis (5,035K) adverse due othe net impact ofthe above.
Capital Expenditure
{Capex (E90TK) adverse - unplanned expenture of (£224k) on Real ime interface project and (£76 1k) on Stratege insurance platform project, ost
by fevourable spend of £25k on Fiance sytem project.
Ne approved business. case forReal te interface. and Strategic Insurance platform projects
NX /
Period 8 Performance Pack - Al Cameron
17th December 2015
Page 21 of 22
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Digital Net Income
November 2015
Strictly Confidential
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ET
2015-16 Web YTD
Teovernment Services [covernment Other £348,257 £165,000 £285,263 £300,000 116.1% 35.0%
Te [Telecoms IHomePhone £630,560 £569,056 £352,080 £871,360 72.4% 65.3%
Grand Total including Verify - Business target including additional stretch £15,175,941 I £18,271,516 £13,395,592 £26,194,042 57.9% 69.8%
Period 8 Performance Pack - Al Cameron
17th December 2015
Page 22 of 22
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POST
OFFICE
17% December 2015
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Period 8 Financial Performance
Context jonni
For 2015/16 the Post Office has an EBITDAS budget of: !RRELEVANT; The Q2 re-forecast achieves the
same level of EBITDAS. Net income was reduced by} ith improved Mails performance partially
offsetting the impact of lower Travel insurance and the withdrawal of NS&I. Expenditure was reduced
by with reduced Postmaster costs, offsetting the impact of higher pensions and. Card fees.
Project expenditure was reduced by jireevant, For Period 8, our EBITDAS forecast was I IRRELEVANT:
Questions
+ I What was the financial performance of the business in P8 compared to budget and forecast?
* What are the implications of variances to forecast on our full year outlook?
Conclusions
. EBITDAS o
— At BAU level, EBITDAS was £(1.3)m below forecast driven by NetIncome!
am Jower expenditure, mainly in Non-Staff costs. Project Opex was
IRRELEVANT I ! ' better than budget and forecast in the period.
I below, partially offset by
Wer than forecast
* Net Income was significantly lower than expected in the period due to lower volumes in Mails,
weaker renewals income in Insurance, and the phasing of the forecast in Telecoms & Lottery
-— Mails volumes were impacted by customer spending patterns around Black Friday and a significant shift
online, and by continued lower volumes and increased competition in international.
— Motor and Home insurance income from renewals was below forecast, both in volume and rate.
— Within Telecoms, the November 8th price rise was not fully realised within billings cycle, with 3 weeks of
additional income still to be recognised. This will be captured in the next billing or accrued.
— Lottery income for the launch of the new game was incorrectly phased within the period
* The majority of the variance to forecast is driven by timing of income and costs. We have not
adjusted our full year expectations, but there exist some risks & opportunities.
— The commercial teams are reviewing Mails volumes over P9 to assess the FY impact of P8 volumes
®
— The POMS teams are reviewing Motor & Home renewals, but are currently confident in the forecast
2 — Project Opex spend in Invest to Grow is below forecast YTD. Expected full year spend is being assess
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Period 8 EBITDAS was ahead of forecast, with lower income
offset by lower costs and project spend
Current Month
2
Q Variance
£m Actual Budget Variance
Forecast
1
TOTAL GROSS INCOME
Cost of Sales
TOTAL NET INCOME
Staff Costs
Postmaster Costs i
Non-Staff Costs
Total Expenditure (pre Project OpEx)
FRES - Share Of Operating Profits
a IRRELEVANT
Depreciation
Network Payment
EBIT pre exceptionals items
Interest
Impairment
Exceptionals (incl BT) & Redundancy & Severance Costs
Government Grant Utilisation
Profit/(Loss) On Asset Sale
Total Profit/(Loss) Before Tax
+ Net Income [ir ‘below forecast driven by lower mails volumes, lower insurance renewals
and forecast phasing across Telecoms and Lottery.
* Total Expenditure avourable driven by:
* Staff Cost - lower than forecast headcount and pension costs
+ Non Staff Costs - Q2 VAT return, lower POMS and Marketing spend, partially offset by
higher IT costs
. Project Opex isi favourable, driven by capitalisation of Mobile costs and lower than
3 forecasted spend within Invest to Grow
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The majority of the variance to forecast is driven by timing.
Underlying, the full year impact in Mails and Insurance is uncertain
Variance to Forecast Of Which:
£m Actual Q2 Variance Estimated Estimated
Forecast Timing Underlying
TOTAL NET INCOME
Staff Costs
Postmaster Costs
Non-Staff Costs
Total Expenditure
FRES
EBITDAS - BAU
IRRELEVANT
Project OpEx
EBITDAS
* Telecoms £(0
Underlying variances:
Income
Items still under review:_.__.
* Black Friday impact'
+ Intn’l mails volume ; IRRELEVANT
+ Insurance renewals
More certain:
+ SSK Accruals
+ POMS accounting
Staff Costs: :
* Pension run rate}
Non Staff Costs poco
+ POMS accounting I !Rretevant:
Project Opex
+ Run rate
Within Net Income we currently expect to recover £(1.7)m against forecast, mainly:
m - the full impact of November 8* price will be captured in future billing cycle
. Underlying, we are still reviewing the full year impact of the lower volumes within Mails and lower
Insurance renewal income. The forecast remains unchanged as we assess P9 performance
. Operating costs variance to forecast is driven by phasing or timing of spend, with no significant FY
impact. Underlying, pension costs are running below the revised forecast due to lower headcount.
. Our run rate on Project Opex suggests we will spend less than forecast over the remainder of the
Full year expenditure forecasts are being reviewed - we are currently estimating a potential
saving against forecast.
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Mails revenue was impacted by weak international volumes
and a negative effect of Black Friday and Cyber Monday
Mails net income i ' adverse
to forecast reflecting ‘lower than
— expected volumes across most Royal
i Mail services. Volumes are being
monitored daily over P9 to assess the
! full year impact
Stamps ; : + Volumes in the last 2 weeks of
Labels ; ! the period were impacted by
Specials I R RE L EVAN T customer spending patterns in
Home Shopping returns I : the build up to Black Friday -
Other i resulting in lower parcels and
returns.
Fixed Mails
. International mails performance
reflects the generally lower
volumes; impact of exchange
rates; and increased
competition from My Hermes and
eBay’s global shipping
programme.
Lottery net income is t! adverse to forecast reflecting the
aggressive phasing of the impact of the new lottery game. This
. ’ + Inland parcels (labels) of
is expected to recover in period 9 Ht
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Telecoms is impacted by the timing of billing relative to
the price increase. Customer numbers are ahead of plan
Period 8 Telecoms net income is £(0.8)m
adverse to forecast.
F Var to Q2 U=iefer ss Var to
EAE Forecast Budget
s * The price rise was effective from
HP&BB (0.8) 44 (0.6)
Nov 8. The billing cycle resulted in
3 weeks of the additional revenue
: ey ERASER EAE OAT (£0.5m) not being realised in the
Other (0.0) 0.3 (0.0)
DVLA
(0.1) 0.5 : aan .
period - this will be accrued in
ROCA : #0 (Q5) 20 0 future periods. No impact to FY
Home Office 2.0 03 2.0 0.0 forecast
ID Services (0.0) (0.1) 0.2 (0.2) .
Other 03 0.2 0.5 (0.2)
TotaGaverATenESEHICES NY (CNN NNN NGO MZ MGR —- — Stronger trading performance has
added 3000 more customers than
Government Services are £(0.3)m adverse to forecast due to: forecasted in the period.
. Higher additions and a marginal
change in mix has resulted in
£(0.3)m lower net income than
forecast due to higher up-front
. Verify volumes are 69% behind plan in P8. connection charges.
. POCa impacted by incorrect forecast phasing with no full
year impact. POCa account numbers are being maintained.
. Offset by strong UKVI performance reflecting continued
strong Secure Collection and Biometric Residency Permits
volumes @
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Within FS, Motor and Home Insurance are behind forecast
in the period, but the full year outlook is unchanged
Q2
ees ee ee Forecont al
Mortgages & Transactions
Savings
Insurance
Travel
Banking & Payments
Stretch/Other
Travel
Motor
Home
Life
Period 8
Var to
‘IRRELEVANT
Period 8
a2
=e. Varto a2 Budget Var to
forecast Budget __
IRRELEVANT
Financial Services Income is {re
adverse to budget. Included in the
forecast were:
+ The cessation of NS&I ie
+ — Write back of Post
(unredeemed) of"
er breakage
POMS net income is I
forecast driven by:
I adverse to
. Motor insurance income from renewals
has worsened due to lower volumes
and lower rates - this is under review
to assess the full year impact;
. Home insurance reflects a correction
of prior month estimates;
. A change in the accounting treatment
between income and costs for under
the Junction contract. Net nil impact
to EBITDAS.
. Over 50s insurance performed well in
the month and is expected to continue
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Costs are lower than forecast predominantly due to
the timing of spend or phasing of the forecast
Period 8
_ Forecast I _ Budget _
Postmaster Costs !
== IRRELEVANT I
Staff Costs are urable to forecast in the period driven by lower headcoun !and lower
pension costs as a resul I The higher full year pension costs, due to unfavourable market
conditions at the year end has now been built into the forecast.
Non Staff Costs are /ietevanr! favourable to forecast, driven by the timing of spend or forecast phasing
POMS, reflecting capitalisation of costs; closure of POs; and change in accounting
treatment for the Junction contract (offset in income). The FY forecast is unchanged.
wt VAT rebate for Q2. This is reflected in the FY forecast, but phased incorrectly.
* £0.4m lower Marketing spend, as full year plans are under review but FY forecast is still held.
Offset by:
within IT & Operations driven by Desktop services (related to EUC delay); Horizon Terminal
Services (timing related to RPI adjustment); and Website maintenance (timing of spend).
tT} within Property, relating to timing of planned maintenance spend.
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Project Opex is currently below plan which may result
in lower full year costs
£m Current Month YTD Full Year
Themes Programmes Actual Budget Var. Actual Budget Var. Outlook
Other See TEE
Sparrow
Reduce & Variablise NetworINTP
Other R&V
Commercial Customer Management Programme
Digital
Mobile (Wave)
Other Invest to Grow
POCA (Maypole / Iliad)
Reduce Central Costs Other Central Costs
Project IRIS
Grow Financial Services Eagle
Hawk
Invest to Grow FS
Replacement CapEx IT Risk & Resilience
Property
Separation
Supply Chain vehicles
Transform the OrganisationIPeople & Organisation
Transformation Office
A
AJ
ITI
rr
>
Zz
—_I
Opex Total
. Project Opex igs [immecevanrI below plan in the period due to the capitalisation of Mobile costs, and
lower than planned spend within Invest to Grow projects.
+ Year to date spend is ‘irrevevanr;
currently being re-assessed
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Capital Expenditure continues to track below budget due to
delayed expenditure across the key IT towers
10
£m Current Month YTD Full Year
Themes Programmes Actual Budget Var. I Actual Budget Var. Outlook
Other Flow Thro
Fujitsu extension contingency
Other Replacement Capex
Sparrow
Reduce & Variablise Network Costs
CTPL
CTP2
Front Office
NTP.
[Commercial
Customer Management Programme
Digital
Mobile (Wave)
Other Invest to Grow
Winning in Retail
Lean IT
Back Office
IEUC
Networks
TPOM
Reduce Central Costs
Other Central Costs
Reduce Central Costs
Grow Financial Services
Eagle
Invest to Grow FS
Replacement CapEx (Including Separatio
IT Risk & Resilience
Other Replacement Capex
Property
Separation
Supply Chain vehicles
Transform the Organisation
Capex Total
Year to date Capex is Iiretevan
People & Organisation
Transformation Office
: below plan.
i
IRRELEVANT
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Exceptionals remain rrevevant higher than budget driven by
Postmasters’ Compensation, Restructuring & Onerous Contracts
Exceptionals
ém Current Month YTD
Themes Programmes Actual Budget Var. I Actual Budget Var.
other Flow Thro
Reduce & Variablise Network Costs cra
cTP2
Front Office
LBD
INTP. i
Commercial Digital {
Other Invest to Grow i i
Winning in Retail i i
Lean IT leuc i i
Back Office i Hl
‘IRRELEVANT
Reduce Central Costs Other Central Costs i H
Project IRIS i Hl
Reduce Central Costs i
Grow Financial Services Eagle i
Hawk i
Replacement CapEx (Including SeparationOther Replacement Capex i
Separation i H
[Transform the Organisation People & Organisation i i
[Transformation Office i i
Central Exceptional Adjustments Central Exceptional Adjustments I i
+ Postmasters’ compensation (within NTP) reflects the charge for the year calculated at point of
liability, but budgeted at point of exit. The restatement of the provision will not be posted until
finalised.
* Reduce Central Costs, net
phased across the year.
dverse, are mainly due to Wave 2 redundancies, with budget
dverse reflect the earlier than budgeted provisions for property
an to exit loss making crown branches. ©
+ Central adjustments
onerous contracts, wh
11
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Cash flow is "r«evI favourable to budget mainly due to
earlier Winter Fuel Payments than expected
(em YTD Cashflow Variances )
IRRELEVANT
YTD Budget Operating profit Network Cash Working Capital Client Balances CapEx and YTD Actual
Inc Interest, Exceptional
tax, pensions (mainly NT)
S
+ In Period 8, cash outflow of IRRELEVANT I favourable to the budgeted outflow of!
cash at! ™ below budget;
ast! of this is attributable to the cessation of NS&I products meaning reduced cheque and debit
card holdings. This is fully offset within lower Client Balances.
* Combined branch and cash centre holdings are: ‘below budget, due to winter fuel payments
being paid earlier than expected, having a material impact on branch holdings.
* Capex and Exceptionals ar
partially offset by higher thar
below budget, with delayed capital spend across the key IT towe 6
geted exceptional items.
12
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Some of our Scorecard metrics remain challenging,
impacted by lower income in Period 8
Current Month YTD YTD Full Year I 2914-15
Act Target Var. Act Target Var. IPrior YearI Target I Outturn
Key Performance Indicators
Growth
Total Net Income (excl NSP) £m (Bonus 10%)
Operating profit £m
Earnings before ITDA and Subsidy £m* (Bonus 30%)
Free cashflow £m
Digital Net Income (measured using Credence) (Bonus 10%)
Customer
Customer Satisfaction
Customer Effort (Bonus 10%)
Net Promoter score Financial Services (Bonus 5%)
Net Promoter score
Branch Compliance - Financial Services - basket of 11 measures I R R E L EVA N I i
Queue time % <5 minutes - Top 1k branches
People
Engagement Index % (Once a year April) (Bonus 15%)** (P)
Subpostmaster Engagement Index % (Once a year)**
New Starter Turnover
Representation (Senior Managers) - Gender
Representation (Senior Managers) - Ethnicity
Modernisation 4
Number of branches (one month in arrears)
Crown Profit (Loss) £m (Bonus 10%) 4
NT Branches Transformed In Year (Bonus 10%) q
Bonus worthy metrics
* ITDA Interest, Tax, Depreciation, Amortisation.
** Measured annually with some additional ‘Pulse surveys’. ®
(P) October Pulse Survey Result
5% Tolerance for amber.
13
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POST
OFFICE I
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Q2 P&L Phasing
ee Ee ea EE
Mails 80,059 79,308 34,037 31,801 41,035 31,966 —-28,378 29,310 355,895
Retail 10,740 9,966 I 454 479 617 399 353 324 23,331
Govt ee 27,709 24,375 8,192 7,097 6,278 8,682 8,309 8,198 98,840
Telco 12,858 12,388 5,078 4,635 4,693 5,906 4,685 4,758 55,001
Other 105 112 32 32 32 32 32 32 409
Commercial 131,471 126,150 47,793 44,043 52,655 46,985 41,757 42,622 533,477
Mortgages & Transactions 1,866 2,529 974 987 850 893 1,035 2,062 11,196
Savings 15,745 16,170 4,571 4,576 4,572 4,565 4,605 4,743 59,547
Insurance 3,287 3,038 I 2,364 2,213 2,974 3,480 I 2,395 2,515 22,267
Travel 9,936 11,928 2,975 1,863 1,861 2,030 2,133 2,442 35,167
Banking & Payments 42,399 42,530 16,249 14,347 15,277 14,983 13,596 14,697 174,077
Stretch/Other ; ; ; _
FS 73,234 76,195 I 27,133 23,985 25,534 25,950 23,764 26,460 302,254
Supply Chain 6,519 7,264 3,322 2,327 2, 400 3, ove I 2, 995 2,645 29,911
Other Income 773 1,416. 350 360 350 4,289
Agents Pay - 104,469 - 101,495 - 37772 - "32.913 - 40,823 - 36,305 I [- "a et0 - 31,59 - 415,200
Staff Costs - 59,433 - 57,128 - 20,113 - 18,888 - «19,119 - ~—-20,811 - 18,512 - 18,370 - 232,374
Non Staff Expenditure - 80,132 - 58,390- 24469- 23,109- 23,300- 23,143 - 22,082 - 21,803 - 276,428
Invest to Grow - 4,781 - 4,430 - 268- 1,544- 1,554- 1,663- 1,556 - 864 - 16,660
Dep'n 107 107 63 63 63 63 63 - 18 1,110
FRES 10,568 13,087. 2,505 1,708 1,846 4,771 2,158 2,357 36,000
EBITDAS 86145] 2,776 I 1,456 I- 3,080 I- 1,948 I 2,784 I 2.473] 1,788 I 34,221 I
15
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Q2 Forecast Commercial Income phasing
Mails & Retail Government
—Act/Fre = 14/15 —Act/Fre = 14/15
£50,000 £20,000
£40,000
£15,000
£30,000
£20,000 £10,000
£10,000 £5,000 4
Pdi Pd2 Pd3 Pd4 Pd5 Pd6 Pd7 Pd8 Pd9 Pd Pd Pd £- + T T T T T T T T T T T 1
10 11 12 Pdi Pd2 Pd3 Pd4 Pd5 Pd6& Pd7 Pd8 Pd9 Pd 10Pd 11Pd 12
Telecoms
——Act/Fre = 14/15
£8,000
£7,000
£6,000
£5,000
£4,000
£3,000
£2,000
£1,000
f£- +
Pdi Pd2 Pd3 Pd4 PdS Pd6 Pd7 Pd8& Pd9 Pd 10Pd 11Pd 12
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Q2 Forecast FS Income Phasing
Mortgages & Transactions Savings
£m Act Fre ee 14/15 £m Act /Fre ee 14/15
£2.5 £7.0
20 £6.0
£5.0
£15 £4.0
£1.0 £3.0
£2.0
£0.5
£1.0
£0.0 + £0.0 4
Pd1 Pd2 Pd3 Pd4 PdS Pd6 Pd7 Pd8& Pd9 Pd10 Pd11 Pd12 Pd1 Pd2 Pd3 Pd4 PdS Pd6 Pd7 Pd& Pd9 Pd10 Pd11 Pd12
Insurance & Travel Banking & Payments
£m ——Act/Fre, = 14/15 £m ——Act/Fre, = 14/15
£7.0 £18.0
£6.0 £16.0
_ £14.0
. £12.0
£4.0 £10.0
£3.0 £8.0
£2.0 £6.0
£4.0
£1.0 £2.0
£0.0 + £0.0 +
Pd1 Pd2 Pd3 Pd4 Pd5 Pd6 Pd7 Pd8& Pd9 Pd10 Pd1l Pd12 Pd1l Pd2 Pd3 Pd4 PdS Pd6 Pd7 Pd& Pd Pd10 Pd1l Pd12
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~ POST I
OFFICE
December 2015
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Summary
Context
We agreed to start explaining performance in our Operations to enable a shared understanding of where we
are and ensure focus on improvement
Questions
What do our latest KPIs tell us for Supply Chain, Support Services and IT for period 8?
Conclusions
Suppl
y Chain
Accidents are higher than target in the period resulting on 30 days lost. Year on year is improved due to increased focus on health &
safety.
There has been a 45% reduction in Road Traffic Incidents (and 55% reduction in blame worthy). New training has been launched for low
speed manoeuvring.
Quality of service remains below target. Three sites are responsible for a high proportion or service failures due to high levels of absence
or staff on rehabilitation
Support Services
IT
People engagement scores are green, despite the ongoing Support Services transformation programme;
Customer service levels continue to perform below target, driven by a spike in calls due to product changes (Moneygram) and high sick
absence rates. This is in transition with the agreed transformation programme due to complete by Q1.
The number of severity level 1&2 incidents dropped slightly, but remain at a high level. A significant number of system stability issues
were concentrated within Supply Chain. An overarching improvement plan has been developed between Supply Chain and IT.
Some service partners continue to operate outside agreed service levels - a service improvement programme has been launched wit
ATOS
Supply Chain KPIs
PERIOD - 7 / 8 Progress
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MEASURE PDAI Actuals Target Prev Year YTD Actuals YTD Target Prev Year
Accidents (H&S Site Report) P7 9 8 12 53 58 67
Accidents - LTIFR (Lost Time Injury Frequency Rate) P83 0.76 0.75 N/A 0.86 0.75 N/A
Accidents - Number of Accidents Per 100,000hrs P7 3.54 No Target N/A 3.05 No Target N/A
Accidents Causing Absence (H&S Site Report) P7 6 No Target 4 13 13 No Target 23
Days Absence as a result of Accidents (H&S Site Report) _I P7. 30 38 14 163 266 106
Sick Absence - %age Ps 4.09% 3.40% 3.93% 3.82% 3.40% 3.71%
Number of Road Traffic Incidents P8 18 24 24 189 189 185
Num ber of Blameworthy Road Traffic Incidents P38 9 12 16 113 99 99
Budget Performance - Actual Costs / Expenditure £k Ps £5,293 £4,957 N/A £46,228 £46,628 N/A
Revenue - Actual / Plan £k P8 £2,599 £2,771 N/A £19,279 £22,807 N/A
CVIT Quality of Service - POL P7 97.96% 98.20% 98.30% 97.39% 98.20% 98.31%
CVIT Quality of Service - EXTERNAL P7 I 94.33% 98.20% 97.08% 95.78% 98.20% 97.20%
CVIT Quality of Service - OVERALL P38 95.85% 98.20% 97.57% 96.40% 98.20% 97.64%
Cash & Coin Centre Quality of Service P8 I 100.00% 98.20% 100.00% 99.96% 98.20% 99.97%
Stock Centre Quality of Service Ps 99.92% 98.20% 99.60% 99.43% 98.20% 99.00%
High Value Mails Quality of Service Ps 99.73% 98.20% 100.00% 99.78% 98.20% 99.23%
Inventory Team Grade of Service P8 I 48.88% 70.00% N/A 34.51% -35.49% 70.00% N/A
Customer Management Centre Grade of Service Ps 59.46% 70.00% N/A 54.14% 70.00% N/A
Complaints P7 48 62 50 334 429 385
Gross Hours - Year on Year Reduction* P7 I 193,131 215,791 N/A 1,739,732 1,892,952 N/A
Total IT Incidents Logged Pg 43 No Target N/A 262 No Target N/A
NOTE: Period 7 data has been shown / used where Period 8 data is not available yet
N/A
IFor items shown with this, data is not available or has been requested and is being waited for
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Supply Chain: KPI Commentary
Accidents - P7 had 9 accidents with 30 days lost / LTIFR down 0.11 YTD.
> Predominately caused by improper lifting & handling technique & Vehicle slow manoeuvring errors. Corrective
action: Reminder of techniques through local training
Absence - P8 is a 0.3% improvement on P7.
> 1 site has 13% of SC absence hours - mainly stress/anxiety related
>» 41% of SC absence requires mandatory ATOS referral (Stress/Muscoskeletal)
Road Traffic Incidents - 45% reduction in incidents, 55% reduction in blameworthy.
» Slow speed driving is still the main cause. Corrective actions: (i) New training pack developed for low speed
manoeuvring (ii) investigation to explore where there are blindspot issues with vehicles
Quality of Service - Three sites responsible for 2.78% of service failures.
> Staffing - High levels of absence / Staff on Rehab (11FTE per week)
System Stability - Overarching improvement plan developed in conjunction with IT
>» Major POLSAP & Transtrack Issues ~ National and local issues
> Manual Contingencies invoked for Outward Remittance
> Largest depot without Transtrack for 5 days
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Support Services Scorecard: Financial Performance
Current Month YTD
Key Performance Indicators YTD Prior IFull Year Target IFull Year Forecast
Act Tet Var Act Tet Var
staff Costs -£935,061 I -£911,510 -£7,674,703 I -£7,435,243 -£12,702,044 I -£11,132,495
Financial Performance INon- staff Costs -£1,007,507 I -£806,249 -£9,140,554 I -£7,357,679 -£12,013,782] -£11,335,895
Tota! Costs -£1,942,568 I-£1,717,759 -£16,815,257 ]-£14,792,922 -£24,769,411] -£22,468,390
Total Staff Costs: £(239k) adverse.
FSC: £(134k) adverse - Mainly due £(20k) Severance costs (ill health), £(114) temp agency overspend and £(146k) efficiency target, offset
by £114k vacancies and £32k pension savings.
HRSC:; £(30k) adverse - £36k savings offset by £(67k) staff efficiency target.
Contact Centres: £(10k) adverse - £158k temp agency staff underspend, £92k savings on pensions, £39k staff savings offset by £(18k)
Severance costs and £(381k) efficiency target.
Agency Contracts: £35k favourable: Mainly due to staff working on SSTP
Total Non-Staff Costs: Overall, non-staff costs are showing as £(1,783k) adverse, the main reasons can be explained as follows:
FSC: £(1,897k) adverse - £(1,906k) higher card processing costs and £(282k) efficiency target, recruitment fees £(28k), offset by £289k
underspend on the cheque processing costs, £51k underspend on small IT changes.
HRSC: £(21) adverse - £(55k) efficiency target, £(41k) overspend on computer services, partly offset by £77k underspends on ©
recruitment, T&S, stationery and postage.
Contact Centre: £4k favourable - £42k underspend on computer services, £11k T&S, offset by £(53k) customer compensation.
Agency Contracts: £131k favourable - mainly £51k postage, £30k T&S and £20 Gains/Losses savings.
Support Services Scorecard: People
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Full Year Target I Full Year Forecast
Current Month YTD
Key Performance Indicators YTD Prior
Act Tet Var Act Tet Var
Employee
People 70%* 63% 70% 63% N/A 63%
Pulse Oct 15*
People:
High level of engagement maintained despite being in midst of Support Services transformation. However variances across the team :
+ Contact centres 62%
+ FSC 69%
+ HRSC 85%
+ Other 40% (issues with report as responses from CIO area included).
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Support Services Scorecard: Customer (1 of 2)
Current Month YTD
Key Performance Indicators YTD Prior IFull Year Target I Full Year Forecast
Act Tet Act Tet Var
i 28% 46% 53% 70%
Calls answered within 20 70% 70%
secs 10065 147075 214238 520524
lAverage handling time 346 342 302 320 316 320
18% 14% 11%
customer-NBSC I Calls abandoned 5% 5% 5%
7783 51859 45803
Ave time in queue 178 N/A* 112 N/A* N/A 85 N/a*
(secs).Indicator not target*
ithi 79% 70%
alls answered within 20 57% 70% 52% 70%
secs 227200 396418
lAverage handling timein
seconds 246 279 271 241 248
customer - POEX om in om
calls abandoned 5% 5% 5%
2722 30733 14118
fave time in queue
56 N/A N/At 64 N/A 25 N/A
(secs) Indicator not target*
Total Closed Complaints 3120 28120
customer - CCU
complaints Closed in 10 96% 95% 86.50% 95% 95%
Number of cases received 132 1207
Customer ECT cases ae within10 35.61% 95% 55% 95%
Support Services Scorecard: Customer (2 of 2)
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Current Month YTD
Key Performance Indicators YTD Prior IFull Year Target I Full Year Forecast
Act Tet Var Act Tet Var
Calls answered within 20
73.70% 80% 58% 80% 71% 80%
secs
Customer - HRSC Calls resolved at tier 1 90% 80% 87% 80% N/A 80%
calls abandoned 0.97% 5% 3.80% 5% nfa 5%
CPS! 95% 90% 95% 90% 91% 95%
Invoices paid on time 92% 81% 69% 66% <40% tbe 75%
Customer settlements on
: 100% 100% 100% 100% 100% 100%
customer - FSC time
Customer enquiries ~ open 36 5 o46 o4 36
items (millions)
(Customer — Agen
Bency — INumber of audits 509* m4
Contracts
f ded
Indicators Agents suspended as 2 7 N/A N/A 37 N/A N/A 29 N/A 56
result of audit
HTerminations/notice given 0 N/A N/A 2 N/A N/A 14 N/A 18,
Non-suspension cases N/A N/A 86 N/A N/A 95 N/A 130
Amount of losses recovered I 6196 34 100% 0% £839.7k 100% 0% £460.8k 100% £1258.5k
rom non-suspension
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Support Services: KPI Commentary —- Customer
Customer:
NBSC - Grade of service has been impacted throughout the year as the number of FTE has not been sufficient to cope with
the volume of calls within business as usual. Period 8 saw an increase in call volumes of 3000 over forecast which was largely
due to product issues such as Moneygram product changes, Moneygram outage and launch of 2D barcoding in 5000 branches.
This was also at a time when lines had to be closed on 9" November due to system issues.
POEX - Grade of service being largely affected by the sickness levels within the team - upward trend (c.10%) since
transformation announcement
CCU - The team are back on track in Period 8 regarding closing complaints within SLA and have worked to clear the backlog
from Periods 5 and 6.
ECT - Whilst the team always respond to the stakeholder within 10 calendar days, the complexity of some of the cases
usually means that the case cannot be classed as resolved within the 10 days. There has been an issue with resolving
telephony Flag Cases and a revised resolution process has been implemented with Managed Services.
10
IT: Severity Level 1 & 2 incidents
Business Areas Service Aug__Sep__Oct__Nov_I Total
AE 3 3
DVLA 1 1 2
Horizon 1 2 2 5
MoneyGram 1 1
Branches Paystation 1 1
POCA 1 1
Self Service Kiosk 1 1 2
BT- Telephone 1 1
Lottery 1 1
[GlobalPay 1 1
POLSAP 2 2
Contact Centres HPBB Services 2 1 3
INBSC Services 1 1 2
Credence / MDM 1 3 2 6
. , POCA, 1 1
Finance Service Centre ECOG —File Transfer 1 2 1 1 5
POLSAP 1 1
Mails Local Collect 1 1
[Track & Trace 1 1
Office SharePoint, internet & Drives 1 2 3
Post Office Mobile WAVE /Top-up 1 1 8 7 16
POLSAP. 6 2 2 8 18
HTranstrack 2 3 6 5 16
ISupply Chain
internet 1 1
Shared Drive 1 1
Website cop 7 2 6 15
Grand Total 23 I 21 I 36 I 31 [I 111
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Incidents by Service Partner
1040
o7-Aug
cc
700
600
300 —oren
z 400 OVER 14 DAYS OLD
300
-——BREACHED SLA
200
100 ——1 pays SINCE LAST MODIFIED
° -
10! O7-Aug_—=—=«A Aug t-AUg—««ODSep «AB Sep—2SSep —OSOct_ «AO. «AOR 2Ot
280
200 -
—oren
Z 150
8 OVER 14 DAYS OLD
100 BREACHED SLA
50 14 bas SINCE LAST MODIFIED
°
10M O7-Aug=—= «AAU DA-AUg”—««O9SeP-—=«ABSep SS OSE. ©—« AGE. ©—««AGOK_«——23.0ek
300
—oren
200
5 lh —over 14 DAYS OLD
100 — —— BREACHED SLA.
° smn 14> DAYS SINCE LAST MODIFIED.
14-Aug —-2L-Aug 09 Sep 18-sep 25Sep 05-0ct 12-0ct 16-0ct 23.0ct
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Post Office Ltd — Confidential
GROUP EXECUTIVE Reference: GE 12/11/15 =I
Date: 12/11/15 I Venue: Finsbury Dials Time: 09.30 I
Present: I
Paula Vennells (PV) I Chairman (items 1.2 onwards) —=———S—~—ésd Im Attendance Cid,
Alisdair Cameron (AC) Tom Wechsler (TW) I
Neil Hayward (NH) Chris Broe (item 1) (CB) I
Kevin Gilliland (KG) CE "I Mark Davies (item 1&4) (MD) I
Jane MacLeod (JM) Radha Davies (item 1.1) (RD) I
Martin George (MG) Andrew Viggars (item 1.1) (AV) I
David “Hussey (DH) I —_ 7 7 : oO : I Michael Brown (item 3) (MB) I
Nick Kennett (NK) Amber Kelly (item 4) (AK) I
Alwen Lyons (AL) ee - ee - I Martin Kearsley (item 6) (MK) I
Pafonmance’ Customer
Purpose
To update the GE on the customer performance for period and 6 and share the flash reports for period 7
Discussion
AV gave a summary of the customer report with performance above target on all measures, and although 2
areas showed slight decline the longer trends were positive.
e Effort remained above target in the period and ytd, with improvements in all segments. MG recognised
the Network for the focus on the cause and effect to drive improvements and KG in turned thanked RD
and the team for the support being provided. An analysis of the correlation between ‘effort’ and individual
branch P&L was requested.
* KG explained that the worsening in WHS queue times had been caused by higher migration from
converted Crown branches, plans were being drawn up to mitigate the short term effect, although higher
migration was good news. AC was concerned that the perception of queue times had worsened KG
assured the GE that this was monitored closely.
e AV explained that the queue target at Christmas was reduced and that he was working with Andrew
Thompson on Crown Office queueing at Christmas. It was agreed that the ‘Christmas Maker’ training
should include a focus on Customer.
e Travel Money differentiated pricing was causing VOC complaints. PV asked for a piece of work to be
undertaken to understand the issue and propose a solution.
e FS NPS had fallen in the month but was still above target. RD explained that work was underway with
Bol to understand NPS at a product level
e RD explained that the Nunwood data would be reported on a quarterly basis, with the full index produced
annually.
e AC thanked RD and KG, on behalf of PV, for the fantastic teamwork which was delivering these results.
The right behaviours were driving the right outcomes on scores thanks to VOC and effort across the
network.
Outcomes So eee
GE agreed the following actions:
e Produce a branch by branch analysis of the correlation between ‘effort’ and P&L. RD?
e Include customer focus in the Christmas maker training KG
© Produce a paper for the GE explaining: What is the Travel Money customer proposition and promise and
how does it tie back to Post Office values and the pricing policy? What are the current problems and the
options available to overcome them? What is the proposal to mitigate the complaints
NK/RD/KG
‘Performance - =e
I Purpose
I To update the GE on the period 7 and ytd sales results and the implications ‘for the plan I
Discussion
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Post Office Ltd —- Confidential
KG reported the period 7 sales performance, focussing on:
e Mails & Retail maintaining its performance with a result of 105% against target for P7. International
Standard mail was 10% down on target which may be driven by the unfavourable exchange rate. RMG
are planning an advertising campaign to promote the product.
e Guiding Coalition now rolling out to a further 2000 branches 5000 in total. The underperforming
members of the group are also being tackled.
e Telecoms strong performance in P7 & the start of P8 meant the product would be above target for the
year in P8.
e Travel Money had performed better against a lower target in P7. NK explained that competitors had
reverted back from their reduced margins during the peak summer period, making the PO rates more
competitive. FRES were anticipating a similar move next year and were considering how to respond.
e Insurance flash sales trial going well. The GE discussed the data capture initiative and how it could drive
sales. It was important that effective data was captured with the customer's knowledge and consent.
e On-line Credit card sales were above target, after an improvement in the web journey, but in branch
Sales had become more difficult since the regulator change.
IRRELEVANT
e KG reported that 90 branches were trialling new Point of Sale the results of which he would bring back to
future meeting.
* Mortgage sales are below target and KK was asked to ensure that the report to the Board included the
market information which helped to explain the reduction in sales despite being in best buy tables.
e SSK resilience and availability was discussed. CB explained the process for logging issues. He accepted
that there needed to be an enhanced SLA response over the Christmas period, and a focus on keeping
SK’s working.
e CB was asked to produce a detailed plan identifying; the accountable SLT person; what has been agreed
with the suppliers who provide the helpline and in-branch engineers; and what should be done if an SSK
fails during the Christmas period (including considering the option to provide branches with ‘kit’ to make
simple repairs themselves).
Outcomes
GE agreed the following actions:
e Provide a paper for December GE to give comfort that the customer data capture would ensure al customer
awareness and consent.
«Include the mortgage market changes in the sales report for the Board KGINK
e Include a section on ‘what to do if the SSK goes wrong’ in the Christmas Makers briefing KG
e CBwas asked to produce a detailed plan; identifying the accountable SLT person; what has been agreed with the
suppliers who provide the helpline and in-branch engineers, and what should be done if an SSK fails during the
Christmas period (including considering the option to provide branches with ‘kit’ to make simple repairs
themselves). : CB/ KG
Performance - Financial
Purpose
To update GE on the Financial performance P8 (flash results) full results to be discussed at GE on the 16/11
Discussion I
AC reported that the flash results showed a good performance for P8. Income ahead of budget and staff and
spmr costs below. Non-staff remained adverse but GE would discuss on the 16" November with a session on
forecast on the 23" November
Outcomes I
Porormance- Operations
Purpose _
To update GE on the Operations performance.
Discussion
AC explained that this was the first Operation report produced and asked the GE ‘to feedback what was useful
and any omissions
e Supply Chain focus on safety wasmaking good progress with fewer accidents so far compared with last
year. However there are issues with quality of service and complaints which are made worst by the high
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Post Office Ltd —- Confidential
level of absence. AC was asked to provide a breakdown of complaints showing those from spmr and
external customers.
e The Quality of Service is made worse for external customers by issues with Sunday attendance and
implementation of new routes. Project IRIS is being presented to the January Board and will be
discussed at GE in January.
e IT. Incidents increasing. There is a need to report incidents from a customer impact perspective eg lost
hours, or no of branches unable to trade, no of AEls down, number of SSKs down. Commercial
Committee are looking at the top 20 products and the effect of IT on these product sales, so that product
teams look at the effect of IT on their customers.
e IT infrastructure is an ongoing problem for the Supply chain.
e Support Services. Call centre performance not acceptable with too many abandoned calls. A specific
Camelot issue drove calls from spmr in period 7 and Pete M and Angela VDB are dealing with this
product issue. AC proposed that a strategic review of the PO call centre provisions would be undertaken
towards the end of the financial year
¢ NH proposed that he provide the report on the HR service centre to be included in the pack.
Outcomes OES es Se nn
GE agreed the following actions: :
e AC explained that this was the first Operation report and asked the GE to feedback what was useful and
any omissions in the pack ALL/AC
e Breakdown Supply Chain complaints into spmr and external customers AC
e Report the IIT incidents from a customer impact perspective cB
e Include the report on the HR service centre performance in the pack AC
e A strategic review of the PO call centre provisions would be undertaken towards the end of the financial
year. AC/AVDB
Minutes and Action Log
Purpose
To agree the minutes and review the action log
[Discussion
The Minutes of the GE meeting 14" October 2015 were agreed
The action log was discussed and the following input agreed
* Christmas planning SSK action overtaken by SSK action from 12/11 closed
e Succession planning put back to January (to be agreed by NH)
* Christmas makers action closed
* Governance action closed
* Prosecutions policy explanatory note on risk management to GE in December JM Dec
e Telco customers churn issue to be picked up by commercial committee closed
e Customer complaints circulate a note to GE to close the action
« Christmas investment closed
e Christmas lunchtime cover, not a union issue as PO already have agreement to keep time to a minimum
and have casual support over the lunch period closed
« CEO meetings with Santander and Nationwide organised closed
e AL to pick up issue of organising Board session on political context for the Business January
e RMG mandate, date changed needed for January January
« Access criteria shared closed
« Weighting VOC metrics to be considered for next year’s target closed
All were asked to updated actions before the meeting.
Outcomes oF oe : a : oF Se I
GE agreed the following actions:
e The Minutes of the Meeting
« Action log to be updated as agreed AL
. Actions to be Seto, before the meeting ir in time for r papers to be distributed ALL
Business Transformation
Purpose
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To review and take input into the draft Transformation update for the November Board
Discussion _
DH explained the CQC approach to the paper setting out the plan and its ‘pinch points’.
e In the context that the Board had seen the 2013 strategy and how the transformation contributes to the 3
year plan. The paper would explain the outcome of the planning activity and the consequences of the
subsequent delay. The complexity of the IT would be made clear. The plan would be positioned as
deliverable but still full of risk, including the cost risk
e NH suggested that the paper would be clearer if it was set in the context of the transformation narrative,
to help storyboard the plan, even if this narrative was provided in the reading room to set out why the
hard yards are worth it. In his opinion the paper needed to; set out the plan milestones; drill down into
the areas of risk including impact on financials.
e JM challenged that the detail was very executive, and proposed that the paper should focus on what was
trying to be achieved, why it had changed and what were the consequences for the 3 year plan, through
delay and cost.
e GE discussed the scope and context of the transformation and whether it should include other big
programme beyond IT and front and back office. AC believed that Business transformation included all
the areas with a material impact on funding, IT and Network as these were the scarce resources. With
the main spine being IT.
e The Board may challenge capability and capacity to deliver, so the paper needs to give them confidence
that we believe we can deliver the new plan, give them reasons to believe it is now realistic.
e Need to clear about why the original plan has slipped, and who is at fault, how are we challenging over
ambitious suppliers?
e AC proposed a narrative which explained; why we procured the way we did; what looks different now;
what are the consequences; what we are doing to mitigate; what contingencies will cost in time and
money and how this aligns with the 3 year plan
e The paper should to be set in the context of the big change programmes already delivered including NT,
CT and HAWK.
Outcomes :
GE agreed the following actions:
e DH would redraft the paper taking account of the above for discussion with a smaller group of GE
Monday 16" November DH
"Engagement mid-year Pulse Survey results
Purpose
To brief GE on the Pulse Survey results in advance of cascading to all employees
Discussion _ : : She on : I
AK summarised the headline pulse survey results.
« 60% of employees at PO are engaged which is a 2% decline from the 2015 full survey and a 1% increase
since the pulse last year. The 76% response rate was very encouraging.
e The key areas of focus highlighted in the last survey had all seen an improvement, although ‘decision are
made without undue delay’ was still only up to 25%
e Biggest area of concern was the Band 4 and 3A leaders with a significant decline of 10% in their
engagement.
e This group of managers were less ‘motivated to go the extra mile’ Band 4 down 20% and Band 3A down
19%
e AK thought we were focussing on the right areas, employees who know their engagement champion are
more engaged than those who don't, as are employees who believe we have taken action since the last
survey.
e MG shared the Commercial team results with the GE and believed the effect of not providing basic
equipment and space in the building was having an adverse effect. AK agreed to analyse the results to
see if basic hygiene factors are effect peoples engagement
e The results would go live on the 13” November with a blog from Neil to SLT members to direct them to
the portal for the results. Support would be given to managers with the offer of deep dive sessions and
targeted briefings
« Additional work was needed to test with lead teams what areas of decision making were a problem, and
why there was a perceived view that decisions were not made quickly
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Outcomes : : : 4
GE agreed the following actions:
e Each GE member to spend time with AK to understand their teams results, collate the plans and come
back to GE with next steps AKIAIl
GE members to ensure they have engagement champions in each part of their business. ALL
GE to ask lead team members for they views on why decision making was perceived to be slow GE
GE members to review plans at monthly team meetings All
AK to analyse the results to; see if basic hygiene factors are affecting peoples engagement; understand
the significant shift in Band 4 and 3A results; and identify the 5 things we should focus on as a business
to fix quickly 7 . AK
‘Sales Strategy Us
Purpose :
To update the Network on the Sales strategy, and work underway
Decusien Cl eee eee Se One A RES
KG explained:
1. The Sales strategy would be presented at the GE in December, with an explanation on Network sales
segmentation and the techniques being used to drive sales. KG would report on the trials underway and
how performance ties back to the 3 year plan, identifying any gaps or opportunities.
2. Work was underway on FS growth, which was broadly flat and below plan. A team was looking at
performance at a product level to understand why the Business growth strategy was not working
3. The FS Sales and Marketing forum and FS pricing forum had been put on hold and the work taken over
by a more strategic meeting of KG, NK, PM with Gordan Gourlay (MD PO Businesses Bol) and Mike
Joyce (Bol Head of Product). This would ensure a more strategic approach.
AC supported this change as it should mean that issues raised at the joint SEC ( PO & Bol Board) would enable
better debate, help clear the ground for the renegotiation, and ensure in future we take action before we are
behind the plan.
AC stressed that it was important that the PO were seen to agree on the sales strategy and performance before
starting discussion with the Bol.
PV asked AC to finish the FS product sales review and then look at lessons learned to understand how we could
have avoided another crisis in the future.
In the run up to the Bol renegotiation it is important that any contact with Bol is coordinated. All to check with NK
before any meeting
Outcomes
GE agreed the following actions:
e AC feedback the lessons learned during the FS product sales reviews to PV to understand what could
have been done differently
e All to check with NK before any meeting with Bol ALL
Banking Services Framework (88)
Purpose nes sens
To update the GE on the status of the banking services framework and seek “input
Discussion
NK explained the BSF currently being negotiated with the banks to move from existing arrangements onto the
BSF. NK explained the economics of the proposal and the inclusion of a collar and cap arrangement.
e MK explained the range of views and commercial concerns held by the banks and their perception that
their costs were increasing by 50%
e The negotiations were reaching the final crunch point and the Business needed to decide whether it
« “KC asked if PO could be an ex-cash Business, and NK said that he had been clear to the banks that we
would withdraw the service. KG stressed that the thing that differentiated PO from its competitors was
cash and mails and without these retailers might look for alternative to the PO
e The last Govt. were supportive of BSF as they saw it as supporting the PO, but this Govt. supported BSF.
because of customer financial inclusion, could we asked for more visible SoS support?
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« KG stressed that we should not underestimate our competitors ambitions, as we have seen them manage
green giros in the past, although we might not think they have the infrastructure to deal with large sums,
cheques and business banking.
« GE members had different views on whether to stick to the BSF offer and giving notice to the banks who
would not sign
e There was a real concern that we should not jeopardise the work that we do for the banks and make
them look for alternative providers
e The following suggestions were made:
1. Exploring political support; SoS intervention (SoS has a meeting with the Chairman which could be used
to make the BSF point (PO subsidising Bank profits as they are allowed to close leaving the cost for the
tax payer!)
2. lobbying Mark Russell (CEO BiS) delivery of SGEI! products
3. lobbying rural MPs who's constituents are losing their banking services (possible PMQ)
4. Chairman to Chairman contact with the banks
Outcomes
GE agreed the following actions:
e NK to recalibrate the Board paper; to pull back from asking for a decision on withdrawal of banking
services if BSF is not agree; to explain the steps being considered — political-PR- influencing and to
options for negotiation, including threats from competitors if PO withdraws from the market
‘Financial Services aE
Purpose
To update the GE on the status of the Financial Services Strategy ¢ and seek input
Discussion
NK explained that ‘preliminary “conversations are - underway ‘with the Bol loo ing for a model which might work
better for both Businesses post 2023. There is currently duplication of activity making growth difficult. There are
also structural and capability issues. There is a challenge that two Businesses’ strategies are not aligned
e MG suggested that the paper should set out our aspirations and how the current relationship stymies
these
e NK explained that there was alignment in the medium term but that there were day to day constraints
e The proposal moves PO to a direct relationship with the Bol P&L and a position where PO would benefit
from Bol growth. To achieve this would mean a much longer relationship past 2023.
e NH suggested including the information on what has not gone well in the current relationship and the
inability to respond to changes in the market
e MG suggested that the paper should include a refresh of the strategy for the next year including the
effect on products.
Outcomes
“GE ‘agreed ‘the ‘following i 5
NK would update. the Board paper taking account sof the GE discussion
AOB
Purpose
To cover issues raises as AOB
Outcomes.
e End User Computers EUC AC explained the new computing equipment being provided and the
timescales. GE asked NH to ensure that the communication going out to colleagues does not oversell the
kit. NH
e JM reported that the Prudential Regulation Authority (PRA) had requested a meeting with the COO, so
AL and CB were due to meet them. It is thought that they do not fully understand the PO and Bol
relationship, although the exact questions are not yet know.
e NK explained that a number of small products, such as home help schemes had been closed, but this
had led to some issues especially in Scotland where there is a very traditional view of PO, NK to bring to
Monday's GE
e NH to bring IR issues including Pensions and Christmas Eve to Monday's GE
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« All Board papers to be received by Company Secretary by close of play Wednesday 18" November.
All
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Strictly Confidential
Post Office Limited Group Executive Status Report as at: 30/11/2015
Board I REFERENCE ACTION Action Owner Due Date STATUS Open/
(GE Member) Closed
POL GE I 16/04/2015 Have succession plans in place for GE, I Neil Hayward / GE in On agenda to be discuss at GE on Open
Capability GE-1 and GE-2 levels by the end of Sarah Malone February 20th August - on going and needs to
Development the calendar year. 2016 be reviewed again in February 2016
Action 5
POL GE I 14/10/2015 To check the customer profile of new Peter Markey March 2016 Telco customer profile to come to Open
Sales telco customers to understand how GE Meeting Commercial Committee. Report
Performance best to manage churn. back to GE in March.
Action 2
POL GE I 14/10/2015 To organise a session for the Board to I Alwen Lyons January To be discussed with the Chairman Open
Public give them the political context for the 2016 Board
consultation Business. Meeting.
on our social
purposes
Action 3
POL GE I 12/11/2015 Produce a branch by branch analysis Radha Davies GE on 11th This action is on the agenda for GE I Open
Performance - I of the correlation between ‘effort’ and January on 17/12
Customer P&L.
Action 1
POL GE I 12/11/2015 Produce a paper for the GE Nick GE on 11th Open
Performance - I explaining: What is the Travel Money Kennett/Radha January
Customer customer proposition and promise Davies/Kevin
Action 3 and how does it tie back to Post Office I Gilliland
values and the pricing policy? What
are the current problems and the
options available to overcome them?
What is the proposal to mitigate the
complaints
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POL GE I 12/11/2015 Provide a paper for December GE to Kevin Gilliland Initials A summary to be provided that describes I Open
Performance - I give comfort that the customer data update at GE I the actions in place in preparation for the
Sales Action 1 I capture would ensure proper on 17th r fi the PIA. We h
customer awareness and consent. December outcomes trom the rise nave pre-
empted the outcomes of the PIA and
have actions prepared to take us in to Q4.
POL GE I 12/11/2015 Breakdown Supply Chain complaints CFO GE on 11th Open
Performance - I into subpostmaster and external January
Operations customers
Action 2
POL GE I 12/11/2015 Report the IT incidents from a Chris Broe GE on 11th Introductory report prepared for Closed
Performance - I customer impact perspective January QBR covering the “basics” will be
Operations enhanced in the move customer -
Action 3 centre KPIs 6 next version.
POL GE I 12/11/2015 A strategic review of the PO call CFO/Angela VDB GE on 10th Open
Performance - I centre provisions would be March
Operations undertaken towards the end of the
Action 5 financial year.
POL GE I 12/11/2015 Actions to be updated before the Group Executive Open
Minutes and meeting in time for papers to be
Action Log distributed
Action 1
POL GE I 12/11/2015 Each GE member to spend time with I Amber GE on 17th Action taken — three areas that had seen I Open
Engagement AK to understand their teams results, I Kelly/Group December the greatest decline in engagement
mid-year collate the plans and come back to GE I Executive fab bust f ‘
Pulse survey with next steps (commercia , business transformation
results Action and corporate services) have all spent
i time with AK to understand results. Deep
dive sessions for these three areas
carried out, findings and recommended
next steps shared with each GE member.
Other GE members supported by Heads
of HR.
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POL GE I 12/11/2015 GE members to ensure they have Group Executive I GE on 17th BT have 4 Open
Engagement engagement champions in each part December
mid-year of their business
Pulse survey
results Action
2
POL GE I 12/11/2015 GE to ask lead team members for Group Executive I GE on 17th BT Deep Dive sessions scheduled for I Open
Engagement __I they views on why decision making December 10" and 14" December.
mid-year was perceived to be slow
Pulse survey
results Action
3
POL GE I 12/11/2015 AK to analyse the results to; see if Amber Kelly GE on 17th Action taken - AK conducted 1:1 Open
Engagement basic hygiene factors are affecting December phone calls and ran five deep dives
mid-year peoples engagement, understand the sessions (36 people). Findings and
Pulse survey significant shift in Band 4 and 3A
results Action
5
results; and identify the 5 things we
should focus on as a business to fix
quickly
recommendations have been
completed and are being addressed
as part of the engagement strategy.
In addition to the key themes from
the survey, a number of basic
hygiene factors arose that are
impacting senior managers, they
are:
1. We do not have the technology
in place to fully support agile
working
2. No telephone directory, really
difficult to find a colleagues
phone number
3. 15 minutes to load laptop
everyday
4. New starts are waiting for.
weeks before received work
equipment - poor induction and
breaches information security as
confidential documents are
being held on personal devices
5. SLT/GE do not seem to support
agile working culture (visibility
remains important), trust issue.
6. Meeting rooms that are empty
but unavailable as reserved for
GE member/project team
Points 1 to 4 - sent to Chris Broe.
Points 5 - GE to communicate
clearly what we mean by agile
working to their lead teams to
disseminate and encourage.
Point 6 — Review block booked
meeting rooms to see if there can be
any removal or compromise on block
booking
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POL GE
10/09/2015
Paddington
Action 1
GE to revisit PO approach to travel
hubs as a separate issue
Kevin Gilliland
End of
December
This has been discussed as part of
the Paddington negotiations and
further conversations regarding this
will be part of the next phase of
discussions.
Open
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Improving Engagement in Post Office - Our Strategy
Author: Amber Kelly Sponsor: Tom Moran Date: 10 December 2015
Executive Summary
Context
Compelling evidence demonstrates the business value of engagement. Analysis from
our Crown Offices shows our income, customer experience and productivity measures
are all better in branches where employees are highly engaged: sickness absence is
32% lower; customer satisfaction is 5% higher; and we deliver better income
performance (total 280k a year difference in income vs target).
The challenge is to improve engagement levels right across Post Office - a great
business to work with and for - as the pace of change within Post Office drives our
transformation programme. We have seen a gradual increase in engagement levels
over recent years but they are still lower than in comparable retail and FS businesses,
and we have seen concerning signs of disengagement in our most recent survey.
Engagement will only improve if the clear strategy and detailed implementation plans
we now have are fully and publicly supported at all levels of the business.
Questions this paper addresses
1. What is engagement and why is it important?
2. How engaged are our employees and agents?
3. How are we going to engage our people better?
Conclusion
1. Engagement means having a strategic narrative for our people, backed well by
managers and seen by everyone as having integrity. Engagement is important as it
improves the ‘top line’ and the ‘bottom line’, improving business performance.
2. Our most recent engagement surveys show our employees and postmasters are
not as engaged as we would like and less engaged than competitors’ employees.
3. Our strategy is based on the four key themes which make up effective
engagement. It will use our engagement surveys, action plans and champions to
make engagement integral, drawing on what is already working well, and best
practice from outside Post Office.
4. We have a clear strategy and detailed plan, ready for roll-out from January 2016.
It is part of the People & Engagement Strategy which underpins our
transformation. Managers, and particularly the GE, need to give it their backing.
Input Sought from GE
The GE to review, endorse and actively implement this strategy. This does not mean
any additional funding - what we need is further commitment to tackle some of the
key issues that are getting in the way of engaging our people.
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1. What is engagement and why is it important?
Engagement at Post Office is the same as in any other workplace or organisation.
Extensive research has proved four key themes essential to having colleagues’ who
are committed to the organisation, advocates for working at Post Office, and willing
to apply discretionary effort in their work.”
1: Strategic narrative
Strong, visible, strategic narrative about the organisation, underpinned by
empowering leadership, provides a strong story about where we have come from
and where we are going. This gives a line of sight between the job and the
organisation’s vision. The story is communicated clearly, consistently and
constantly.
2: Engaging managers
Managers offer clarity, appreciate employees’ effort and contribution, and treat their
people as individuals. They organise work efficiently so employees feel valued,
equipped and supported to do their job. As well as coaching and mentoring their
people, engaging managers deal with dysfunctional behaviour fairly and firmly.
3: Voice of the people
A consistent voice for people throughout the organisation, allowing us to reinforce
and challenge views between functions and externally. A business which sees
employees and postmasters as a key asset - not a problem. Employees and
postmasters feel they are able to voice their ideas and are listened to, both about
how they do their job and how the business is run. Problems are shared and so is a
commitment to arrive at joint solutions.
4: Integrity
The values on the wall are reflected in day-to-day behaviours. There is no ‘say-do
gap’. Employees feel the organisation lives its values, resulting in trust and a sense
of integrity.
Our strategy focuses relentlessly on these four enablers of engagement. Section 3
sets out what steps we have already taken and will take to achieve them.
Post Office has c7000 employees and thousands of staff in the c11,500 Agency network. This Strategy
is aimed at all these people. The phrases ‘people’, ‘workforce’ and ‘colleagues’ apply to both employees
and postmasters, unless otherwise specified.
? Engaging for Success’, David MacLeod & Nita Clarke for the UK Government, 2009.
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The value of engagement
A growing body of evidence demonstrates the value of getting engagement right. We
have conducted research on our Crown branches which confirms this for our
business? Detailed analysis of the links between engagement scores in Crown
branches and a variety of key performance measures (attendance, customer
experience and sales) shows a clear positive correlation. For the first time, we can
show a clear link between engagement and performance in the Post Office.
Figure 1: Crown Branch Engagement Analysis 2015 - Headlines*
Engagement reduces absence...
Absence
The lowest quarter of
Crowns by Engagement
(73) cost £120k p.a.
more in sick pay than
the (70) Crowns in the
highest quarter. This is
an average difference
of c£1,685 per branch
.improves customer satisfaction...
Customer
satisfaction
This is 5% higher in
Crowns in the top third
(those with
engagement of 70%+)
than it is in Crowns in
the bottom third (those
and increases sales.
Income
The highest third of
Crowns by engagement
(70%>) earn £280k p.a.
more (difference in
income vs target) than
the lowest third (<55%).
with engagement of This is an average
55% or less). difference of c£1,600 per
branch.
2. How engaged are our employees and postmasters?
To know what success looks like, we need to understand the trend and history of
engagement in the Post Office and how we compare with our competitors across
similar retail and Financial Services (FS) businesses.
At present, Post Office employee engagement is stable, but lower than the
benchmarked average for similar retailers and FS businesses - the so-called ‘retail
norm’ and ‘FS norm’.° The UK retail norm is 64% and the high-performing norm is
73% — Post Office engagement is at 60%. The UK FS norm is 66% and the high-
performing norm is 73% - here Post Office engagement is 54%.
While our future is as a retailer with a strong FS offering. We also need to
recognise our legacy as a public sector and largely public-funded organisation. The
3 Crown Branch Engagement Analysis 2015, Post Office December 2015. Conducted by Stillae Ltd using
industry best-practice analytical tools to identify key trends. The Engagement Team has worked with the
Crown team on this work and will be sharing it with Crowns and the wider business.
* See Appendix 1 for more detail.
5 Hay Group Engagement Survey Benchmarking Data, 2015. For Retail, this covers 10 UK organisations
including Tesco, Specsavers, Dixons. For FS, this covers 24 UK organisations including Barclays, HSBC,
Aviva, Santander, Standard Life, Prudential.
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POST OFFICE PAGE 4 OF 17
Civil Service engagement score is 58%, having remained stable over the last five
6
years.
There are also significant variations between parts of the business.
Postmaster engagement is significantly lower than we would like (56% in the
2014/15 survey) but we have a more fundamental problem - not enough
postmasters complete our survey for it to be reliable.” We are working closely with
the Communications team, Agency support teams, NFSP and _ postmasters
themselves to increase response rates.
Employees
The 2015 engagement survey showed 62% of employees at Post Office were
engaged. The most recent mid-year ‘Pulse’ survey® showed a 2pp decline to 60%.
Based on the sample size, this decline is seen as stable. Moreover, the last three
years have seen engagement levels increase. However, this still leaves us below
our comparators and the headline scores mask concerning signs of disengagement
particularly within the senior manager population.”
ure Post Office Employee Engagement Results 2013-15
Engagement Results
58 59 62 60
s 55 54
2
2
g m@ Census
°
: = Pulse
2013 2014 2015
Engagement represents employees committed to the organisation, being advocates for working at Post Office and
willing to apply discretionary effort in their work.
There were also significant differences between teams. Engagement levels in our
Crown and Supply Chain networks are holding up well despite significant levels of
change.'° However engagement has declined quite significantly among some of our
central support teams, including Commercial, Business Transformation and FS Sales.’*
® Institute for Government, Civil Service Engagement Index, IoG 2014.
” Only 26% of postmasters replied to the 2014/15 survey.
® All employees are surveyed in the full-year survey. c25% are surveyed in the Pulse survey.
° Engagement scores for senior managers (Band 4 and 3a) declined by 10pp to 52% and 57%
respectively.
10 Crown Network: Pulse 62% vs. Census 62%, Supply Chain: Pulse 57% vs. Census 54%.
‘1 Commercial: Pulse 42% vs, Census 53%, Business Transformation: Pulse 38% vs. Census 48%, FS
Sales: Pulse 60% vs. Census 70%.
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Postmasters
The 2015 postmaster opinion survey’? reported 56% of postmasters as highly or
moderately engaged. However this was based on a response rate of just 26%.
The low response rate compares unfavourably to other franchise businesses - Smith
and Henderson, our survey supplier which specialises in these surveys for franchised
businesses, reports an average response rate for 2015 of 77%. This is partly
explained by some key differences:
e Their largest franchisor client has c400 franchisees, far fewer than Post Office; and
e All but one of these companies have email addresses for each franchisee to drive
up response rates and wider engagement. We are addressing this as part of our
Strategy.
ffice Postm: rEn ment Ri Its 201
mHighly Engaged
= Moderately Engaged
Disengaged
mActively Disengaged
Based on Engagement Index: Highly Engaged mean answer > 4.0 (Agree); Moderately Engaged mean answer > 3.0
(Neutral), Disengaged mean answer > 2.0 (Disagree); and Actively Disengaged mean answer < 2.0 (Disagree)
3. What is our engagement plan?
This Engagement Strategy is shaped by the four key components of engagement we
define at Section 1. The key areas of focus are summarised below and the detail of
our approach below that. Delivering this and improving engagement is critical to
taking our workforce with us as we transform the Post Office.
12 Conducted by Smith & Henderson.
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Our first step has been to use the 2015 Pulse survey as a catalyst for focusing on
engagement within each team. We - working closely with the Communications team -
have carried out a series of ‘deep dive’ sessions in priority areas to identify the root
causes of disengagement. This involved:
e 9 separate ‘deep dive’ sessions;
e Over 80 Band 4 and 3a colleagues;
e All business areas, with 3 sessions devoted to priority areas: Commercial,
Corporate Services Transformation;
e Additional support on engagement from the Engagement Team and relevant Head
of HR
e A series of CEO lunches with open discussions on where we are as a business.
These will continue in to 2016 and demonstrate the commitment we have to
listening to our colleagues. The Engagement Team will capture key themes and
feed them back in to Action Plans.
This activity has resulted in bespoke Engagement Action Plans for the three priority
areas and refresh of all other existing plans, which are owned personally by the
relevant GE member.
The key themes that emerged have been embedded into this strategy, along with the
action that needs to be taken. The actions set out below combine engagement-specific
work with wider business activity which will affect engagement. This combination is
crucial to the success of our Engagement Strategy and means we need the full
support of the business.
1: Strategic narrative
Current situation: A key theme emerging from the deep dive sessions is that the
strategy and direction for Post Office is unclear. People want to know what the future
plans are and how they align themselves to that. We need to be clear on our story.
Actions to enable strategic narrative:
e Our Transformation Narrative has already been launched to the Senior
Leadership Team (SLT). We will be launching it across the business in January
through ‘immersion sessions’ with managers;
e We will work closely with the Communications team to support the launch of the
Transformation Narrative by developing case studies of best practice relating to
the Narrative and events for our Engagement Champions so they can be
advocates for it in their teams; and
¢ Our new Communications channel, ‘One’, launched in November 2015. One will
reach to the edges of Post Office and make sure all employees and postmasters
are getting clear and consistent communication messages
e A new approach to engaging our senior leaders which addresses declining
engagement and communication indices (strategy understanding drops from
SLT [85%] to Band 4 [66%]) and sets the business up for the forthcoming
communication of our Transformation Narrative.
This proposal will be discussed by the GE separately to this strategy and would
involve dissolving the SLT in its current format. In its place, would be the
Leadership 300, an expanded group that would meet twice a year to
communicate business priorities. In addition, there would be a smaller Group
Leadership Team [GLT]; the c20-30 roles that would directly support GE define
strategy, lead transformation and organisational culture.
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2: Engaging managers
Current situation: Not all our colleagues have the skills and support needed to
improve engagement confidently. We will shine a light on best practice across our
business through the development of best practice case studies, highlighting what
good looks like at Post Office.
Actions to enable engaging managers:
¢ Our new People Management Fundamentals training programme launches in
January 2016. It will focus on developing managers across the business with
key messages about engagement in the mandatory ‘My impact as a leader’
module, accredited by CMI;
« Engagement objectives will be included in an individual’s PDR and PDP from
2016/17;
¢ We want to roll out the new ‘Dynamic’ performance and talent review process -
successfully piloted in Commercial - to the whole business for 2016/17. This
would address a key issue from the deep dive sessions - senior managers
highlighted the current PDR process as poor;
eA service extension from Adviser Plus (My HR) goes live in January. This
innovative model provides advice and guidance, coaching and case
management for line managers. The result is enhanced commercial
performance, line manager capability, and quality of HR advice; and
e We launch the Post Office Learning Academy in April 2016. The Academy will put
learning in the hands of colleagues and postmasters, giving them the skills they
need for the future. Learning will be available on-line, 24/7 and with specialist
face-to-face learning where it is needed. Our best leaders are already showing
the way, constantly challenging to improve their teams and themselves.
3: Voice of the people
Current situation: We have two suppliers in place to deliver the employee and
postmaster surveys. Our service from Smith & Henderson (postmasters) is
excellent, from Hay (employees) less so. We need to move away from a focus on
the survey to what we do with the results, throughout the year. The survey is a
check point, not an end point; the catalyst to start a conversation.
Actions to enable voice:
e We have revised the annual survey for employees and postmasters with input
and sign-off from business leads;
e An online portal for survey results access, action planning and resources will go
live in April;
¢ We are tendering for a provider for employee and postmaster engagement
surveys. Our aim is better service and value for money. The new provider will
be in place by July 2016;
¢ Communication plans in place (developed and approved by the Communications
and Agency support teams) to promote both employee and postmaster surveys
and raise response rates, particularly amongst postmasters. This year we will
use postmasters’ personal email addresses as well paper surveys for the first
time. We will monitor survey response rates daily and share with relevant
teams to drive up response rates and work with Regional Sales Development
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Managers (RSDMs) and Area Sales Performance Managers (ASPMs) to ensure
they are encouraging participation in the survey;
e We currently have around 100 volunteer Engagement Champions - but varying
levels of knowledge and experience and no clear charter on way of working.
We are re-launching the Champions network with an event in January 2016. At
this event we will agree what the role is, agree our ways of working and set the
tone for engagement going forward. This will be followed up with quarterly
champion events to ensure champions are fully supported;
e The new One platform will offer a two-way channel to communicate with
employees and postmasters. Using One, we will create online communities to
listen, inform and share best practice; this will not replace face to face
interaction. To enable voice our default position is collaboration with our people,
through a continuous commitment to talking to our people directly and often.
e A quarterly engagement forum that includes key stakeholders from the agency
network, unions, internal functions and postmasters will keep engagement on
the agenda and ensure planned activities are joined up.
4: Integrity.
Current situation: We aspire to be a business where the best people can thrive, in
line with our common values - commit, challenge and care. Those that succeed
will be recognised, rewarded and able to thrive, whether as employees or
postmasters. The recent deep dive sessions, and our survey data, show decision
making remains an obstacle.
Actions to enable integrity:
e An engagement masterclass will clearly define what engagement is, why it is
important and how we can improve it. Rollout will being in January.
e Our new Target Operating Model (TOM) will determine how the business will be
structured in the future. We are working with the Transformation team on the
TOM, using the feedback from the deep dive sessions to inform the ongoing
review of accountabilities and decision making so the new model(s) address
the concerns we have heard.
¢ We will ensure unethical behaviour can be escalated without fear. We have
heard reports of employees being pressured into completing the survey while a
manager has stood over them, and of surveys being completed on behalf of
employees - and of examples of managers trying to identify individuals who
have completed the survey. This is unacceptable. We will promote the Speak
Up line for both employee and postmaster surveys and throughout the year to
report unethical conduct.
e Employee wellbeing is associated with high levels of employee engagement and
performance. We already undertaken a broad range of wellbeing activities,
notably: personal health checks; ‘at work’ referrals to occupational health;
mental health awareness work; and our ‘Lifestyle Online’ wellbeing self-
assessment tool. Our next phase will include a new ‘Self Service Wellpoint’,
extending our wellbeing self-assessment to all agents and improved support to
employees and agents who suffer trauma. The Head of Engagement will work
closely with the wellbeing team to support a refreshed approach to wellbeing.
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Additional activity to engage postmasters
Most, but not all, of the activity outlined above will apply equally to employees and
postmasters. As some activity (eg. the new PDR process) will not apply to
postmasters, we have identified some additional activity to drive engagement in this
area, based on feedback from the postmaster engagement survey and other channels
such as the Agency support team and the NFSP.
We already have a postmaster-specific Engagement Action Plan, owned by the
Network & Sales Director and delivered by their team, with oversight and support
from Engagement. This is on track at present but not yet as high-profile or ambitious
as it could be - this Strategy and the new ‘One’ approach to Communications give us
an opportunity to demonstrate the value of engagement to our postmasters.
There is a joint commitment from Post Office and the NFSP to support Postmasters
better in their small business challenges, through advice, coaching, mentoring,
business/financial education, tools, and to create services.
To deliver on this promise, we are funding additional support to Postmasters from
Franchise Finance, a leading franchise/small business practitioner which we asked to
carry out a more in-depth research project to further refine precisely what could best
support Postmasters. We will review this regularly with the Agency team to identify
the impact on engagement and the Agency Sales Strategy. The activity is proposed to
be a 3-month pilot of a number of support initiatives as follows:
e Business Health Checks for 50 postmasters;
e Business Plans for 10 Prospective Sub Postmasters and for them to attend the FF
‘Understanding Business Finance and Accounts’ course;
e Arranging Finance;
e Understanding Business Finance and Accounts Courses for both Post Office &
NFSP; and
e A Help Line for NFSP (3 month pilot).
This postmaster-specific activity will be delivered through close working with the
Agency support team which is charged with delivering the Agency Sales Strategy
which has to deliver £60m in incremental contribution from the agency network by
March 2020. This includes:
e Our Financial Services Strategy which focusses on the CRM Program;
e Our Mails Strategy which focused on the 2 key areas of
o Increasing our Mails ATV; and
o Winning New Business outside the doors of our branches (New Business
Development Model);
e Our Retention Strategy and how we will ensure we keep our customers doing
business with us into the future.
In summary, the successful delivery of the Strategy is designed to create a culture of
engagement in Post Office. The expected behaviours are explicit and bought into by
all - ‘the way we do things’. It becomes part of the Post Office DNA.
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4: What do we each need to do now?
We have a clear strategy and detailed plan, ready for roll-out from January 2016. This
builds on the work that is already ongoing. Appendices 2 and 3 provided a high-level
timeline and a detailed, month-by-month, implementation schedule for reference.
All the planned activity in this paper is already funded from existing Engagement or
other team (eg. Communications) budgets. What we need is therefore the full backing
of all parts of the business to make the Strategy a success. The matrix below
demonstrates this. The Engagement team is responsible for co-ordinating and over-
seeing this Strategy but it can only delivered by the business as a whole.
Figure 4: Respons s for delivering the Engagement Strategy
Line
Managers
Team Postmasters
members I /RSMs &
ASPMs
Group
Executive
Eng.
Champions
‘Buy-in’ and
promote
Strategy
Prompt
action on
Action Plans
and Deep
Dives
Encourage
responses to
engagement
surveys
Own and re-
enforce
Transformat
ion
Narrative
Complete
surveys and
contribute
to Action
Plans
Criteria for success
Our ambition is to exceed the retail norm for people engagement within our 1000 day
transformation journey. That means improving to at least 64% by 2018.
We have also set ourselves challenging targets across the activities we need to
improve engagement overall. These are set out below.
In addition to these targets, we will build on the first ever detailed analysis of the links
between engagement and performance and make it annual. This Post Office
Engagement Value Index will measure the impact and value of high and low
engagement. Over time, we can use this as a predictor of future performance.
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ure 5: Engagement Strategy Targets and Success Criteria
Now OIE 017 2018
. Employee Engagement - Employee Engagement - Employee Engagement -
Employee Engagement ge prt age
Line Manager Engagement Line Manager Engagement Line Manager Engagement
Line Manager Engagement Index - 70% Index - 72% Index - 740%
. Employee Response Rate - Employee Response Rate - Employee Response Rate -
Employee Response Rate som ‘80% Sor
Postmaster Response Rate Postmaster Response Rate Postmaster Response Rate
Postmaster Response Rate a050 * 45e0 ee
Action Plans Action Plans - 100% in Action Plans - 100% in Action Plans - 100% in
place and implemented place and implemented place and implemented
Engagement Comms - Engagement Comms - Engagement Comms - Engagement Comms -
Resulte Quarterly 'You Said, We Quarterly 'You Said, We Quarterly 'You Said, We
ese Did" Did" Did’
Key Risks and Mitigation
1. The business does not ‘buy-in’ to and promote the engagement strategy. At GE
level, the presentation of this strategy is designed to secure support by
demonstrating the value of engagement. Across the business, we will use this
compelling evidence from Crowns to get buy-in. And our network of Engagement
Champions will keep colleagues interested - just as the Agency support team will
with postmasters.
2. The degree of wider business change disengages our employees. This is our
largest risk and not one we can mitigate by simply stopping our transformation
activity. Given this, it is best mitigated through the successful landing of our
transformational narrative and implementation of this engagement strategy.
3. Feedback from ‘Deep Dive’ sessions is not acted on - or seen to be acted on - by
senior managers. This would be hugely damaging to engagement and we are
pleased to have secured personal commitments from all relevant GE members as
part of developing this Strategy. The Engagement team will support each GE
member in delivering their Action Plans and making sure they are communicated
to their teams so the differences are noticed.
4, The response rate to the postmaster survey remains low, making it hard to get
accurate feedback and act on it. This is partly a practical problem and partly a
‘puy-in’ issue. On the practical side, to date we have not been able to offer
Postmasters an on-line option for completing their survey and we will resolve this
for 2015/16 and future years. On ‘buy-in’, we will use our Comms channels to
demonstrate the benefit to Postmasters of completing the survey.
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5. Basic ‘hygiene factors’ such as the ‘on-boarding’ process for new employees are
not good enough, disengaging people despite improvements elsewhere. Basic
hygiene factors (getting laptops, phones not set up etc) must be addressed to
ensure we engage and retain new employees -and minimise the number of
employees who are engaged in their jobs but do not feel enabled to do them
properly. The Engagement Team is working with each relevant function identified
as part of our engagement feedback (surveys, deep dives etc) to highlight these
so they can be resolved. Examples include IT (for employees’ equipment and IT
helpdesk),the NBSC (for day-to-day postmaster support) and issues with desk
space and meeting rooms at the customer support centre. For example, the
implementation of the new desktops/laptops in Q4 of 2016 should address a
number of the IT equipment issues raised in the deep dive sessions.
Post Office Engagement Team
December 2015
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A ndix 1: Findings from the Crown Branch En ment Analysis 201
We commissioned Stillae, analytical experts specialising in engagement and business
performance, to look at our Crown network and identify key trends and links. This is
the first time we have conducted this type of research within the Post Office.
This work followed a rigorous scientific methodology. Approach which included
90% of all Crowns. Some were excluded based on objective criteria relating to
considerations, not engagement results.
Figure 1: En ment link n
& . stillae
Engagement linked to Absence
. I ows semen 215 (tom Gurr 3000 Bottom Quarter of
pa : aniston I 52.72 Crown Offices by
_ Highest Engagement 2015 (Top Quarter: 70 COs) Engagement in 2015
aid show significantly
higher sickness absence
during the year
(2014/15)
1.3%1.2%
1.5%
Sickness Absence Total % Short-Term Sickness Long-Term Sickness
2014/15 Absence % 2014/15 Absence % 2014/15
Total Sickness +32%
t e 7%
Figure 2: Engagement linked to
come
stillae
@ Engagement linked to Income
‘™ Bottom Third by Engagement 2015 I
Middle Third by Engagement 2015
Top Third by Engagement 2015 70+
102% I 103% 103%
Income versus Target JR
2015/16
Income vs target Income Growth (YOY
15/16 15/16 vs 14/15)
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Figure 3: Engagement linked to customer advocacy
stillae
@engagement linked to Customer Advocacy
Engagement
Bottom Third by Engagement 2015 I
& Middle Third by Engagement 2015
"Top Third by Engagement 2015 I 70+
Customer
Satisfaction is 5%
higher in the Top
Third (by
Engagement),
compared to the
Bottom Third
Cust Sat (14/15)
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Strategic
Narrative
First engagement case study
published
Produce a leadership guide on
Engagement
Produce a bank of Engagement Resources
recommendations to GE
Postmasters & employees:
Seekinput and sign off rom GE on
_ Engagement Strategy
Engagement objectives in PORs
share survey results
with 6E
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Appendix 3: Detailed month-by-month timeline for implementation
Month Activity
December Ie Deep dive sessions on Pulse results with Band 4, Commercial, Corporate Services and Business
2015 Transformations.
e Present key recommendations from deep dive session to Group executive.
e Paula SLT sessions
e Seek input and sign off from Group Executive on engagement strategy. Including first review of the
business linkage analysis
e First engagement case study published
e Utilise One channel to create online communities for champions
January e Comms for both surveys through One
2016 e Circulate infographic for postmasters on action taken as a result of 2015 survey
e Pre-Survey comms pack sent to managers and champions with key messaging about why the survey is
important, best practice and FAQs. Include Speak Up details so unethical behaviour can be reported
e Engagement champions launch event
e Begin roll out of engagement masterclass to leaders and managers
e Management development programme launched across the business. The ‘my role as leader’ module will
contain engagement collateral, supplied by the Head of Engagement, to ensure consistent messages are
being given to all managers.
e Launch postmaster survey
e Management development programme launches, to include consistent content on engagement
e MY HR, with additional services, goes live
February Ie Launch employee survey
2016 e Produce a bank of engagement resources
e Produce a leadership guide on engagement
e Engagement forum launch
March e Share survey results for postmaster and employees with Group Executive
2016 e Survey comms pack for managers and champions
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April e Survey results cascade
2016 ¢ Online portal goes live
e Engagement awards issued, with supporting communications to the wider business
e Post Office Learning Academy launches
Qi to Q4 Ie Action plan reminders and monitoring
(All action I «
ongoing) Ie
Champion events
Masterclasses
Case studies
Mid-year Pulse survey
New survey provider in place
New PDR process rolled out
New Apprentice scheme
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Leadership Team Composition Decision Paper
Authors: [Aidan Alston and Mark Davies] _ Sponsor: [Neil Hayward] Date: [10/12/2015]
Executive Summary
Context
The senior leadership team (SLT) has grown in the last three years from an initial
cohort of 49 (2012) to a current population of 73 (Dec 2015). The current format has
lost some clarity on its purpose and is experiencing declining engagement (down
3%ppt to 67% in October Pulse). With the forthcoming launch of our Transformation
Narrative, now is the time to revisit our approach to senior engagement.
Questions addressed in this report
1. What is the purpose of the SLT?
2. What roles should be in the SLT?
3. How do we engage with senior leaders outside of the SLT?
4. What is our recommended approach?
Conclusion
1. The SLT exists to provide business leadership. They are the most senior group
that support GE to deliver the strategy, to lead transformation and to set the tone
in the way we do things.
2. The roles included in SLT should be the most senior positions leading customer
facing teams, revenue generating business units or support functions with business
wide impact. There are a number of ways this can be defined; current format (73
roles), job size (60 SLP roles with 950 Hay Points), reporting lines (52 GE direct
reports at Band 4 and above) or a more fluid identification of business critical roles
(c.20-30 roles).
3. In addition to SLT, is the need for a broader senior forum to address declining
senior engagement (W 10%ppt at Level 4 and 3a to 52% and 57% respectively).
In response, we propose to create the Leadership 300, a broader collective of
senior roles that would meet twice a year (Annual and Interim results) as a senior
communications forum.
4. We recommend dissolving the SLT in its current format. In its place, we
recommend forming the Leadership 300, an expanded group that would meet
twice a year to communicate business priorities. In addition, we recommend
establishing a smaller Group Leadership Team [GLT]; the c.20-30 roles that will
directly support GE define strategy, lead transformation and organisational culture.
Input Sought: Input Received:
GE is asked to support the proposals put This paper has been formed through
forward in this paper. discussion with AC, DH, NK, TW, AL,
MG, JM and PV
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The Report
What is the need or opportunity and why now?
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1.1: Over the last 3 years the senior leadership team has grown by almost 50% to its
current population of 73; with on-going requests in place to add further members. As
a result of this growth and an evolving senior structure (e.g. ExCo to GE) the
collective has lost some of its clarity, purpose and ultimately effectiveness.
1.2: On the back of declining engagement and communication indices (strategy
understanding drops from SLT [85%] to Band 4 [66%]) and the forthcoming
communication of our Transformation Narrative; now is the time to reposition our
approach to senior engagement.
1.3: External benchmarks (e.g. ITV, Dyson’) identify the purpose of an SLT is
generally to communicate business priorities to the critical senior audience to enable
them to implement locally. In addition, there is also often a smaller team that exists
to provide strategic support to the Executive Team.
1.4: External benchmarking also indicates our SLT to be comparatively large as a
leadership group and small as communications forum. In the current format it
represents 1.1% of employee base (73 from 6634) which is significantly above
leadership forum benchmarks such as Lloyds (Top 40 from 76,000 employees is
0.05%) and Serco (Top 60 from 125,000 employees is 0.05%); however it is
comparatively smaller than senior communication forums at organisations such as ITV
(200 from 4600 employees is 4.3%).
2. The proposal
2.1: We recommend dissolving the SLT in its current format and replacing it with the
Leadership 300 (L300) and Group Leadership Team (GLT).
Group Executive
(GE)
Group
Leadership Team
(GLT)
Leadership 300
@ (L300)
Purpose: (Executive Team)
To run the business
Purpose: (Leadership Forum)
To support GE define strategy,
transformation and culture.
Purpose: (Communications Forum)
To understand business priorities as
part of leading implementation
locally.
Benchmark data provided by T-Three Consultancy (http://www.t-three.com/clients/client-
stories.php)
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2.2: Feedback from GE members and external benchmarks both support the
formation of a broader senior communications forum. We therefore propose to form
The L300, a group made up of senior operational and support centre roles (appendix
1) that would meet twice a year (July and November) in alignment with Annual and
Interim results. This would provide consistent business updates to the critical
population in cascading them; as well as support declining Band 4 engagement.
2.3: By purposing the L300 clearly as a communications forum, a smaller group can
exist to provide strategic support to GE. We propose to form the GLT, a group made
up of the most senior business roles (appendix 2) that would meet every two months.
This would provide a platform for strategic updates/debate (e.g. Mails or IT strategy)
that critical business leaders need to know (but may not be appropriate to a wider
audience) as well as responding to critical business issues (e.g. declining senior
engagement) outside of GE.
Purpose of Role of group Frequency Membership
group members
Group Business To support GE to: I Meets for a half-day The most senior
Leadership I Leadership o define and every two months to I positions leading
Team Group deliver provide strategic customer facing
(GLT) strategy updates (e.g. Mails teams, revenue
o lead Strategy) or respond I generating business
transformation I to critical business units or support
o set the tone in I issues (e.g. declining I functions with
how we do senior engagement business wide
things levels, slow decision impact (c.20-30
making) roles)
Leadership I Senior To lead and Meets for a full-day v SLP grades (60)
300 Communications I communicate twice a year in v Level 4 roles
(L300) Forum business priorities I alignment to Annual (211)
locally and Interim results v Other large ops
(July and November) I managers (c.20-30)
3. Risks and Mitigations
3.1: The primary risk associated with this proposal is the disengagement of excluded
members in the transition from SLT to GLT (c.40-50 roles removed). This risk will be
mitigated however by a) positioning of the L300 as an expansion of SLT and b)
providing transparent criteria on GLT purpose and membership to enable GE to brief
their direct reports.
3.2: The secondary risk associated with this proposal is the time and cost required to
run a GLT and L300. This risk will be mitigated by establishing a Steering Group
(Comms Director, Director of LRT, Head of Engagement, Transformation Director,
Head of Strategy, Company Secretary) who will work together to ensure senior
engagement supports business priorities.
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4. Timetable
4.1: Based on GE support, we propose to communicate the formation of the GLT and
L300 in January. As part of launching the L300 we would gather them together in
January to launch the Transformation Narrative; and thereafter they would come
together in alignment with Annual and Interim results. The first GLT event would be
in February (appendix 3). Both audiences would be supported through the year by
the broader communications channels (e.g. TeamTalk, In the Loop).
5. Conclusion
5.1: The current SLT format is unclear and has declining engagement levels (3%ppt
drop to 67% in October Pulse). Based on this, and the forthcoming launch of the
Transformation Narrative, now is the time to reposition our approach to senior
engagement.
5.2: External benchmarks identify a common approach of establishing a senior
leadership group that gathers together at key points in the year to hear key business
messages (e.g. ITV, Lloyds, TfL). This exists as a senior communication forum and is
typically a population of 200-500 depending on organisation size. In addition to this,
organisations also often have a smaller group that gather more frequently to provide
strategic support to their Executive Team.
5.3: We propose to create the L300, a senior communications forum that would meet
twice a year in alignment to the Annual and Interim results. The purpose of this is to
directly communicate key business messages with the senior leaders who will cascade
them locally.
5.4: In addition to this, we propose to form the GLT, a business leadership group
that would meet every second month to provide strategic business updates and
address critical business issues to support GE deliver the strategic plan. This would
provide the talent pool for GE succession with direct exposure to business strategy
formation; as well as the opportunity to push decision-making down from GE.
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Appendix 1: L300 Composition
Purpose:
Communicate business priorities to leadership population key to local implementation.
Proposed Roles (c.300)
e Current SLP (60)
e Band 4 Managers (211): This includes:
Crown Area Managers (10)
Regional Network Manager (2)
NT Regional Network Manager (2)
Regional Sales Managers (2)
FS Regional Managers (3)
e Non-Band 4 Operational Leaders (e.g. Supply Chain Area Managers)
e POMS Management Team
00000
A full list of roles and individuals to be included in the L300 will be sent to Directors
and Heads of HR for confirmation.
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Appendix 2: GLT Proposed Roles
Purpose: Support GE to deliver the strategy, to lead transformation
and set the tone in the ways we do things
Inclusion criteria: The most senior positions leading customer facing teams,
revenue generating business units or support functions with
business wide impact
Proposed Roles (30)
Role Incumbent
1 Chief Financial Officer Al Cameron
2 Finance Controller Dave Carter
3 Chief Information Officer Chris Broe (interim)
4 Supply Chain Director Mark Ellis
5 Director of Support Services Angela Van Den Bogerd
6 Strategy Director Martin Edwards
7 Group People Director Neil Hayward
8 Communications and Corporate Affairs Mark Davies
Director
9 Head of Agents Development and Nick Beal
Remuneration
10 Director of Learning, Talent and Jonathan Cormack (starts Jan 11)
Resourcing
11 Director, Employee Relations and Tom Moran
Engagement
12 General Counsel Jane MacLeod
13 Head of Risk and Assurance Mike Morley-Fletcher
14 Company Secretary Alwen Lyons
15 Chief Commercial Officer Martin George
16 Head of Mails Mark Siviter
17 Head of Government Chris Doutney
18 Chief Marketing Officer Pete Markey
19 Head of Telephony Geoff Smyth (interim)
20 Director Financial Services Nick Kennett
21 Director Post Office Money Henk Van Hulle
22 Network & Sales Director Kevin Gilliland
23 General Manager Network Development Kevin Seller
and Transformation
24 General Manager Agency Michael Larkin
25 Head of FS Sales Jeremy Law
26 General Manager Crown Network Roger Gale
27 Group Business Transformation Director David Hussey
28 Head of Change Management Alison Thompson
29 Chief of Staff Tom Wechsler
30 Chief Executive Paula Vennells
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Appendix 3: Timetable
e Following GE endorsement (17 December) the new approach to senior engagement
will be communicated. This will include a guidance note for GE on how to brief
their direct reports about the shift from SLT to GLT, with clear definitions on
purpose and membership. There will also be guidance and support provided on
managing the disengagement risk of those not in GLT.
e The Leadership 300 will be launched in January as part of launching the
Transformation Narrative; and will then meet twice a year to coincide with Annual
and Interim results.
e The first GLT will be held in February, with membership and agenda confirmed to
GE in January.
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17* December 2015
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Purpose:
Review the 2016/17 plan submission and agree next steps
Context
In July 2015 we confirmed our 3 year plan. Our target is £(10)m EBITDAS in 16/17 and break-even in 17/18, with
an aspiration to bring forward break-even to 16/17. Achieving our 3 year plan target is critical, both in terms of the
credibility of the management team, and to protect our cash position.
The budget process takes us through to board sign-off in March 2016. At this stage, we have consolidated the first
submissions for early review at GE.
Questions
. How does the first submission compare to the 3 year plan and the 2015/16 full year forecast?
. What are the key movements in Income and Costs versus last 2015/16 and the 3 year plan?
. How realistic is our income forecast?
. What is the size of the challenge to come back to plan?
. What would we have to believe to close the gap and what are we going to do about it?
. What are the next steps and how will we talk to the Board in January?
DuRWNE
Conclusions
1. First submission has EBITDAS of £(88)m in 16/17, £(78)m below the 3YP target and £(54)m lower YoyY.
2. Net Income £(14)m lower than 3YP, £(6)m lower YoY. Forecasts seem less optimistic.
3. Costs are £(65)m higher than the 3YP, and £(46)m higher YoY
4. We are recommending a cost reduction target of £110m to give contingency against break-even. The pack sets
out what this would look like and the anticipated projects.
Input Sought
- Key Question: Do we agree to the collective challenge and the steps to March?
@
The 3yr plan showed us achieving an EBITDAS profit in
2017/18. Our aspiration is to break even in 2016/17
Funding from Government, £ million
450
400
350
300
250
200
150
100 —
50
2012/13 2013/14
2014/15 2015/16 2016/17
2017/18
40
20
-20
-40
-60
-80
-100
EBITDAS, £ million
tema’ Investment funding
mmm Network Subsidy Payment (NSP)
--@-EBITDAS
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Financial Sernices (inc Poms) I
Mails & Retail
Gov Senices
Telecoms
Supply Chain & Other
Total Net Income :
Agents pay
Staff Costs
Non-Staff Costs
Total Expenditure
Dep'n
ITS
FRES
EBI TDAS
16/17 15/16 Q2 Varto 2016/173yr Varto
Submissions Forecast 15/16 plan 3yr Plan
IRRELEVANT
* Income forecasts look
realistic (prudent?) - subject
to product reviews in Q4
* Costs will need to be
addressed before we finalise
our budget
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Key movements to 15/16 -— Income and Costs
Income £m
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Financial Services growth impacted by the removal of the
savings underpin and NS&I. Insurance is well below 3YP
Vs 15/16 Vs 3yr plan
Forecast
Mortgages
Credit Cards
Current Accounts
PO Money card &
Personal Loans
Savings
Investments
Insurance
Travel
Banking
Payments
Stretch
Financial Services
5
IRRELEVANT I
I Adverse to 15/16 due to remo
: Versus 15/16 & vs 3yr plan Banking framework drive
{orders also declines b'
: Versus the 3yr plan income is down due to delayed rollout of Digital Wallet jresiever
; Mortgages are Flat YOY due to a rate cut in commission: IRRELEVANT : offset by a higher MS & productivity
numbers.
Versus 3yr plan income is down due to lower MS headcount, productivity and lower commission rates
: Versus 3yr plan sales volumes have been reduced following low branch sales in 15/16 andess optimism in
banks willingness to consistently provide top tier products
Variance to 3yr plan due to delayby BO! in national roll out of Current Account products
Moneycard no longer on sale following agreementwit!
RELEVAN' IT and personal loans now a soft launch in
16/17 due to restrictions b a
expected back book position
Positive on 15/16 due to FY impact of Hawk. However behind 3yr plandue to delays in new pr
and momentum on Travel Insurance. The 3yr also plan excluded cost of sales from aggregators
f income growth
Versus 15/16 Bill payment declint (14%) due to rate reduction and ongoing market decline. Postal
due to market trends.
ind faster declines in Bill
payments and postal order:
: Stretch position linked to improvements in digital experience yet to be embedded
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Lower than expected decline in Mails and growth in Telecoms,
Retail & Verify. Faster migration of Government services online
Vs 15/16 Vs 3yr plan
Forecast
Mails Variable Reduction on 15/16 due RM product portfolio, no price increase and competitorsstronger digital solutions.
: However decline is at a lower rate than the 3% assumed in the 3yr plan and we enter 16/17 with momentum
favourable to 15/16 budget).
Mails Fixed Fee Reduction in annual count
Lottery & retail : : New lottery game
improved retail offering on packaging, collectibles and greeting cards
Government (ex H + Vs 15/16 decline is linked to migration of POCA and lower inte! in card account balance
Verify) I : combined with decline across DVLA, UKVI & passport service:
The 3yr plan assumed a higher migration of POCA customers improving the position by) mec offset by:
IRRE LEVANT I - Digital passports } Tin 16/17 3YP.
: - ID Assurance assumed faster access to Govt Depts than has been eviden
I - Faster decline across DVLA iiseusvenr!
Verify Increase on 15/16 Assumes 50% market share and 60% successful registrations
: Higher prices — increasing from for a new registration and:
Reduction vs 3yr plan due to riskin Government departments’ delivery of new services.
Telcoms ' I Vs 15/16 driven by price increases to HP&BB £5m and Mobile rollout £1m; offset by lower Etop up £(1m) .
i i Vs 3yr plan higher HP&BB income of £3m resulting from increased prices being offset by lower mobile
income (£5m)
Net Income
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Other Income - Supply Chain expected to remain flat on 15/16,
reduction in Gamma following conclusion of Hawk
Vs 15/16 Vs 3yr plan
Forecast /
GAMMA 1
= IRRELEVANT
Net Income
PWN
au
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Our view of our current year costs is being grouped into seven
key areas of spend
Service Centre
P8E (excl
Pension Other Non: Comms & HR
scheme Staff Managed Corporate Losses Contact Service Agency
Function £000) Cost of Sales Staff costs Bonuses payment costs Property Marketing Services Affairs) &MDA Security) FSC Centre Centre Contracts Projects) Total
Commercial support ” - “en " =e as = =e = “= “en “ ~ “
Telephony
Government services
Mails, retail and lottery
Digital and other
Financial services
POMS
Card processing
Marketing
Total commercial suppor
Crowns
IT I i
‘Supply chain i
Central
Finance & procurement
Central HR i
Chief executive office
Centrally managed
VAT
Corporate services
Total central
Network support
Transformation
Total
Postmaster costs
Gross income
FRES - share of operating profits
EBITDAS loss H
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Costs are forecasted to deteriorate in 2016/17 and against the 3YP
Vs 15/16 Vs 3yr
Forecast plan
Group Wide
Costs
1. Commercial
Support Costs
2. Crowns /
6. Network
Support
3. IT Costs
4. Supply
Chain Costs
5. Central
Costs
Agents Pay
IRRELEVANT
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have to take costs out on this scale.
10
Cost
Possible impact £m Contributing Programmes
1. Commercial
Support Costs
2. Crowns Cost
3. IT Costs
4. Supply Chain
Costs
5. Central
Costs
6. Network
Support Costs
7. Agents Pay
Group Wide
Costs
Project Expenditure (doing less)
Cost of sales
Commercial Support Costs
Crowns
IT (reduce run costs to 3yr plan
levels)
Supply Chain
Central and Back Office costs
Sales and Network Support
(including FS/MS)
Agents Pay
Terms & conditions
Pensions
Property
Total Costs
Income
TOTAL
IRRELEVANT
: Product Profitability
Cost review
I Paddington / CNDP.
Trinity, back office
IRIS
‘ Cost review, back office
programme
i; Learning academy
Paddington, GCAN, Product
I Profitability
Crescent
1 Pathfinder
Shape of Estate, Paddington
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Some projects already exist, and we are looking to sign off
the plan (1 of 2)
pT Guestion I _Accountability & owner Proposed Timing
1. Crowns
a) More radical options beyond Paddington/CNDP?
b) Retail strategy for the Crowns
c) Whatis the right model for FS/MS.
2. Supply chain (Iris)
a) Sale / Outsource / JV
b) Productivity, automation, review of external contracts
c) Demand management-— more radical options
3. Costs of employment (Pathfinder, Crescent)
4. Costs of IT
a) Run costs of IT
b) Transformation: Trinity; Trinity implications; aiming off; back office
(see below)
c) Can we reduce the technology costs of the two AEI products?
5. Back Office
a) Efficiency
b) Transformation and outsourcing
6. Site strategy (informed by 1, 2 and S above which drive shape of
estate)
7. Commercial support
a) Optimal structure, managed services, costof sales
b) Partner alignment— mails
c) Partner alignment— Bol (shared cost base?)
d) Marketing & investment projects — zero-based review of value
11
Kevin Gilliland/Roger Gale (team supported by
Berkley)
Pete Markey on retail
Al, Mark Ellis (supported by Martin Edwards,
KPMG & Assay)
Neil Hayward/Tom Moran
Al, Chris Broe/Nick Sambridge (external support
required on cost drivers?)
AE!I: Chris Doutney, working with IT team
Angela Van-Den-Bogerd/Irvin Newbit for IT
Kevin Seller + leads of 1,2 &5
Al to Chair, Martin & Nick to co-ordinate overall
process, working with relevant leads in
Commercial & FS (external support required)
GE discussion February
March Board (3YP)
GE and Board discussion in January to
agree next phase of work
Consultation process underway in
January; formal GE/Board decision in
May (update March)
Trinity: January GE & Board
Costs and implications: February GE &
March Board (3YP)
Back office IT decisions required by 23
January
February GE & March Board (3YP)
February GE & March Board (3YP)
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Some projects already exist, and we are looking to sign off the
plan (2 of 2)
8. Network strategy & agents’ remuneration:
a) Whatare the options for reducing fixed pay for non-converted
branches?
b) Whatis the strategy for the second half of NT? When do we stop
the current programme and start the new one (see below)?
c) Cheaper operating models for unconverted/lossmaking branches
9. Sales strategy in branches
a) Have we got the right model for the rest of the network?
10. Central costs — how do we reduce, is there a different model—
radical realignment?
41. Should we be rewarding or charging customers to optimise
payment methods?
12. Can we simplify the Mails product set, especially ParcelForce?
13. What new products? (Mobile, Current A/C, Digital Wallet,
Investments, Insurances, Move Mate)
14. Are there products we should stop or be better remunerated
for? (Credit Cards; Mortgages; Phonecards; Prepaid stationery;
Custody of Pouches; Inland Express; Vehicle Licensing; Health Lottery)
15. Government: how do we seize the opportunity of digital and
spending reductions?
16. What is our identity strategy?
12
Kevin Gilliland, Kevin Seller, Martin Edwards
(supported by Berkley)
Linking to ‘Transforming Agents’ Pay’ project—
see below
Kevin Gilliland/Jeremy Law
Informed by FS strategy developments
Dave Carter to co-ordinate process (external
support required?)
Alan Smith, working with network and product
teams
Mark Siviter/Debbie Smith
Martin Edwards to co-ordinate process from
strategy perspective, working with David Hussey
from transformation perspective & relevant
product teams/FDs
Relevant FDs to lead review of products in their
areas
Martin George/Chris Doutney, supported by
strategy team
Martin George/Chris Doutney
February GE & March Board (3YP)
February GE & March Board (3YP)
February GE & March Board (3YP)
February GE & March Board (3YP)
Part of February GE and March Board
submissions
February GE & March Board (3YP)
February GE & March Board (3YP)
February GE & March Board (3YP)
February GE & March Board (3YP)
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On the 24th March we will present to the board our final budget &
updated 3yr plan — next steps are:
41‘ January
GE
21st January
Board
18" February
GE
(papers due 12!
February)
+ 10 March
GE and 24th
March Board
13
GE 2" review of budget
Update on cost position
Identify budget deep dives which will be completed during
January & early February
Agreement of KPI's for 16/17 scorecard
Review of Marketing & Customer objectives for 16/17
Update on status of budget
Draft budget document
Updated 16/17 budget
Income by pillar and channel
Review of product profitability
Cost review by category (Bakewell)
Review of transformation costs and benefits
Final review of budget prior to Board approval
+ First draft 3YP - 2016/17 to 2018/19
+ Identify strategy deep dives which will be completed during January
& February to inform final 3YP — covering both income and cost
opportunities
+ First view of 3-year investment/transformation budget, including key
choices and cash implications
+ Update on outlook for the 3yrs (both cash & EBITDAS) and explain
the programme of work to March Board
Draft of full 3YP document, including:
+ Updated financial projections
+ Outputs of strategy deep dives
+ Explanation of customer strategy— linking target customers, product
propositions and channels plans (this will be WiP)
+ Explanation of how resources and activities are being prioritised to
deliver strategic priorities (and what are we not doing as a result)
+ Identification of KPIs and milestones which underpin the financial
projections, as the basis for future performance management
+ Identification of major risks to the 3YP and how these will be
managed
+ Final review of 3yr plan prior to Board approval
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OFFICE
Appendices
17* December 2015
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Commercial Key movements to 15/16
Mails
Sa ‘IRRELEVANT
Other
IRRELEVANT
15/16 Q2 Mails - Back Mails - Fixed Mails volumeMails - HomeMails - E-bay _ Mails Retail Lottery Telco - Price Telco - Cost Telco Telco Teloo Gov't Gov't - 16/17
forecast BillingCOP& Fee — reduction Shopping /RMRisk Barcoding increase of promotion Customer Mobile Etopups. Volume ~—_—Veerify budget
Change Returns from 15/16 volume and reductions (volume and
Requests Market and 16/17 mix price
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Mails market holds steady to deliver close to flat year on year
trading income, while retail and lottery continue to grow
2015/16 a2 forecast 2016/17 2016/17 3yr plan
Stamps
Labels
Specials
Home Shopping returns
=. IRRELEVANT
Fixed Income
Retail
Lottery :
Assumptions vs 15/16 Vs 3 yr. plan
. Price increase — no increase for 16/17 Marketplace (e.g. eBay) volumes will grow but at a slower rate than
b) Annual count will reduce year on year. assumed in the 3 year plan
N
Marketplace (e.g. eBay) assumes that growth is less than market
due to poor SME offer (Drop & Go. Competitors such as My
Hermes, Collect+, Parcles2Go and RM; continue to attract
customers to its online channel. Returns continue to grow
strongly.
RM will not fundamentally change its portfolio or pricing
@
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Government Services migration from established services
partly offset by Verify
015/16 a2 forecast 2016/17 2016/17 3yr plan
POCA Volumes i :
IRRELEVANT
Verify volumes
Assumptions vs 15/16 Vs 3 yr. plan
Identity (Verify) : + Slower migration of Poca Customers a
+ Assumes 50% market share and 60% successful registrations + Digital passports assumed to deliver income oftrrscevanr}
+ Higher prices — increasing fro! for a new registration + ID Assurance assumed faster access to Govt depts. than has been
evident
+ Rod and Game contract not extended past March 2016
: The migration of accounts started in P6 2015/16 this is assumed
to continue at current migration rates. I income on
card account balances is 12% lower a’
UKVE:
+ Main migrant volumes expected to decline by 25%
+ 27% increase in volumes driven by students — continuing 15/16
trend
: @
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Telecoms: Full year and ongoing price increases drive
net income
eet e016 eens 2016/17 16/17 3yr plan
HP&BB Base 468k 472k 502k
HP&BBGrossincome Pore” Ger eee £184
Cost of Sales i C745) Sl eet eta
PO Phone cards ee
Assumptions vs 15/16 Vs 3 yr. plan
ek: segmented price increase scenario: oe hg Postponed Mobile rolled out in 15/16 causing a dele to benefit profile
: + 15/16: £1 on line rental for Home phone & BB (£2 on line ee) ay plan and business case.
rental saver from February 2016); £1 Evening & Weenend : :
tariff; £1.25 on Anytime tariff :
+ 16/17: £1 on line rental for BB only; 50p on each of Tage ee as :
Pyeng & Weekend, ae Anytime tariffs. co ee ee ee :
. ~ ARPU increases from aH2 Q2F of #28. a to an 1 average of
' «B24, 36 i in 16/17 :
* Broadband remains on promotion I for full year
u ; PAYG Mobile i is I s rolled ou nationally from April 2016 (PAYM.
launch delayed until Nov 2017) rae
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Telecoms —- Mobile P&L
DO BOISE cree 2016/17 16/17 3yr plan
-Mobilebase 7 6 ak
Direct Costs £(1.1)m £(3.1)m
Investment & other £(1.1)m
Assumptions vs 15/16 Vs 3 yr. plan
i 9 su
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FS - underlying growth of 6% YoY
Mortgages & Transactions
Savings
a IRRELEVANT
Banking & Payments
Stretch/Other
z
A
Tl
<
>
=<
—I
Q2Forecast Mortgage & GiftCards Savings Savings & NS& POMS — MoneyGram Bill Payments Postall Orders Banking Other 16/17 budget
Credit Cards Underpin Investments Insurance Framework
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Mortgages & Transactions — up yoy but short of 3YP
015, 2016/17 2016/17 Mortgages: Income
forecast 3) r plan “ a _. _ _ enn, MN2OIG/I7 Pan *
errs I 2 IRRELEVANT ="
Credit Card Sales a H swans I
A I mM Ps Ph SG PY PB 9 PIO. PMY iD
I = IRRELEVANT
impact, compensated for by higher Mortgages: 3YP assumed more Mortaage Specialists, higher sales
MS numbers and productivity per MS and higher income rates, I RRELEVAN
+ 3YP initiatives delayed include C:
Moneycard, Total income shortfal
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Savings — no underpin in 2016/17 has a significant impact
on income
415/16 a I 2016/17 I 2016/17 3yr [ici 2. an I
forecast plan eo —- — a mm a 216/17}
POL balances ~ I RRE L EVANT I sm 2o187 rant
I
I
“I
* The size and mix of the book as we exit 2015/16 drives
income shortfall.
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POMS Insurance (Group basis) -— up yoy but not enough to
achieve the 3YP target
2015/16 az 2015/16
forecast Run-rate
2016/17 2016/17 The mid-year 2015/16
3yr plan acquisition of the PO! (Hawk)
has a distorting effect on year-
on-year comparisons. To
remove that distortion, a
restated 2015/16 comparator
has been calculated on a run-
i rate basis to give a more like-
I for-like view.
Assumptions vs 15/16 Run rate Vs 3 yr. plan
+ Travel: Volumes are planned to grow by 13% YoY, is based on + The key differences are that the 3YP assumed significant net
implementing a simplified Branch sales process, ‘from new products versus:
+ Home: Continuing strong growth with renewals volumes 34% YoY Budget. Introducing products these is dependent on the Strategic
following strong new sales performance in 2015/16 Insurance platform and that is delayed by a year.
+ Car: New sales volumes are planned to be (7)% down YoY and . Additionally, the syP did not anticipate the drop in travel insurance
renewals down (26)% YoY. This is a result of our response to the sales experienced in 2015/16, nor include any cost of sales from
hardening Car market
+ Life & Life (over 50s): Sales volumes are expected increase in Life
but decrease in Life (over 50s). Taken together, net income is
broadly flat YoY whilst we re-engineer the life business model.
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Travel — Ahead of 3YP due ongoing strong growth in
MoneyGram
2015/16 o2 I 2016/17 I 2016/17 Tovelnoner:incame
forecast 3yr plan oo i
IRRELEVANT I
Ci a ee
MoneyGram: Income
< IRRELEVANT
a a a TT}
Assumptions vs 15/16 Vs 3 yr. plan
* MoneyGram up jm (10%) continued strong trading in “send” + The increase i yGram income was not anticipated in the
transactions to eastern Europe 3YP, driving a i
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Payments & Banking — ahead of 3YP due to new Banking
Framework
015/16 a2 16/17 2016/17 3yr
forecast plan
a 1
Bill Payment - Direct: Income
IRRELEVANT
Bill Payments - Reseller: Income
IRRELEVANT
IRRELEVANT
ATMs: Income (£k)
IRRELEVANT
Assumptions vs 15/16 Vs 3 yr. oul
* Bill payments downi! (-14%) due to rate reductions and on- :
going market decline.
+ Postal orders dow
(-10%) continuing the declining trend. * Faster declines.in.Bill.Rayments (volume and rate) and Postal
‘oY Orders drive aj 'rretevan shortfall.
+ Reduction in Personal and Business banking is due toa fasterthan °* he key element in the positive variance to the 3YP is the
anticipated decline in Santander business banking ani income from the new Banking Framework ‘es, which the YP
one-off income in 2016/17. did not include. :
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Staff Costs increase by £4m on 15/16
IRRELEVANT
Q2Forecast Payrise Pension Impact of NI. FY Impact Crown 15/16 Crown- Crown 16/17Supply Chain Digital & Com Bonus adjto 16/17
reduction POMS —flowthrough Paddington Savings Analytics Services 100% budget
15/16 Q2 Rebased budget 16/17 I Var to
Forecast 15/16 After Rebased
transfers I 15/16
‘IRRELEVANT
Non Staff Costs increase by
, POMS:
by IT I IRRELEVAN
IRRELEVANT I
/on 15/16 — driven primarily
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IRRELEVANT
“Q2Forecast ITlicenses IT Towers
operating
costs
13
IT Dual POMS
Running costs operating
costs
Central
Commercial
Finance
Property
Corp Services
FS (inc Poms) }
IT & OPS
Crown
Network
P&E
Supply Chain
transformation
Total
Marketing Bau Corporate Property —-‘TelcoBad = HP&BB Mobile FS BAU cost
uplift services Bau increase in Debt increase operting costs running costs grow to.
Uplift ATM (volume support
maintenance driven) income
Rebased idget 16/17 IVar to
15/16 After Rebased
transfers 15/16
‘IRRELEVANT
16/17 budget
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Network Sales Strategy
Author: Jeremy Law — Sponsor: Kevin Gilliland Date: 12/15
Executive Summary
Context
Sales through the Network channel operate within the context of current commercial
strategies (mails, FS etc.) and current marketing and customer strategies. Network
must drive the most effective sales strategy for its channel within this context. We
intend to adjust the network sales strategy as the commercial, customer and FS/MS
strategies are developed. This paper is supported by supplementary slides which are
provided for reference only, with key slides highlighted in the paper.
Question(s) this paper addresses
1. What is the network sales strategy and what are we doing to deliver it?
2. What are our dependencies on others?
3. What are the next steps?
Conclusion
1. Our Network Sales strategy is a balanced composite of three parts: improve the
performance of the agency network to drive up the penetration of sold-products;
improve the performance of our existing specialist sales teams to increase the
number of products sold per week; increase the reach of our specialist sales
teams to more of the Network making them accessible to a wider customer base.
2. We expect to deliver approximately £20.9m incremental income against a gap of
approximately £21.3m! in FY17/18 through delivering the following initiatives:
Improve the performance of the Improve the performance of our Increase the reach of our specialist sales
agency network existing specialist sales team teams to more of the Network
+ Guiding coalition (28m) + FS productivity improvement + Hub & spoke
+ Customer data capture (£0.7m) (4.2m) + CRMs (£0.6m)
* Business development + Mobile MS (0.3m) or MS Digital
managers (£2.3m) face to face (3.8m)
+ MS productivity improvement (£1.0m)
3. To deliver the Network Sales strategy we will require collaboration from teams
across the business, including: other channels, marketing, product pillars,
technology, finance, clients and information security.
4. We will iterate this strategy as inputs to it are updated. In the immediate term,
this will include: the Customer Strategy, the review of economics of the FS/MS
sales team and the update to the FS strategy.
Input Sought
We would welcome the GE’s input regarding this strategy, specifically: Do you agree
with the balance of our strategic sales focus? Will you support us in delivery?
See section 1 of “The S
gy” for an exple
Strictly Confidential
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The Strategy
. This strategy is positioned against the sales targets set out in the 3 year plan.
These sales targets have been derived top-down, for each product but without a
specified channel split. For the purpose of this paper we have (for the first time)
attempted to split the channel income and build a bottom-up plan extrapolating
some of the key pilots and initiatives. To understand the Network components of
the FY17/18 income we have assumed a smooth transition from the actual
channel splits in recent years to the FY19/20 projections (where available) in the
commercial strategies.
2. What is the environment in which this sales strategy is framed?
2.1. Market: The income from our Network has been declining in recent years as a
result of a number of factors: A Mails market facing a shift in dynamics;
Government services customers shifting online and away from POL; Payments
customers moving to other channels through direct debit and other payment
methods; A number of PFS products moving to other channels. Furthermore,
footfall in the high-street is in decline putting pressure on our sales teams to get
more from the footfall we do have.
2.2. Branch: Through our transformation activities, our Network is being
transformed into a retail environment that is more conducive to sales with a
better retail environment and longer opening hours. Sub-postmasters are also
better incentivised to drive sales through variable pay. These factors are all
having a positive impact on the sales of both convenience and sold products
with: Mains income is up 7% when compared with a control group that is 1%
down; Locals income is 1% down when compared with a control group that is 6%
down.
2.3. Commercial: Our commercial strategies illustrate our Network sales
challenge: slowing the decline of our
traditional markets and growing our
capabilities to sell more sold-products in
the appropriate segments of the network.
Meeting this challenge will enable the
network to deliver its components of the
commercial plans.
3. What is the network sales strategy?
3.1. Our sales approach is tailored to our broad and diverse product range which
have different sales requirements:
« Some sold-products are about convenience (e.g. Mails, Travel money);
« Some sold-products require a higher level of sales conversation effort and/or a
compelling customer value proposition and/or higher brand awareness (e.g.
Insurance, other PFS).
3.2. We have a clear sales strategy based on 3 components to represent the multi-
dimensional aspects of our Network:
e Improving the performance of the agency network to drive up the penetration
of sold-products by helping Agents to build their own businesses with both
Network income
2, Slow the decline
of our traditional
makrkets
2017/18 (est
Strictly Confidential Network Sales Strategy
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POST OFFICE
regular customers and local SMEs (with strategies and techniques
appropriately deployed dependent on the branch model and size);
e Improving the performance of our existing specialist sales teams;
e Increasing the reach of our specialist sales teams to more of the Network (e.g.
MS, FS, CRM).
3.3. To ensure we continue to focus on our medium and long term targets, we will
maintain a balance in effort between capability expansion and performance
improvement. We will remain nimble and adaptive to the commercial strategy
while focussing our efforts at the most commercially viable opportunities.
Strictly Confidential Network Sales Strategy
POST OFFICE
4. What are we doing to deliver the strategy?
4,1. Improving the performance of the agency network to drive up the penetration of sold-products by helping Agents to
build their own businesses with both regular customers and local SMEs:
Descriptio
would you have to
believe?
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estimates
Guiding
coalition
Coaching from the top SPMs for their peers.
Complimented by the Branch standards team
ensuring agents are having the right sales
conversations to provide customers with the right
service, which in turn drives sales of high-value
mails products.
FY17/18)
0 branches at the
beginning of
FY15/16 to 5k
branches
£7,190k to £8,400k
(ref slide 27)
The level of benefit
being realised by the
existing GC branches
can be sustained
(running at £6.9m pa).
The remaining 1000
branches in phase 2 will
provide the same level
of benefit as the first
1000.
£300k - £500k pa
depending on the
number of mystery
shops required per
branch to maintain
performance.
Customer data
Increasing the volume and quality of in-branch data
capture to ensure we contact the right customer for
From 160k to 460k
£550k - £870k
Capture an additional
300k leads per year.
Improve conversion rate
from 0.56% to 0.68%
£75k pa (25p per
capture the right reason. leads pa (ref slide 28) through email validation I '@4)-
of renewal dates after
data capture.
* We will build 200 new
branches per year.
Business Actively supporting the SPM community to generate * We will be able to -
development I more, local SME business, through BDM coaches in prom 200 to 600 fepade og) achieve the same level £370K (providing one
managers targeted, high potential branches. of benefit as we did in Per region).
the BDM trial (£1.5m
pa).
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Network Sales Strategy
POST OFFI
4.2. Improving the performance of our existing specialist sales teams:
cE
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Initiative Description KPIs (by end of Benefit (p.a. at end What would you have to Cost estimates
FY17/18) FY17/18) believe?
Equipping our FSs with the required tools and support I - ; . TBC and subject to
« Teutroving performance management; 4.5 end FY14/15 * Increase in the business case finalisation
FS » POM academy educating the wider business in PFS, I 7-9 end FYi5/16 nape oes rom and submission. Costs
voductivi » Enabiin POM branches (customer data in ‘I 9-10 end FY16/17 I £2,200k to £8,240k I ¢200 now to the next year are estimated
p ty t branch 9 11+ end FY17/18 (ref slide 30) template of 238 by the I at £1m-£1.5m.
improvemen Pranch) lead generation to build the sales & end of FY16/17, then I Ongoing pa costs in
ncreasing generati ut From c200 FS to 300 by end FY17/18. I FY17/18 are not yet
pipeline; 300 confirmed.
+ Improving POM brand awareness. :
4.3. Increasing the reach of our specialist sales team to more of the network:
Initiative Description KPIs (by end of Benefit (p.a. atend What would you have to Cost estimates
FY17/18) FY17/18) believe?
Developing "Spoke" branches with Customer £300k to £1,350k I » POM supported CRMs _I Tablets will require an
relationship managers in branch to: (ref slide 34) are able to achieve an_ I initial investment of
+ Capture leads and book referral appointments for Note: the baseline average of 4.25 sales I approximately £1m up
the MS community; From c340 CRMs to I performance will be i front and an annual
ine I ©200 (approx. 40% I revaluated prior to per week.
+ Provide customers with a route to self-serve online maintenance of £250k
POM supported) business case * ASPM supported CRMs
through a tablet in-branch; pa.
; submission which are able to achieve 2.5 ;
+ Provide sub-postmasters with information that helps may drive the ; ‘ Additional ASPM support
Hub & Spoke them see the benefits of sales and leads. benefit up sales per week. and VMS £600k pa.
> CRMs will refer 1.2
mortgage leads per
peveope “Spoke” branches within ws areas fora 1000 mortgage £270k to £970k week Costs to be confirmed
cnotured by the CRis leads pw (ref slide 35) * Our lead to completion I once branches identified.
P Y . conversion rate
remains at 7%.
* Centralising the team
Mortgage al face-to-face technology solution I wotcage sales will reduce the total Awalting business case
specialist for a centralised team of MSs to serve customers. This from no 3 y to £2,280k to £5,330k I Number of MS required I FONTAN te
reach is designed to both drive up income and improve +3 PI (ref slide 36) + Enough leads are
c0.53 " £905k for POC and £12m
expansion efficiency of our MS workforce, reducing costs. supplied to meet the
over 5 years for roll-out.
demand.
MS Improving mortgage product journeys, which will be * Enough leads are
productivity I delivered through a re-built Bol mortgage platform pomsegs Sales UP (rot aloe ae supplied to meet the —_I Costs to be confirmed.
improvement _ I and an improved web lead journey. ¥ 0. PPI demand.
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4.4. The mid-range scenario level of benefit is illustrated in the diagram below:
£21.3m sold-product income
improvements required to
meet our commercial plan
Fyia/is Guiding
Coalition
Gullding coalition already
Customer data
capture
delivering, £6.9
Business
development
FS pro
improvement CRM
ity Hub & Spoke
Hub & Spoke
mobile MS
Hub & spoke
ital face to
face
Ms
productivity
improvement
FY17/18 (est)
5. What are the key risks to delivering the strategy?
Risk
A number of the initiatives
are currently in business
case or pilot stage and the
benefits may not be
delivered when scaled up.
Impact
Benefits are lower than
modelled. A low-range
scenario has been modelled
which results in £6.6m lower
benefit in FY17/18.
Mitigation
Our approach is one of flexibility. We
will monitor all initiatives and focus our
resources on those that are proving to
deliver the greatest benefit, while
maintaining an appropriate balance
between performance improvement
and capability reach expansion.
Declining high-street footfall
is more dramatic than
industry research suggests.
Fewer customer interaction
from which to up-sell higher
value products.
Greater focus on driving referrals to
the specialist sales teams from the
Network and other channels.
Required volume and quality
of PFS leads for both FS and
MS are not possible and/or
sustainable.
The level of sales and hence
benefit will be lower than the
modelled £0.6m.
Increase the levels of support for the
CRM community to increase the
quantity and quality of leads captured.
Investment funds for digital
face-to-face are not
available.
£3.8m of additional income
modelled in the mid-range
benefit scenario would not
be achieved.
Continue with the mobile MS (hub &
spoke) plan to ensure MSs have a
wider reach by travelling to multiple
branches.
Economic review of FS/MS
(due mid-January) indicates
our current operating model
is inappropriate.
PFS products make up
£4.2m of the proposed
benefit. This may not be
achieved at all or
considerably reduced.
Top 30% of FS are currently achieving
an average of approx. 8.3 sales per
week. There is a case that can be put
forward to retain the top performers.
The BDM benefits already
achieved are not replicable
in other areas.
A reduction in the level of
£2.3m benefit stated in
FY17/18.
Benefits stated take a realistic view
with only 400 of the 600 branches
achieved.
Products are not competitive
in price and/or features.
Cannot achieve FS
productivity improvements
as customers either do not
come to branch to buy or
take a better deal elsewhere.
Commercial teams to work with
Network our clients to ensure we have
products that are competitive in the
Network environment.
6. What are our dependencies on others?
6.1. Delivering our sales strategy and achieving the benefits we have outlined is
dependent on support from across the business:
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Network Sales Strategy
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e We must ensure we have the right marketing to raise awareness of Post Office
as a PFS provider as well as local promotion of the specialists we have in
store;
« We are dependent on the product teams developing customer value
propositions that are compelling;
e We must ensure the implications of sales are considered when the commercial
teams develop the contracts we sign with our clients (e.g. restriction clauses
within contracts can constrain our sales teams’ abilities to cross-sell);
e We are dependent on technology to help provide our sales teams with the
tools and the data to enable a more informed and complete conversations with
our customers;
« Finally we are dependent on risk and information security to help find the
right, compliant way for us to capture and use customer information.
7. What are the next steps?
7.1. This strategy is defined in the context of current commercial strategies (mails
strategy, FS strategy etc.), marketing and customer strategies as well as the
currently understood channel economics of the FS/MS sales team. As these
strategies are refreshed, this Network sales strategy will also be refreshed,
starting with the FM/MS economics review mid-January.
7.2. We will use the outputs from this strategy to inform the business planning
process for next year and to validate our bottom up view of income channel
splits in the 3 year plan.
7.3. We will validate which of the expected costs are already included in the 3 year
plan and which are incremental as part of the business planning process in the
New Year.
7.4, Where not already in place, appropriate business cases will be submitted for
each initiative outlined in this document.
Strictly Confidential
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Strictly Private & Confidential
Post Office
Network Sales Strategy
December 2015
Post Office®
Contents
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Scope
Context and background influences on the strategy
Network sales strategy
What we are doing to deliver the strategy
Dependencies on others
Financial benefit and the 3 year plan gap
Next steps
Supplementary analysis
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©)
IN THE STRICTEST COMMERCIAL CONFIDENCE
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®
Scope and inputs to the Network Sales Strategy
Direct
channels The channels ;
strategies are inter-
dependent as they
reinforce each other
in a multichannel
Network environment
ue
Network Network sales
strategy strategy
Customer Product Channel ,
strategy strategy y strategy mp
* Deciding the mix of models to fulfil our commercial (e.g. longer
opening hours) and social obligations (e.g. meeting access criteria)
* Driving improvements in network sustainability e.g. through retail
support for sub-postmasters to improve their profitability
* Reducing costs through transformation programmes and exploiting
natural churn to put in place more profitable models
This operational strategy
* Leveraging the
capabilities of our various
branch models to deliver
the network component of
the commercial targets
The Network Sales Strategy is dependent on a number of up-stream inputs. As
these change we will need to revisit our strategy to ensure we are aligned
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Contents &
© Scope
6 Context and background influences on the strategy
[3 ] Network sales strategy
(4) What we are doing to deliver the strategy
ts ] Dependencies on others
re ] Financial benefit and the 3 year plan gap
@ Next steps
rs ] Supplementary analysis
©)
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Context of Network income in the overall scheme of
POL growth
POL income growth The market context
1,000 * As stated in our 3 year plan, we intend to grow POL income.
900 : soe * However, we have seen network sales declining due to:
800 + AMails market facing a shift in dynamics;
700 * Government services customers shifting online and away from
600 fee es a POL;
500 * Payments customers moving to other channels through direct
400 =] debit and other payment methods;
300 * Anumber of PFS products are moving to other channels;
200 Hit aha * Footfall in the high-street is in decline, however, closure of
100 high-street banks is sending some banking customers to POL.
* This decline in our footfall driving transactions (Mails and Bill pay)
2013/14 2014/15 2015/16 2016/17 (est) 2017/18 (est) has put further pressure on our sales teams to get more from the
(Target) .
footfall that remains.
™@ Network - core products Network -sold-products _™ Digital .
ac The sales role of Network going forward
‘ontact centre Non-channel income
* The network has an important role to play to minimise the impact of
declining markets and grow in the Financial Services and
Telephony markets.
* Our network sales challenge is to:
Our challenge is to grow our sold income fom the
network by £21.3m
600 .
400 - - * Slow the decline: While the mails market is declining, to
Network - sold-products reduce the rate of POL’s Mails income decline; To deliver new
200 a bith m Network - core products Government Services when they are available;
* Grow our capabilities: to sell more, high value (PFS and
2014/15 2017/18 (est) Telephony) products to enable the network to deliver its
Note: channel splits defined from: components of the commercial plans.
FY14/15 — actual income + FY16/17— Early submission of targets for next year
FY16/16 — Current in year target * FY17/18 — projection based on current performance & strategic plans 7
Nar
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Income defined by income factor from the Network Mi team
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Our Network strategy is delivering branches open for
longer and with a better retail sales environment
Mains Locals
Perf Indicat Actual ae Vi Key Performance Indicators Actual ee Var
SOs Tae Group I 2 Group Locals performance has
Total Incorre: Post vs Pre Conversion Total Income: Post vs Pre Conversion steadied at a level
POL Bethe eels & Ox} % POL Branchesive6-12months (1% (5% 5% I above expectations
Branchesive12-24months Te (e} 8% Branchedive2-24nronths (Y%__(6)%__ 6%
There is still room for
Agents Rermuneration: Post vs Pre Conversion Customer Sessions improvement as we
Branchedive6-12ronths 5% (Qk I 7% Branchedive6-12rronths 5% (1% 6% I improve merchandising
Branchetivel2-2émonths 3h] 6h Agent Branchesive12-24ronths 9% __ (5) 14%) in new format branches
oer Custorner Sessions Operator Feedback on Retail Sales Perforrrancd 11% to promote the full suite
Branchedive6-1 2rorths a (Oh ue Operator Satisfaction 71%, of products available in
Branchedive12-24mronths (Q%__ (7% I 5% Target a less formal
Operator Soe on Retall Sales Performance ee Average Increase in Opening Hours 110% 80% 30% environment.
Operator Sesion ea Custorre] Customer Satisfaction 58% 0h Bh
[laverage Increase in Opening Hours 4h 20% I 2% Queuing Tins SOs _<S inst
Customet Custorrer Satisfaction 9% =WEI Th nome . a . en
(Queuing Tirres Amt7s <5 ring 3434 We are building a retail environment that helps slow the decline traditional
Mains performance continues to show sustained
improvement
Crowns
+ Introduction of FS and MS sales teams with an
environment in which they can hold PFS sales
conversations (averaging 5.6 sales per week
across all FS and MS in weeks 1-33 this year);
+ Automation has driven down costs and allowed our
counter colleague team to focus on sales.
markets and provides an environment more conducive to sales:
+ Longer hours help to slow the decline of convenience based products;
+ Private conversation areas provide an environment more conducive to PFS
sales;
* Screenless counters promote a more natural and personable sales conversation;
* Variable pay is incentivising agents to sell .
We now need to utilise this improved environment to deliver our sales
strategy
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Our top branches give us a yard-stick to measure the
potential of the rest of the network
Sales
volume
penetration
of
«when
selling
owns 1000 Large 2266 Smaller Converted Unconverted Community
mains mains locals locals branches
_ Travel Passport Not sold
S insurance applications 1. There is an opportunity to
e TMC Buresu sales improve the performance of
branches to achieve the sales
@ Car 10 MVL's penetration of their peers
s insurance processed
5 ¥
2 oe at 2. There is a considerable
Dede Peyme opportunity on improving the
> sales performance of sold-
2 HomePhone 100 Bill products across pillars in
& &Dual Apps payments actively managed branches
> :
e Spee! Labels 13.15% I 8.72% 8.77% 10.82% 10.76%
a 2 Delivery
oO
© International International , ‘
Ee Priority standard ene 21 00%
3. Recent Guiding Coalition activity in Mails show that we can bring
actively managed branches up to the standard of the Crown network
4. The “tail” of branches are less actively managed,
providing a lesser opportunity to drive up penetration
across the estate
Post Office®
IN THE STRICTEST COMMERCIAL CONFIDENCE
Selling high value products requires a more
specialist skill set currently present in only a few
branches
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Crowns
Sales routes for Key Products in the future state network
Mains Locals and Community...
PFS Mortgages
Life Assurance
Savings
Life Cover 50+
Credit Card
Motor and Home...
Initial investment made in
branch and application
— Data capture
sent for approval
Telephony Home phone
Travel Travel insurance
Travel money
Moneygram
Premium Special delivery
Mails
Recorded delivery
International priority
i} 2000
4000 6000 8000
Advised sales (MS)
@® Assisted Sale (FS/MS)
™ Counter colleagues
Introduced Sale
(CRM/CRM with POM
support)
Leaflets or data capture
® Application packs
3 Current branch reach
(made at least 1 sale in
last 12m)
10000 Number of branches
* Note: this represents the capabilities in the future network once transformation is complete. Some products such
as Savings and Life Cover 50+ are currently available in some unconverted Locals
Post Office®
improve their productivity
IN THE STRICTEST COMMERCIAL CONFIDENCE
To sell more high-value products, we must both expand the reach of our product specialists and
How we up-sell and
cross-sell
Counter conversations
driven by linked
products/ transactions
with counter
colleagues providing
leaflets and/or referring
customers
Hosts in branches
opening up a more
relationship based
sales conversation
Data capture for
selected products with
appropriate margin
Specialists selling
products
Contents
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_
@ Scope
6 Context and background influences on the strategy
G
(4) What we are doing to deliver the strategy
ts ] Dependencies on others
re ] Financial benefit and the 3 year plan gap
@ Next steps
rs ] Supplementary analysis
Post Office®
©)
IN THE STRICTEST COMMERCIAL CONFIDENCE
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Our sales strategy will focus on building our income .
on sold-products from both product specialists and Ea
counter colleagues
Our sales approach is based on our broad and diverse product range with different sales
requirements:
¢ Some sold-products are about convenience (e.g. Mails, Travel money);
* Some sold-products require a higher level of sales conversation effort and/or a compelling
customer value proposition and/or higher brand awareness (e.g. Insurance, other PFS);
¢ Non-sold, convenience products require branches open at times that are convenient to the
customer with the best possible retail environment (being delivered through the Network
strategy).
Our Network sales strategy focusses on sold-products and is made up of:
1. Improving the performance of the agency network (using strategies and techniques applicable
to each branches model and size):
* Drive up the penetration of sold-products;
* Help Agents to build their own businesses with both regular customers and local SMEs.
2. Improving the performance of our existing specialist sales teams;
3. Increasing the reach of our specialist sales teams to more of the Network (e.g. MS, FS, CRM);
~*~
er
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1. To deliver the network components of the :
commercial plans, we will improve the performance
of the wider network in high volume, up-sell products
Improve the performance of our Crowns Branch income performance
counter colleagues in actively (LLL TRA SULLA TTD CET ATTA
managed branches £200
£1,000
Actively managing upsell of high volume — 2 ggg
products (predominantly mails and travel g e600
money): 5 Counter colleagues up-sell
Actively targeting high volume customers § “” wee [oO Oe
of low value products (SME mails £200 “= oe ae!
customers); £0 ————
0 2000 4000 6000 8000 10000
Exploiting our knowledge base by
sharing best practise of the high
performing branches with their peers.
Number of branches
However we will limit our focus to the actively managed areas
Capabilities we will target Of the network
* Guiding coalition is driving £6.9m pa from the top 3000
branches, but the return per branch has been lower for the
next 1000 branches.
+ Our initial focus will be on the higher opportunity branches
within the ASPM network to drive better compliance to their
contractual obligations, up-selling mails products to customers.
* Our investment of management and training time will be
proportional to the level of benefit we feel it will achieve.
MI to measure and manage our top potential
branches;
Greater commercial awareness of our agents;
Credible commercial penalties for continuous
under-performers
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®
2. AND we will improve the performance of our existing
specialist sales teams
Improve the performance of our
specialists
We will improve the performance of our current
specialist sales team by:
* Improving the tools and training they have;
* Increasing the number and quality of leads
Telephony Ho:
Crowns
Life Assurance
Savings
Motor and Home.
Life Cover 50+
Credit Card sales and Apps
Sales routes for Key Products in the future state network
Mains Locals and Community...
Advised sales (MS)
100 Mortgage Specialists
a Assisted Sale (FS/MS)
c200 Financial Specialists
c340 CRMs
m Counter colleagues
Introduced Sate
(CRM/CRM with POM
support)
available to them;
* Boosting the knowledge of our sold-
products across the business;
Premium oc
Mails
* Increasing targeted marketing focus to Recorded de!
drive more customers into specific International prio
Leaflets or data
capture
= Application packs
{2.Current branch reach
branches
+ Ensuring they are compliant with regulators
Current average sales
per week
Mortgage specialist 0.3 mortgages per week
Financial specialists
POM supported CRMs
ASPM supported CRMs
6.2 products per week
3.6 products per week*
2.3 products per week*
° 2000 4000 6000 8000 10000 Number of branches
Capabilities we will target
* Relationship based sales driven by higher
tenure of specialist sales team;
* Supported by improved lead capture;
* Improved access to customer data in branch;
* Improved product journeys in branch
* Data driven leads
* Local marketing and visibility
* Linked product journeys
* Multichannel journeys
* Includes both PFS and
Telephony products
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IN THE STRICTEST COMMERCIAL CONFIDENCE
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3. AND we will increase the reach of our specialist
sales team to more of the Network
@
Extend the reach of our specialists
We will extend the reach of our current
specialist sales team in a cost effective way
by:
* Increasing skills and knowledge of non-
specialists in the high opportunity branches
+ Enable each FS/MS to have access to a
wider set of branches and customers
* Ensuring they are regulation compliant
Crowns
Area of focus
“1
Branch income
Branch income performance
Mains Locals °
Sales routes for Key Products in the future state network
Crowns __Mains Locals and Community...
ul i ]
PFS Mortgages [I
Initial investment made in
branch and application
~ sent for approval
Life Assurance
Data capture
Motor and Home... on
Life Cover or
Mails, ° Y
AEE EE TE
° 2000 4000 6000 8000 10000 Number of
Capabilities we will target
* Digital remote mortgage advice
* Customer access to digital and co’
centre channels in branch
+ Private conversation areas available in more
of the right branches
+ Multichannel journeys (e.g. appointment
booking online joined up across branches)
4000 6000
Number of branches
8000
10000 e
available at the counter
Remote access to wider branch network
Next best action based on customer data
Advised sales (MS)
Assisted Sale (FS/MS)
mCounter colleagues
support)
Leaflets or data capture
‘= Application packs
aCurrent branch reach
(made at least 1 sale in
last 12m)
branches
ntact
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IN THE STRICTEST COMMERCIAL CONFIDENCE
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The balance we strike between capability expansion °
and performance is dependent on a number of
factors and we need to remain nimble to respond
Competition
* Traditional banks leaving the high
street driving personal and
business banking services
customers to POL
Speed of structural market Client contractual conditions
decline + Influencing when and how we are
able to open customers up to
+ External factors over which we
cross-sell opportunities
have little control
Commercial strategy Footfall is in decline
coo nele + General high street foottallis in
+ Adapted through the annual decline. A factor over which we
commercial planning process have little control
Customer buying behaviours
+ Dependent on the outcome of the
customer strategy
+ High street customers are moving
to other channels
Improving both capability and performance is mutually reinforcing.
To focus on only one or the other will lead to missed opportunities, however we must ensure we are
focussed on the greatest areas of long term benefit for POL.
Post Office®
(3)
IN THE STRICTEST COMMERCIAL CONFIDENCE
Contents
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_
@ Scope
6 Context and background influences on the strategy
[3 ] Network sales strategy
©
ts ] Dependencies on others
re ] Financial benefit and the 3 year plan gap
@ Next steps
rs ] Supplementary analysis
Post Office®
@)
IN THE STRICTEST COMMERCIAL CONFIDENCE
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We will target a number of initiatives to deliver our
strategy in the 3 year plan period
" Initiative I Crowns I Mains I Locals&
ms I wis I other I Community
“Spoke” branches with Customer relationship
Improving the reach of our managers to:
specialists & improve their + Capture leads and book referral appointments for all
performance products for MS
Hub & Spoke _ . Provide customers with a route to self-serve online
through a tablet in-branch
“Spoke” branches with MS areas for a mobile MS
workforce leading to MS productivity improvement
Mortgage Leveraging the Hub and Spoke branches, deliver a
specialist Digital face-to-face technology solution for a centralised eer I
ee ae reach team of MSs to serve customers. This is designed to both
Financial Specialists expansion drive up income and improve efficiency, reducing costs
cRMs
—__—— I Equip our FSs with the required tools and support from
eed the network through
——— FS + Improved performance management
productivity + POM academy educating the wider business in PFS iia
improvement * Enabling POM branches (customer data in branch)
+ Increased lead generation increasing the sales pipeline
+ POM brand awareness improvement
Improve the performance i
i p Business Active support for the SPM community to generatemore,
of the wider network in Development i ied
high-volume products Managers local SME business
Sg ae Coaching from the top SPMs. Branch standards team
Guiding "
oom fy lit to ensure agents are having the right sales conversations Poe I
che Sac nosh coalition to up-sell high-value mails products.
Customer Increase the volume and quality of in-branch data
data capture capture contacting the right customer for the right reason
Contents
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_
@ Scope
6 Context and background influences on the strategy
[3 ] Network sales strategy
(4) What we are doing to deliver the strategy
ts ] Dependencies on others
re ] Financial benefit and the 3 year plan gap
@ Next steps
rs ] Supplementary analysis
Post Office®
@)
IN THE STRICTEST COMMERCIAL CONFIDENCE
Delivering our strategy is reliant on your help
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Customer
data capture
Exploit the leads
captured
Product
teams
Products
with market
leading
Business
Development
Managers
marketing
>) mix
Guiding
coalition
Transition from
Excel to MI strategic I
solution
Manage
exclusivity
Investment constraints
Hub & Spoke
CRM
FS
productivity
improvement
Hub & Spoke
Mobile MS
of SPM/
staff time Tablets to deliver
for digital journeys in
training branch and if
capture leads. Int yr
Bol to provide
product
coaches
Induction training .
development and
delivery
Hub & Spoke
digital face to
face
New product journeys and digital face-to-face technology
(pilot)
New product journeys and digital face-to-face technology
(roll-out)
Risk & info
sec
Approved
storage and use
of data
Approved
storage and use
of data
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Contents
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_
@ Scope
6 Context and background influences on the strategy
[3 ] Network sales strategy
(4) What we are doing to deliver the strategy
ts ] Dependencies on others
re ] Financial benefit and the 3 year plan gap
@ Next steps
rs ] Supplementary analysis
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Our planned initiatives target performance .
improvement in sold-products to grow overall
network income in a declining core market
2 175 wecotrtts-
5 Optimistic estimates of aa £175.6m
= income improvement ,¢ Realistic estimates of
170 income improvement
£21.3m Sold-product 68. Potential
165 income improvements _f income gap of
required to meet our “ £7.3m.
commercial plan a) a _—
160 62.1m Delivering all
initiatives will
help to meet
Pessimistic estimates of our targets
155 income improvement
\. Guliding coalition
150 already delivering, £6.9
1s 41-20% —-+/-25% = +1-30% = #/-40% = #/-40% = +/-40% = +/-60% ~~ +/- 60%
FY14/15 Guiding Customer Business FS Hub & Spoke Hub & Spoke Hub & spoke MS FY17/18 (est)
Coalition data capture development productivity CRM mobile MS digital face to productivity
managers improvement face improvement
The commercial team plans to introduce new products (e.g. Investments) are not included in this projection and
would reduce the target income to be delivered through these initiatives.
(There are further unknown elements we have not been able to include in our benefit estimates such as the market
dynamic (footfall decline on the high-street), marketing efficiencies etc)
Contents
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@ Scope
6 Context and background influences on the strategy
[3 ] Network sales strategy
(4) What we are doing to deliver the strategy
ts ] Dependencies on others
re ] Financial benefit and the 3 year plan gap
t7 ) Next steps
rs ] Supplementary analysis
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Next steps
* Continuous adaptation of this strategy:
+ The upcoming customer strategy that is being developed should inform the product strategies including
the refreshed FS strategy, which in turn will require us to revisit this strategy to ensure we are meeting
our customer needs and focussing our sales efforts correctly;
* Channel economics for Financial Specialists and Mortgage Specialists are due to be reviewed mid-
January. Any outputs from this will need to feed into our sales strategy.
+ We will also aim to feed into these strategies with input on:
* Which products do customers not want to buy in branch and why;
+ Which products are our sales constrained due to a poor product journey;
+ Have we got the right salesforce to meet the customer demand.
* New product impacts on network income: Work with the product teams to understand and quantify the
network income that will be derived from new products over the coming years. The 3 year plan can then be
updated with channel splits derived in unison with the product teams.
* Engage with other functions by sharing the network sales strategy: This strategy cannot be delivered by the
Network team alone, we will engage with other directorates within the business, gain feedback and adapt where
appropriate and clarify our dependencies on them:
* Increase POM brand awareness;
* Deliver the required technology;
« Ensure we are compliant;
* Improve customer journeys.
@)
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Contents
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_
@ Scope
6 Context and background influences on the strategy
[3 ] Network sales strategy
(4) What we are doing to deliver the strategy
ts ] Dependencies on others
re ] Financial benefit and the 3 year plan gap
@ Next steps
rs ] Supplementary analysis
(a0
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Supplementary analysis contents
=
. Challenges to developing sales in the Network
2. Customer data capture assumptions
3. FS productivity improvement assumptions including:
1. Ratios of FS:MS:CRM
2. FS break even analysis
3. Strategy excerpt of FS productivity improvements
4. Hub & Spoke CRM assumptions
5. Hub & Spoke MS mobile workforce assumptions
6. Hub & Spoke MS digital face to face assumptions
7. Guiding coalition assumptions
8. Business Development managers assumptions
9. Definition of “sold-products” to support the financial difference between Sold and Core
10.FS historical sales analysis
©)
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Challenges (blockers) to developing counter and specialist
sales in the Network
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Challenges for both counter and specialist sales
1.
2.
3.
Customer awareness of the broader Post Office range is low
Customer strategy — there is no defined customer strategy driving product proposition development or
marketing in POL. This is completed on a product by product basis making cross sales challenging
Customer journeys — many journeys cannot be completed in branch and require either paper applications to be
completed by customers or for them to transfer to Digital/Telephony channels
. Cross Sale made challenging by
a. Customer propositions aligned to different target markets
b. Lengthy sales process that starts again each time
c. Poor customer journey
. Customer data — we have no understanding of a customer’s POL product holdings at point of sale, which means
we cannot tailor our conversations to customers
Specific challenges for specialist sales
1.
Marketing — there is limited/no local marketing capability driving conversations into our specialist capability
2. Servicing — all servicing is done remotely. Our Specialist population cannot respond to customer queries which
is not conducive to building customer relationships
Leads — we have limited/ no lead generation capability outside of counter conversations (save for Mortgage web
leads) in the Network. Other organisations have sophisticated and targeted data led lead generation
. For FS Savings (previously Premium Bonds) is the only product that drives footfall— this is either a ‘feast’ or a
‘famine’, depending on Bol balance sheet requirements, which is not conducive to driving capability
Regulation — we are in an increasingly regulated environment in all our business lines, however, FS is where
this has the broadest impact
(»
Na
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Differing levels of specialist capability in branches S
creates a different customer experience Ea
The customer journey can be inconsistent for the same product across different types of
branch.
* Anumber of products can only be sold by specialists to ensure the sale is compliant.
In the case of a specialist not being available, the lead capture and/or referral of
customers to a specialist is inconsistent
¢ Where data is captured for customers, the customer data is used to a limited degree in
some cases
Losing the opportunity to convert the customer at the outset considerably diminishes the
likelihood of a sale at a later date.
©)
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Differing levels of specialist capability in branches Ea
creates a different customer experience
Car
Insurance
Sk hold € only I I
Travel 'schois € and §
: Telephon
see) Money 70.02" :
{Ia like to buy now] I'm interested )
With an Sold through Horizon only Sold through Horizon only Details captured Capture details in
FS/MS Hand-off to counter colleagues Hand-off to counter colleagues on FS laptop Salesforce
(Crown
Live quote Follow up when
only) ropriate
Sales complete Vv i
(V'd like to buy now} (se ["'d like to buy now}{I'minterested _} I(I'd like to buy now] [_I'minterested _]
Bi hh tock online Details captured inI) Provide a brochure
ranch has stoc! Capture details Provide a brochure
Crowns/ Counter Yes Horizon p
; i Customer can
Mains colleagues I} Order to arrive Line test and quote u Refer to FS/MS in Customer can
complete in a
tomorrow vannel branch or; complete in a
LJ sales complete Vv Sales complete ‘i Provide a brochure A channel
oF
tf {'d like to buy now) [ I'm interested } {'a like to buy now) [ I'minterested }
. Provide tablet for Capture details Provide tablet for Capture details
With a . self-serve app self-serve app
CRM Sold through Horizon only 5 , a brochure =
(when tablets Hand-off to counter colleagues we quote Live quote FS/MS
‘ an or;
available) Sales complete v Sales complete Blerovide a brochu@(\
i Lead No down- Lead Near renewal date
As per Mains/ . .
Locals Crowns process Sales complete captured in I} stream process captured in II +» Over 50s DM I
Horizon to process lead Horizon + Under 50s EM ey
{96}
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE “Note: sales of FS products are constrained by regulations and
colleagues having had the right level of training/supervision
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Guiding coalition
Process improvement * Continuation of the existing Guiding coalition success
+ However, as we have launched phase 2, we have seen a lower success rate as we move into the
8.0m ) smaller and less actively managed branches with lower opportunity. This has demonstrated that there
are diminishing returns in actively managing the tail of the network and our efforts are better served in
driving more income from the top branches at the outset
Proposed * Continue to drive sales through the top + Expand the current 1000 GC phase
improvements 3000 branches (GC Phase 1) of £6.9m pa 2 branches to an additional 1000
Supporting data + For each product on which we have focussed (SD, International Express, International Priority, 1C labels,
2C labels, 1C stamps, 24/48, Recorded) we have measured the uplift in sales of the GC group of
branches against the rest of the Network.
+ For Phase 1 (the initial 3000 branches) + For Phase 2 (the next 1000
in the first 33 weeks of the year: branches) in weeks 22-33: Sensitivity analysis
Target FY £4,500,000 [Target FY £1,000,000 Level of Phase 1 targets 160% 1,194,000 1,494,000 1,944,000
Target current point ” 62.855,769 Target 12 months £1,500,000 of £4.5m we can hit 140% 294,000 594,000 1,044,000
Total income achieved YTD £4,012,159 [Target current point £366,667 (currently at 140%) 120% - 606,000 - 306,000 144,000
Total income achieved YTD £222,488 eal ea : 80% aa
i te ts a
Number of weeks measured 33 Number of weeks measured uu
What would you * That the level of benefit currently being realised by the existing Guiding Coalition is sustainable year on year
have to believe? ° We will be able to drive similar levels of benefit from the Phase 2 group. Note: we have assumed a low end
case for the GC benefits profile of £1.1m annualise rather than the target of £1.5m stated for Phase 2 due to
the lower than expected returns we are seeing from the smaller branches
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Customer data capture (currently capture approx. .
160k car and home insurance leads per year through
Horizon)
Process improvement
Email customer to validate details & offer Email/Direct
Capture customer the opportunity to provide additional mail customer
. details in branch renewal dates for other products (Home, prior to renewal
+/- 25% car, mortgage) date
Proposed Current process step New process step Current process step
improvements + Use of ASPMs and + Validate data captured increasing accuracy + Improve the content
MI to improve the + Increase the number of products marketable to of EM/DM using
level of data capture each customer Adobe campaign
+ Increase consent to contact rates + Include outbound
+ Improve the blended income factor for lead calls where
generation by including higher value products appropriate
(mortgages)
Supporting data + 440 branches captured Sensitivity 845,044 887,270 1,027,190 1,307,031
>100 leads by week 33 analysis New leads 296,145 553,974 663,595 882,836
. 1021 branches had 112,775 sacar cael ar
captured 6-100 by week 33 Conversion rate improvements
What would you * The 1021 engaged but + Adobe campaign developments early FY16/17 + Adobe campaign
have to believe? underperforming branches + Wewill capture an extra 0.2 products per customer developments early
7: would capture an * Consent to contact from 59% to 65% for over 50s FY16/17
additional 300k leads per and from 5% to 25% for under 50s
year + Introduction of mortgage leads would increase the
blended income factor from £68.33 to £97.77
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Business development managers
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Process improvement
&>
We will coach 200 branches per year
with a team of BDMs
Previous experience of the BDM
approach in Birmingham raised over
£1.5m incremental income for 200
branches
* The objective is to both grow
new business with new
customers and retain/grow
business with existing customers
Proposed * BDMs will coach the SPMs to go out Sensitivity analysis at year end FY17/18 — note: as
improvements into the local community and find the number of branches increases during FY 17/18,
new business the total £3m benefit will not be realised in year
* The focus is to bring in more high-
volume (but low item value) 600] 3,000,000 4,500,000 I 6,000,000
customers — predominantly SMEs valle 700 7,000,000 oOo gbH 2,000,000
Wale 200! 1,000,000 I 1,500,000 I 2,000,000
5,000 7,500 10,000
Additional income per branch per year
What would yor * The successes in Birmingham can be replicated in other regions
have to believe’ + There are sufficient SPMs willing to take part in the sales initiative
* This could be delivered and maintained by a team of 6 BDMs (at a cost of £370k per year)
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Productivity + We have c200 Financial Specialists Motor insurance 0.7. Channel economics for Financial Specialists and
improvement There is a template for 238 Home insurance 0.5 Mortgage Specialists are due to be reviewed mid-
FS currently started the year selling 4.5 Life 50+ 0.5 January as part of broader Bank of Ireland negotiations
products per week and now sell 6.4 products tarm fife 0.3 Anumber of options will be considered, including:
per week on average constituting of -> ncn os ° the size of the specialist salesforce
+ Using product LTVs this equates to an Savage 30 + the mix between MS /FS/ CRM
average FS income of £400.75 per week 9 “~ * the role of Virtual Advisor in delivering advised sales
+/ Current account 0.5
Proposed improvements
Concerted effort to manage out underperformers faster Improve front line data capture in branches of customer information
Performance New formal PDR moderation exercise in place Customer Invest in SalesForce to support and digitise sales processes
management New incentive scheme that compensates FS specialists for data capture/ Profile customers, understand their needs and anticipate next product
sales, compliance and customer service Sales tools Present customer overview to FS / MS and provide next likely product
Invest in POM Academy to develop/execute initial training prompts
and continuing professional development
. . . aoe Increase tenure of FSs allows them to establish deeper relationships
Clarify FS/MS role requirements to attain/ maintain
Staff training
with counter staff /customer:
aun competence and interventions to support development Increased Enable customers ‘ book in branch appointments
Increase recruitment support, in particular for Specialist roles lead Implement tablet sales tool to front line sales staff with product
Post Office Launch a visually distinct PO Money brand _ generation applications through CPD
Money Brand Invest in branch promotional material and increase awareness Support sales of complex products through the Hub & Spoke specialist
and consideration of Post Office for financial services products model, targeting high value locations
What would you Sensitivity analysis (note: the performance
improvement will be reached at the end of FY17/18
have to believe? * We will increase the number of FS from c200 now to the template of and the total benefit will not be realised in year)
238 by the end of FY 16/17 600] 8,375,675 I 14,574,777 I 20,773,878
+ Wewill get to a steady state of 292 FS by end of FY17/18 once we Number 400] 4,368,175 I 8,500,909 I 12,633,644
have proven we can hit the sales targets in the current population of FS 292] 2,204,125 I 5,221,021 I 8,237,917
+ Wewill get to 11+ sales per week per FS by end FY17/18 237I 1,102,063 I 3,550,708 I 5,999,353
+ Sales per week improvements held on the next slide 6.4 97 2B
Sales per week
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FS productivity improvements
FS Strategy — grow the number of specialist sales teams
Need to align the right size
specialist salesforce with the
600 + broader Network strategy
500 + 50 MSs taken from ;
CRMs (ASPM S d
the FS population ee s( upported)
400 4 “ 1 CRMs (POM Supported)
€ 100 MSs being on-boarded
3 60
3 300 + 6 tm Mortgage Specialists
8 ‘ea I 2 I FS being on-boarded
= a00 I 432 8
32
357 a ok
1m Financial Specialists
100 + 202
0 1 r 1 1 1 1
2010 2011 2012 2013 2014 2015 YTD
—
27 és 5.6 5.0 5.2 6.4 Average FS sales Per
‘" p A FS sal
0.95 1.79 1.96 1.94 2.24 3.11 head, minus savings.
Post Credit Crunch aftermath. Bol raise . I
liquidity using leading savings rates Underlying productivity
has improved
significantly
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FS productivity improvements N
Channel - Branches: To recover fully loaded costs, FS specialists need
to complete ~9 transactions per week
Credit Cards ®® Current Accounts Ml Savings Mf Homeinsurance i Loans ® Motor insurance Life insurance
Break even analysis
- Current
I product mix
2019/20
projected
product mix
Note: excludes costs associated with driving higher FS productivity (e.g. Academy, SalesForce)
1 Fully Loaded costs include £21k base salary; 30% increase for pension, HR, NI; £1,200 annual sales licence and £450 p/m for real estate
2 Average productivity per week for rolling twelve months; 3 Based on 2014/15 YTDEBITDAS margin
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FS productivity improvements N
The FS 2020 Strategy highlighted a need to invest c£4m per annum to
achieve our growth plans
Key actions Progress To Date Impact on Productivity
Current
productivity 45
* — Concerted effort to manage out underperformers faster
Performance . — New formal PDR moderation exercise in place
©
management New incentive scheme that compensates FS specialists for sales, compliance and customer service 30
: Re * Invest in POM Academy to develop/execute initial training and continuing professional development
Stafftraining + Clarify FS/MS role requirements to attain/ maintain competence and interventions to support development 20
Academy * — Increase recruitment support, in particular for Specialist roles
Customer * Improve front line data capture in branches of customer information
* Invest in SalesForce to support and digitise sales processes «<)> 2.0
— Ppa * — Profile customers, understand their needs and anticipate next product
ales tools _»_ _Present-customer oveniew.1o.FS. LMS-and.provide. next likely. product prompts...» ++» +--+ Lee
Increased Increase tenure of FSs allows them to establish deeper relationships with counter staff /customers @
2.0
. Implement tablet sales tool to front line sales staff with product applications through CPD
generation“ _-_ _support sales of complex products through, the Hub & Spoke. specialist model, targeting high value locations
* Launch a visually distinct PO Money brand
Post Office —- invest in branch promotional material and increase awareness and consideration of Post Office for financial
Money Brand services products
lead * Enable customers to book in branch appointments
@
Plan
productivity
All figures average sales per week for Financial Specialist
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Hub & Spoke CRM
Process improvement + We have c340 CRMs with approximately CRMs are Products sold:
40% being POM supported and selling + Trained in “Introduced + Mainly lead generation
approx. 2.8 products per week with an Sales” only + May sell simplest products
average income of £108 + Employed by agents but +» Armed with tablets will enable
* The remaining CRMs are ASPM with some Post Office them to provide customers with
supported CRMs and are currently selling __ training digital self-service sales in branch
approx. 2.3 products per week with an
average income of £62
Proposed soo CAM numbers ame up * CRMs will generate additional leads for MS’s and FS’s
improvements «con + We will need to recruit 6 more ASPMs to cope with the
- additional work (£300k)
+ Ramp the number of “ + Training schemes will need o be put in place requiring
POM supported and » administration of £60k per year
ASPM supported m3 G4 G1 2 as as ar ar GS a + Video mystery shopping (£160 per CRM) is required
CRMs over the next wns wor ve whe as well as customer validation calls (£10 per CRM) at
3.5 years ——Total POM supported Total ASPM supported a total cost of £100k per year
What would you have to believe? Sensitivity analysis (by steady state in
+ We can get POM supported CRM sales + An income factor uplift of 5%-13% is FY19/20)
per week up to 3 experienced by all branches where a CRM is Ti00I 1,074,464 I 1,295,819 I 1,766,504
+ Wecan maintain ASPM supported CRM introduced by a shift in product mix towards ey 676I 556,938 I 689,668 I 976,430
sales at approx. 2.3 higher value products (as per current state) : 251I 39,413 83,516 I 186,357
+ We can recruit and maintain 200 POM * Bol will supply additional coaches for high S02, lcccal eal
supported CRMs by end of FY16/17 and volumes of POM supported CRMs, or POL Sales per persan per week (wejehted
ramp up to 500 by end of FY17/18 will create their own coaching capability
+ We can recruit and maintain 600 APSM + CRM leaflets will be issued in each branch to
supported CRMs by the end of FY18/19" promote the initiative
wW
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Hub & Spoke Mobile MS workforce
Process improvement + We have 100 MS’s at ieee * The average loan value is £180k
present 0.2Life 50+ + Post office currently take 60pbts and pay the agent
* They sell on average 0.3 0.3Term life 10bpts. We expect this to drop to 50bpts next Feb
mortgages per week eee = + We currently get approximately 1.8 mortgage leads
+ They sell on average 1.8 (asavines per week per CRMs plus another 250 per week
other products per week 0.2Current account from Crown counter referrals
constituting of ->
Proposed + Through the increase in CRMs we will increase the Sensitivity analysis (note: the performance improvement
will be reached at the end of FY17/18 and the total benefit
improvements number of leads available for MS’s : sa:
will not be realised in year)
+ We plan to drive mortgage sales up to approximately
4 mortgages completed per month per MS. au oe a aa en
+ An increase in CRMs will open up the possibility of Wetaree: fal —ise-s60 oe 736940
increasing the number of MSs to 200 in the longer wech 356] 583,128I 1,166,256 I 2,332,512
term (unlikely to occur during the 3 year plan period) 50 100 200
Number of MS
What would you have to believe? MS processing capacity(current stats):
+ Each CRM will generate 2.2 leads per week each + 80% of appointments are screened out at
+ Web leads will increase in proportion to CRM leads as a result telephone interview (0.5 hours per phone call)
of a greater MS presence through “Spoke” branches — i.e. more * 20% go to first appointment which takes
locations to book an appointments approx. % of a day (including travel)
+ 1MS can complete 0.7 mortgages per week under their current + 50% of the 1% appointment make it back for a
process and with the current quality of leads second appointment, which takes % of a day
+ Assumes that POM Supported CRMs will not be able to make * 70% of the 2"4 appointments result in a
compliant mortgage referral without Digital POM Branches completed mortgage
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Hub & Spoke MS Digital face-to-face
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Process improvement
+/- 60%
.
We would begin with a trial
then roll out subject to the
trial success
Note: a more detailed business case is being
submitted to the investment committee
Proposed
improvements
Technology will be rolled out to existing MS areas and within selected “Spoke” branches to enable an MS
to carry out mortgage appointments digitally
MS’s would be co-located in a central contact centre allowing them to be deployed to the customer
digitally, driving location based efficiencies
What would you
have to believe?
A majority of our current MS will be centralised
between now and 2020
The total number of MS required would reduce by
30% due to efficiencies (however, if the required
levels of leads are made available, we would maintain -
our current levels to maximise the opportunity)
Customers will be willing to carry out mortgage
interviews via digital face-to-face rather than in
person (Note: this technology is already deployed in
Nationwide and has proven a success
A higher number of leads will be converted as the
ease of finding an appointment slot convenient for the
customer is greatly increased
We will be able to deliver in a compliant way
Finances are available £900k for the trial and
£12m for roll-out
The business case is signed off and the trial
is a success
There are enough mortgage leads to satisfy
the pipeline and meet the increased capacity
of the MS’s
There are cost savings in centralising the
team through compliant supervision in one
geography and more efficient deployment of
our MS resources
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MS productivity improvement
Process improvement + We have 100 MS’s at present
+ They have the capacity to sell 0.7 mortgages per week (see
previous slide)
+ By improving the quality of the leads and the processing
efficiencies we can drive this up to 1 mortgage sale per
+/- 50% week per MS
Proposed + Utilisation of a rebuilt Bank of Ireland mortgage platform (Project Rome)
improvements * Mortgage end to end case tracking and reporting (lead to completion)
+ Rebuilt web to lead journey significantly increasing branch appointments
+ MS scorecards and incentive scheme in Salesforce
+ Discovery Workflow to enable broader relationship based conversations
+ Customer Portfolio Dashboard. Enabling a customer conversation informed by existing holdings
+ Multi Product Sales capability - to add further product sales without re-entering customer data
What would yor + Each MS has the spare capacity to sell 1 Sensitivity analysis
have to believe? mortgage per week through to completion ny 200] 1,127,711 I 2,027,711 I 2,927,711
+ There will be leads of sufficient volume and quality ml it Trt isa 845,783 I 1,520,783 I 2,195,783
to meet this sales rate yee 100 563,855 I 1,013,855 I 1,463,855
+ We will not increase beyond the current 100 MS ae 0.8 0.9) a
(although in a proven model, we would hope to S __ Improvement to
ramp up to 200 at some point before FY19/20)
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Definition of “sold-products” used to evaluate the
network income
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Core network products
Sold network products
Definition of non-channel income streams
ies JAEI - UKBA Financial JATMs (other) PO cash I [Supply chain [All supply chain incomd
(Government Other PFS (Credit card Required Services IUncashed Benefit Mails & Retail {int'l Acceptance
Passports. Current IGift Vouchers - corp UK Acceptance
Secure Collect Accounts Required IMoneycard Youth Card [Dangerous Goods Int
Standard ATM Withdrawal (General Electronic Postal Order [Dangerous Goods UK
FS Banking Other Nsurance Other IMore likely sale INew reseller - Capita (Custody of pouches.
Bill Payments (Growth Bonds ore likely sale Profit Share IRML Fixed Fee
(Cash Withdrawals Home Insurance More likely sale intermediary IPFW Fixed Fee
Payment Services OtherI Instant Access IBackbook IMailwork
POMC. Saver ore likely sale IBack book and other IRM Other
Standard ist Class Labels Vol SA ore likely sale income (Camelot Fixed Fee
mails [ist Class Stamps Val Life Assurance__[More likely sale IEasy saver + bonus IHealth Lottery Fixed
2nd Class & Other Loans Loyalty Bonds Retail - Other
Stamps Val lortgage IOnline Account Government [Digital ID Serv SIA
2nd Class Labels Vol jotor Insurance IMore likely sale [Online Reserve [Services lew DD
Home Shopping Returns Savings ore likely sale INew Investments, [Telecoms IHomephone retention
international Standard Premium Iinternational structures & annuities [Dual - H/phone & BB
‘ol ails Express {Other savings
Lottery nternational [Motor Insurance
jails Other Priority Renewals
Recorded Delivery Parcelforce [Home Insurance
Retail 24/48 Renewals
Special Delivery lLife Insurance Retention
[Telephony HomePhone Lifestyle Protection
IPO Mobile SIMS [Business Insurance
PO Mobile Renewals
[Topups. Pet Insurance (renewals)
[Telecoms Other \Unallocated TI
[Travel loneygram Bureau - Vol (fixed)
[Travel InsuranceIMore likely sale Moneygram Fixed income!
[Travel Money
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Strictly Private & Confidential
Financial Services
Historical sales analysis
November 2015
O
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Savings (excluding online only products)
250,000 > }
200,000
_. IRRELEVANT
100,000
Sales
volumes
50,000 I I
o +4 ia
FOSTERS SULT LOLS 16 TTT
Tet)
Agency mCrown WHSmith Online mContact Centre
Forecasted
outturn (% Tat)
_IRRELEVANT —
Source: Credence (Sales Planning & Analysis Team)
2013/14 2014/15 2015/16 2015/16 Target
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE 40 40
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Online only Savings products
160,000
140,000
Sales 120,000
tans “= IRRELEVANT
60,000
40,000
20,000
0
2013/14 2014/15 2015/16 Forecasted outturn(% 2015/16 Target
Tet)
© Online
Forecasted
outturn (% Tgt)
_.. IRRELEVANT
2013/14 2014/15 2015/16 2015/16
Source: Credence (Sales Planning & Analysis Team)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE Vay
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Mortgages
2,000,000,000
1,800,000,000
1,600,000,000
1,400,000,000 +}
Sales value 1,200,000,000 -!
«) vam [TRRELEVANT
800,000,000 4
600,000,000
400,000,000
200,000,000
i?)
2013/14 2014/15 2015/16 Forecasted outturn(% 2015/16 Target
Tet
Agency sm Crown mContact Centre ‘i Online
Forecasted
outturn (% Tat)
IRRELEVANT
Source: Credence (Sales Planning & Analysis Team)
2013/14 2014/15 2015/16 2015/16 Target
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE 42 42
Credit Cards
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Sales
volumes
2013/14 2014/15 2015/16
Forecasted
outturn (% Tot)
120,000
100,000
80,000
60,000
40,000
20,000
IRRELEVANT
2013/14 2014/15 2015/16 Forecasted 2015/16
outturn (% Target
Tat)
mAgency Crown ®WH Smith mContact Centre m#Online
2015/16 Target
IRRELEVANT
Source: Credence (Sales Planning & Analysis Team)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE
43 43
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Current Accounts
12,000 >p---- a — ao a _ _ 4
10,000 +}
8,000 +
volumes “ IRRELEVANT
4,000 +
2,000 +
2013/14 2014/15 2015/16 Forecasted 2015/16
outturn (% Target
mAgency = Crown = WH Smith 2 bat act Centre
2015/16 Target
Source: Credence (Sales Planning & Analysis Team)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE 44 44
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Home Insurance (NET)
75,000
65,000 +
55,000 +! I
Sales se IRRELEVANT
volumes H
25,000 +
15,000 +
5,000 -
a J 2013/14 2014/15 2015/16 Forecasted outtum (% 2015/16 Target
5,000 “oc
mAgency Crown WHSmith wmiContact Centre Online
Forecasted
2013/14 2014/15 2095/16 21 eniten sur
2015/16 Target
Source: Credence (Sales Planning & Analysis Team)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE 45 45
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Motor Insurance (NET)
180,000 +~ icicicscseserneneneneneneneninininininimiiaeaiainininenoneninininininininiminimiimeaiainenininineninin
160,000 +
140,000 4
120,000 +
von So IRRELEVANT
volumes 80,000 +
60,000 ~
40,000 +
20,000 +
04 h
2013/14 “po1a/is "9015/6 Forecasted outtum (% 2015/16 Target
Tet)
mAgency Crown WHSmith wContact Centre m Online
Forecasted
2013/14 2014/15 2015/36 outturn (0% Tot)
2015/16 Target,
IRRELEVANT I
Source: Credence (Sales Planning & Analysis Team)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE 46 46
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Life Insurance (NET)
30,000 4
25,000 +;
20,000 +
Sales I
volumes ~~ IRRELEVANT
10,000 7
5,000 +
ot
2013/14 2014/15 2015/16 Forecasted outturn (% 2015/16 Target
Tet)
mAgency mCrown mWHSmith wmContactCentre Online
2013/14 2014/15 2015/16 guturm (on rot) 2025/26 Target
A
A
m
rr
<
>
=
—
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Travel Money
3,500,000,000 p.-----
3,000,000,000
2,500,000,000
Sales value
® come, IRRELEVANT
1,500,000,000 ;
1,000,000,000 }
500,000,000
0 in...
2013/14 2014/15, 2015/16 Forecasted outturn (% 2015/16 Target
Tet)
m Agency = Crown m= WH Smith = Online
Source: Credence (Sales Planning & Analysis Team)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE 48 48
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Travel Insurance
Travel Insurance
CC ————— a
700,000
600,000
500,000 4
Sales ~ [IRRELEVANT
300,000 4
200,000
100,000
—
0
2013/14 2014/15 2015/16 Forecasted outturn(% 2015/16 Target
Tat)
mAgency Crown mWHSmith wmContact Centre Online
Source: Credence (Sales Planning & Analysis Team)
Forecasted 2015/16 Target
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE 49 49
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HomePhone
HomePhone
120,000
100,000
80,000
valeme «« [IRRELEVANT
40,000
20,000
wisi 614715 901516 Forecasted outtarn (5% 3015/16 Target
Tet)
mAgency Crown mWHSmith mContact Centre Online
2013/14 2014/15 2015/16
IRRELEVAN
Source: Credence (Sales Planning & Analysis Team)
Post Office® IN THE STRICTEST COMMERCIAL CONFIDENCE 50 50
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POST OFFICE PAGE 1 OF 2
Retail
Author: Allan May Sponsor: Pete Markey/Martin George Date: December 2015
Executive Summary
Context
Retail contribution was declining as a result of poor buying, merchandising, supplier
management and a lack of internal specialism meaning this area under indexed in
recent years. 2015/16 was forecast to be its lowest performance in recent Post Office
history at £3.2m income.
Having made significant progress to address these issues, the performance is now on
track to be over £1m up against budget at year end.
Question(s) this paper addresses
1. What approach has been taken to drive stronger retail performance?
2. What is the longer term strategy to drive ongoing performance for retail and
what role do strategic partnerships play in this success?
Conclusion
1. Introduced new Dashboards and trading meetings focussed on margin, range and
process to improve profitability.
2. Delivering on our new retail strategy will ensure Post Office is:
A Specialist retailer tripling retail income to £10 Million in 2017/18 step changing
Crown profitability and driving additional footfall, a Customer Destination through:
a) Direct Supplier relationships
b) Industry leading partnerships
c) Margin, range and process improvements
d) Improved online shop with Click & Collect.
Input Sought
Ongoing GE support for delivery of the retail strategy.
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POST OFFICE PAGE 2 OF 2
Strictly Confidential Board Intelligence Hub template
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POST
OFFICE
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Executive Summary: Retail
Context
Retail contribution was declining thanks to poor buying, merchandising, supplier management and a lack of internal specialism meaning this
area under indexed in recent years. 2015/16 was forecast to be its lowest performance in recent Post Office history at £3.2m income.
Having made significant progress to address these issues, the performance is now on track to be over £1m up against budget at year end.
Questions
1. What approach has been taken to drive stronger retail performance?
2. What is the longer term strategy to drive ongoing performance for retail and what role do strategic partnerships play in thissuccess?
Conclusion
1. Introduced new Dashboards and trading meetings focussed on margin, range and process to improve profitability.
2. Delivering on our new retail strategy will ensure Post Office is:
A Specialist retailer tripling retail income to £10 Million in 2017/18 step changing Crown profitability and driving additional footfalla Customer Destination through:
a) Direct Supplier relationships
b) Industry leading partnerships
c) Margin, range and process improvements
d) Improved online shop with Click & Collect.
Input sought: Ongoing GE support for delivery of the retail strategy
®
April 2015: SWOT
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Weaknesses
Retail was a declining area, trading from 7% less branches Year on Year and 10% less retail space overall post CTP
Branch Standards and consistent retail execution
Long queues
Poor Customer journey
Silo Management
Poor service from current supplier
Poor margins due to dealing with 3 party
Procurement rules
Too many products not aligned to our purpose
Retail was a low business priority
Limited POS opportunity for retail inside and out
Collectibles poorly executed and loss making (£40k loss - £1M sales in 2014/15)
Seasonal activity was loss making (£83k loss on £953k sales in 2014/15)
Poor relationship with Network
Low credibility in Crown and Agency
Poor Online experience
Summary, lots to go for.
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Roadmap
Roadmap for the first 90 days created beginning with SWOT analysis then followed by our Vision, Strategy and Plan.
Day 1 Day 30 Day 60 Day 90+
Drive
Seek to Introduce
Understand Strategy
Groundwork
before Day1 Performance
Marketing
Short term performance i
Mystery Shop Meet Stakeholders Engage Senior mgmt Day Job
Meet the team Understand issues Evaluate partners Drive performance
SWOT analysis Develop plan & Wheel Stretch partners Execute plan
Plan first 90 days Introduce Steering Launch Vision Expect more
Understand Role Prioritise big wins Launch Plan Accelerate roll outs
Agree Vision & Plan Roll out initiatives Plan procurement
Develop Dashboards Explore Agency
Ongoing Compelling vision of becoming a Retail Specialist
Today
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Short term impact
Retail Income up £743K (+38.2%) vs. budget YTD after P8:
-Budget for full year £3.2M
-Expected if maintain run rate £4.4M (initiatives rolling out now)
Short term strategy was to focus on margins, range and processes
with particular focus on Packaging.
*YTD up £470k on Packaging versus Budget (Full year £1M)
“YTD up £130k on Cards/Stationery/Mint/Travel combined versus Budget
*Packaging initiatives on following slides
*Chart shows possible outlook for remainder of this year and next assuming static branch numbers
and a new partner.
OrRFNWHAUDN WC
*Direction of Travel
78% improvement
1
15/16 15/16 16/17 16/17
Budget Run rate Budget Budget+New
Submission Partner
BIncome £M
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Margin, Range and Process
A Packaging Specialist
We are improving the mailing proposition in approx 200
branches this year in a combination of the following areas
vIncrease in range from 56 to 103 SKUs in same space
¥ Launch of higher density fixtures increasing range up to
100% in 200 branches
¥Launch of Best Better Good ranging
¥Launch of wider fashion range
y Price alignments
¥ Briefing lead teams
¥ Dashboard management at SKU and branch level
vNew mailing Customer journey trial (Manchester/Croydon)
v Auto replenishment
v Seasonal ranges
¥ Gift packaging ranges
-The above has improved margin from 41% in P1
to 54% in P8&
-Packaging income levels should be £1M ahead of
budget for the year.
‘This represents 80%-+ of our income.
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A Deliberate Customer Journey
Concepts:
Trial:
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A Retail Specialist: VOW
GaweS 2 Branches in trial: Informs Procurement
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A Retail Specialist: WHS
Stationery by WHSmith
€ 7 Branches in trial: Informs Procurement 9
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Direct Supplier Relationships
A Collectibles Specialist
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Summary
Slide 2 Context
Retail contribution was declining.
Poor buying, merchandising, supplier management and a lack of internal specialism meant that this area under indexed in recent years. 2015/16 was
forecast to be its lowest performance in recent Post Office history at £3.2m income.
Summary
*Beginning with a SWOT analysis in April we have now developed and launched a comprehensive strategy to make the Post Office a Specialist Retailer
*In addition to the above we have focussed on Margins, ranges and process to step change the short term performance with the following highlights
*Income +38% against Budget
*Margins have increased by 12% to 54%
*The Customer proposition is markedly better
*We have 9 Best practice branches that will help us select the right partner in 2016
*We have launched a significantly improved proposition in Packaging and Greetings Cards
*Initiatives are still rolling out
I believe that we are on the right path to being a Specialist retailer but there is much more to come
11
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POST OFFICE PAGE 1 OF 2
Digital Update
Author: Jeff Smyth Sponsor: Pete Markey / Martin George Date: December 2015
Executive Summary
Context
During 2015/16, Digital has achieved a number of trading breakthroughs; 6
consecutive weeks of income greater than £500,000, a highest ever trading week of
£584,000 and achievement of 2014/15 full year revenue (£15m) by week 35. Digital
income for 2015/16 is currently (week 35) trading at 95% of target and is forecasted
to achieve a £21.5m full year out-turn — provided we retain focus on product
competitiveness, maintain platform stability and execute planned customer journey
enhancements.
Progress in Digital during 2015/16 has principally been achieved by an incessant focus
n “executing the basics well"; successfully launching a rebranded website, improving
customer journeys and using deep data analytics to maximise sales conversion. These
fundamentals underpin high performance digital trading and, in tandem with a stable
digital on-line platform, form the bedrock of success which will reinforced (again) in
2016/17.
Question(s) this paper addresses
As we reach the mid-point of Q3 2015/16, the Digital team are re-appraising their
performance and future plans, specifically:
1. How we have performed in 2015/16 (trading and operationally) and what is
required from whom to achieve year end income?
2. The emerging shape and composition of the Digital Delivery roadmap for
2016/17 and how to deliver that plan?
3. How to evolve longer term digital focus to support a balanced contribution
across growth, cost reduction and innovation goals?
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POST OFFICE PAGE 2 OF 2
Conclusion
1. This update describes Digital 2015/16 in-year performance and our delivery intent
for 2016/17.
2. The proposed Digital Delivery Roadmap aligns directly with growth objectives for
2016/17 and provides key enablement for Mails (Drop & Go), MoveMate (subject
to business case approval), Digital Passports and Travel Hub (Travel Money &
Travel Insurance combined in a Mobile Application).
3. In addition to the delivery roadmap, Digital have a broader aspiration to
complement the growth and income protection agenda by acting as a key enabler
of cost reduction and innovation - aligning our activity to corporate strategy and
priorities.
Input Sought
Digital are seeking GE confirmation that the proposed Digital roadmap agenda
matches GE expectations and is aligned with broader strategic business priorities.
We are particularly interested in any GE guidance that is available to endorse and
mobilise Digital contribution to cost reduction or targeted innovation priorities.
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Executive Summary
Context
During 2015/16, Digital has achieved a number of trading breakthroughs; 6 consecutive weeks of income greater than £500,000,
a highest ever trading week of £584,000 and achievement of 2014/15 full year revenue (£15m) by week 35. Digital income for
2015/16 is currently (week 35) trading at 95% of target and is forecasted to achieve a £21.5m full year out-turn — provided we
retain focus on product competitiveness, maintain platform stability and execute planned customer journey enhancements.
Progress in Digital during 2015/16 has principally been achieved by an incessant focus on “executing the basics well"; successfully
launching a rebranded website, improving customer journeys and using deep data analytics to maximise sales conversion. These
fundamentals underpin high performance digital trading and, in tandem with a stable digital on -line platform, form the bedrock of
success which will reinforced (again) in 2016/17.
Question
As we reach the mid-point of Q3 2015/16, the Digital team are re-appraising their performance and future plans, specifically:
+ How we have performed in 2015/16 (trading and operationally) and what is required from whom to achieve year end income
* The emerging shape and composition of the Digital Delivery roadmap for 2016/17 and how to deliver that plan
+ How to evolve longer term digital focus to support a balanced contribution across growth, cost reduction and innovation goals
Conclusion
This update describes Digital 2015/16 in-year performance and our delivery intent for 2016/17. The proposed Digital Delivery
Roadmap aligns directly with growth objectives for 2016/17 and provides key enablement for Mails (Drop & Go), MoveMate (subject
to business case approval), Digital Passports and Travel Hub (Travel Money & Travel Insurance combined in a Mobile Application). In
addition to the delivery roadmap, Digital have a broader aspiration to complement the growth and income protection agenda by
acting as a key enabler of cost reduction and innovation - aligning our activity to corporate strategy and priorities.
Input
Digital are seeking GE confirmation that the proposed Digital roadmap agenda matches GE expectations and is aligned with broader
strategic business priorities. We are particularly interested in any GE guidance that is available to endorse and mobilise Digj ®
contribution to cost reduction or targeted innovation priorities.
1
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Key Achievements 2015/16
Trading & Income Improvement Customer Experience
People & Behaviours Control & Stability
Building stronger relationships : I Amore stable operating environment has enabled:
+ Senior leadership team with a deep Digital pedigree I + Improved trading infrastructure, less web site downtime
+ Culture of service, agility and high response to support I by eliminating avoidable (i.e. non-DDoS attack) from 18
fast rate changes and quick change cycles I incidents over rolling 3 months to zero since 19/10/15
+ Proactive out-reach to 3" party partners to share best I + Faster response cycle to web problem resolution through
practice on user centered design and optimization I deeper relationships with Accenture, Atos and POL IT
+ Closer relationships with FinProm / Compliance I + Better DDoS attack response management (30min ramp
* Tight coupling of decision making between Digital { up of countermeasures) and close integration of customer
Marketing Spend /Sales Conversion review cycles I messaging through Social Media
+ Zero tolerance of web site downtime - all incidents are
quickly reviewed to ensure understanding of issue triggers
and resolution learning's
Digital have made excellent progress by consistently “executing the basics well”
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Web Site Rebrand
@ Old www.postoffice.co.uk
Post Office exseniale
& Pina
Ponce Fe
Simple Site Navigation
Rolling Product
Carousel
‘We think you'll like Get in touch
Hey, big iam
sender... mam I Access to Quick Tools
Branch Finder, Postage
Calculator
Pack abt ete into your Ratsay
How can we hetp you today?
TV Campaign Link
Drop & 60
Getting Life’s Important
Things Done
Web Site Rebrand provides consistency with PO Money branding and a fresh intuitive interface for users
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Slide 4
Digital in Action : Journey Optimisation
I 0. wonpostoffice.co.uk
I Q Morey
Issue: .
* Travel Insurance Digital sales have been
behind target since week 1 Travel nance Mobile CPS/Con ate
* The Digital journey on portable devices - very “
was converting extremely poorly: ~1% fa .
* The previous mobile journey was simply
a squashed version of the website page
+ Mobile users would have to zoom in and
out of and scroll left and right on in order
Travel insurance to complete the form: >80% of
users simply gave up! - I
“ull
) B§ avelinsurance.postoffice.co.uk
tt
. , Impacts:
) Bl avelinsurance postoffice.co.uk
Approach: + Mobile share of sales increased by 87%
Fravelinsrance . Create a new mobile . Journey conversion rate improved from
Get a quote optimised application ~1% to 4%
Get stant cover ok process for buying Travel + Portable devices now accounts for >35%
eM Insurance of TI applications
Ea: * Customers trying to buy
- Travel Insurance from Improvements to the mobile journey have
Moyne their mobile will have a also made our Digital Marketing more cost
clear and intuitive effective:
Which arma ate you going experience designed
Single Tip specifically for mobile user + Paid Search conversion rate has improved
‘a £1844 £1997 72.28 £2561 £9201 * A combination of by >80%
responsive and adaptive + Driving more traffic to the mobile site via
se build methods were used mobile ads
son tip in order to expedite + Reaching new audiences that our bj
delivery has not previously enabled us to q
mI
Journey improvement is being used to enhance conversion performance of underperforming products
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mmerce report 04 December 2015
Digital Journi
improvements t
significantly
improved thi
performance:
Credit Cardi
HomePhone
Broadband pro¢
June
July
‘August
September
October
November
yo
April
May
June
July
August
September
October
November
yD
April
May
June
July
‘August
September
October
November
yD i
Income has improved significantly in Q2/Q3 — focus and attention is required to secure our FY target
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Achieving our FY Digital income target
Digital performance YTD has steadily improved :
IRRELEVANT
Although YTD performance to date has been encouraging, achieving the 2015/16 FY Digital target is not
yet guaranteed and all teams need to work closely to ensure Q4 income is delivered:
What does Digital need to locally execute?
. Deliver customer journey improvements: Mortgages, Travel Insurance, Savings, Broadband/Homephone
. Work our conversion optimisation capability agenda harder - execute more multi variant testing (MVT) of pages
. Improve our SEO rankings by creating a richer portfolio of relevant content optimised for Google search
What do Digital need from Digital Marketing?
. Continue to deliver paid traffic from Aggregators, Affiliates and PPC that satisfies Cost To Acquire objectives
. Spot and capitalise on any tactical marketing opportunities to drive more traffic to our website
. Ensure that any Aggregator presence gaps (like Travel Insurance) are addressed at the earliest opportunity
What do Digital need from IT?
. Continued stability and a consistent end user performance experience for the web site
. No loss or filtering of customer traffic when the new DDoS solution is implemented
. A fast resolution response to any web infrastructure incidents or outages
What do Digital need from Product Teams?
. Competitive savings products (e.g. On Line Saver and On Line Bond) on sale to new customers
. Continued rate competitiveness of Credit Cards and Travel Money
. A significant uplift in Verify trading volumes during Q4
Achieving our 2015/16 FY income target still requires significant co-ordination and effort
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Digital will continue with “executing the basics” and we have identified extended enablers
to support development of Digital Income and organizational capabilities
(
Make the customer I
experience brilliant I
\ )
> —
Use personalization and
Be Digital everywhere loyalty to delight our
customers
: Growing
Digital _
a Ga
Provide easy omni-channel Think and be Mobile 1° in
and assisted digital everything we do
experiences
Sd
Offer leading edge Digital
)
products and services I
Our forward agenda builds out from “basics” to extended capabilities that increases value and impact
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Digital Centre of Excellence
To-Be: Relationship
As-ls: Transactional
Planned Operating Model
Current operati is model Collaborative PO/BO!I relationships
Integrated, seamless and consistent end-to-end journeys
Common Design authority
Expert in-house team and retained knowledge
Rich data on E2E journeys, systematically delivered
Rapid and agile change
Ad hoc partner interactions
Inconsistent, sub optimal customer journeys
Reliance on external agencies
No ownership of end-to-end customer journey
Limited end-to-end analytics
Slow pace of change
Commercial sustainability
High cost to acquire customers, low return
Spend less
. Reduce agency costs
. FTE/C is more cost effective
Reduce cost to acquire
td More effective customer journeys
Engage and convert more customers
Fewer tactical product changes
. Customer centric products
More agile speed to market approach
Use insight and data to target and personalise cross sales and up
sales
* Increase marketing spend
s: Send more customers into a leaky funnel
2 Lose more potential customers
mS Increased costs
* Frequent changes of product rates
. Less profitable
. Reactive
* Not customer centric
: DCoE has now been mobilized with Bol: now focused on improvements for Mortgages & Savings
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DCoE - Iterative Improvement Model
Business requirements
Competitor analysis
User research
User testing
Key messaging
User journeys
Wireframing
Prototyping —
User testing —
Post Office
Testing &
implementation
somms
DCoE are now using an iterative improvement model to incrementally improve journeys and sales
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Forward Digital Agenda
There are three key domains where Digital can
focus attention.: Growth —Cost —Innovation.
Most Digital attention to date has been focused
on growth and income protection activity.
Going forwards the Digital agenda should be
fully aligned with transformation pri ies
including cost reduction driven initi es OF
innovation enablers that POL needs to achieve
to support customer, network or sales strategies
Moving from ltled to BigD :Executethe BascsandExtend our Capabilties
©
Growth & Income Protection
+ How can Digital support
the top line growth of
existing products?
Which new Digital products
will be launched and how
does Digital enable trading
success?
I pra sens
Os eee
Digital intend to work with FinTech and Logistics
incubators and technology accelerators to
identify novel disruptive technologies for direct
application , investment or white labeled
branding — that are strategically aligned to our
forward business agenda
ees
Cost Reduction
Where does PO need to
strip out cost and how can
Digital support this work?
How does Digital gain a
mandate to contribute to
cost reduction across the
full value chain ?
©
Innovation
In which key areas does
PO need Digital innovation
to support
How does Digital gain a
mandate to contribute to
cost reduction across the
full value chain ?
Digital have consistently achieved YoY
revenue growth — however this trading
objective will become increasingly
difficult without an expansion of the
Digital product portfolio. The proposed
Digital roadmap for 2016/17 is skewed
to this activity domain.
Digital could be used to enable
network cost reduction— however this
would require an explicit mandate and
line of sight alignment with Network
strategy objectives.
Digital can focus on a broad range of
innovation enablers: Block Chain,
Internet of Things, Big Data- however,
if our to-be business model is
principally “white label” then most
innovation plays will be sourced from
3° parties relationships rather than
indigenous breakthroughs PO
10 Agreeing a range of strategically aligned Digital focus areas for Innovation & Cost Reduction is a priority
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Digital Delivery Roadmap 2016/17
1D Task Name Start Finish Duration
pec I san I Feb I mor I Aor I may I Jun I sui I aug I sep I oct I wov I dec I Jon I Feb I mar
1 I CDP Customer Data Encryption Go-Live 01/12/2015 01/04/2016 89d Ie
2. I Post Encryption Stability Chill Period 04/04/2016 31/05/2016 42d oes
3. I Drop & Go Online Account Go-Live 01/01/2016 01/06/2016 109d (STs
4 I Change Requests (Manifest 1) 01/12/2015 01/06/2016 132d I HM ae SY Oe I LEX)
5 ranean (Subject to 01/02/2016 01/07/2016 aod (EE
6 I Digital Passports 01/03/2016 01/07/2016 89d [et AS SL REE LS)
7 I Branch Finder Enhancements 01/01/2016 02/06/2016 110d PTS S62 268 Lat TAN
8 I Change Requests (Manifest 2) 01/02/2016 01/07/2016 110d Bee Fe EIA at Be Pe
9. I MoveMate Scale-Up Go-Live 15/07/2016 15/08/2016 22d ikea
10 I Travel Hub Mobile (Basic) 01/12/2015 01/04/2016 89d Nolte cheeky ea
11 I Travel Hub Mobile (+ MyAccount) 01/06/2016 01/09/2016 67d REAR
12 I Travel Hub Mobile (+ Loyalty) 03/10/2016 01/02/2017 aad Nel cara oe
13 I EA & RMG Tariff Changes 01/01/2016 01/04/2016 66d (eRe
14 ee Re View (eV) 01/07/2016 30/09/2016 66d ne ne ae ee
15 I Change Freeze & Moratorium 01/09/2016 01/02/2017 110d Mies ee ee LY Ces PENA)
16 I COP Transition from Accenture to IBM 01/09/2016 01/02/2017 110d [ey He FS OF Ree 29 SL
17 I Post Transition Stabilisation Period 01/02/2017 01/03/2017 21d eg
18 I First BM Developed Release 01/03/2017 01/03/2017 od C4 °
11
The proposed Digital Delivery roadmap for 2016/17 is directed towards income generation & growth
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Digital Delivery Roadmap 2016/17
The Digital Delivery roadmap has been compiled to ensure common understanding and alignment to the
proposed digital projects portfolio that will underpin income protection and growth in 2016/17. The
plan anticipates 4 core Digital/CDP platform releases in 2016/17 — executed by Accenture prior to a
change freeze that will allow IBM to assimilate the CDP environment and prepare for support transition
in January 2017. Portfolio headlines include:
+ An initial CDP backbone project release (1) executed by Accenture that encrypts all customer data on the
platform. The final stage of this progressive bank of improvements will go-live in April 2016. Mandatory annual
tariff changes for Royal Mail Group & Environmental Agency in April 2016 will occur in parallel
+ A2 month post go-live stabilisation period to confirm the efficacy and integrity of encryption changes
. A Release 2 (in June 2016) which comprises:
. Drop & Go (Small Business Club) on-line enhancements (top-ups and activity statements)
. Enhancements to the BranchFinder tool data set and website presentation
+ — An initial package of mid-sized change requests that have been backlogged since September 2015
. A Release 3 (in July 2016) which comprises:
. A MoveMate pilot (subject to Business Case approval) to prove out system dependent processes
. Launch of Digital Passports (subject to final interface requirements confirmation by January 2016)
. A second manifest of change requests
. A Release 4 (in mid-August 2016) to support the scale up of MoveMate, prior to a change freeze in September
2016 to faciliate transition to IBM in January 2016
. There will also be 3 non-CDP dependent Travel Hub releases of a PO Mobile Application (for Apple and Android)
that will provide a full mobile enabled purchasing experience for Travel Money and Travel Insurance
This is an challenging roadmap for 2016/17 and extensive work is underway in December 2015 to
mobilise delivery resources and assemble detailed delivery plans. POis currently focusing significant
attention on development of the Core Business Model, Customer, Product and Channel strategies and
those outputs may influence this Delivery Roadmap and the broader forward Digital agenda.
Digital Delivery roadmap for 2016/17 focus is entirely on income generation and compliance activities
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Questions
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POST OFFICE PAGE 1 OF 2
Concept Stores
Author: Radha Davies Sponsor: Pete Markey/Martin George Date: December 2015
Executive Summary
Context
e In 14/15 we have been focussed on delivering our customer promise through
five customer focused concept stores which vary in cost, scale and ambition.
They have all been designed to test the impact of a better branch environment
on customer satisfaction, brand perception, effort metrics and NPS.
e The purpose of trialling different components in the different concept stores was
to try and isolate the value of the different elements — i.e. their relevance,
impact and hierarchy of importance to customers. The pilots have been
evaluated using Voice of the Customer against our core metrics (e.g. Effort) as
well as Nunwood’s six pillars.
Question(s) this paper addresses
1. How have all the branch pilots performed?
2. What have the key learnings from the pilot been?
3. What are the next steps?
Conclusion
1. The pilots have delivered strong results overall with key learnings to take
forwards. Customer metrics and revenue metrics have improved. Key learnings
can be taken from Kennington Park and Oxford whilst the immaturity of the 3
more recent concept branches means it is too early to conclude on their
performance.
2. Positive elements of the trials include better external design, improved in branch
way finding, better open plan environment and use of digital screens inside and
outside branch. Open plan desking and use of teller cash recycler have been less
effective but were not material to the pilots. In Kennington Park, footfall has
increased (12% up this year vs 4% down last year for rest of Crowns) and
average weekly sales are up (13%) although underlying income is down due to
sales mix. In Oxford, product recall has increased from 8% to 42% (due to use of
new poster design) and branch sales are now up 8.7% YOY (vs 5.5% pre pilot)
delivering an ROI of £5 for every £1 spent.
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3. Learnings from Oxford now being rolled out into branch comms (including this
Christmas). All other Oxford learnings now being rolled into new WH Smith
franchises (working with the network team). Currently planning wider roll out of
learnings with the network including business case for 16/17. Kennington Park
early learnings incorporated into the 3 more recent concept branches. The go
forward plan for concept branches is to work with network on taking key
learnings into a further 20+ branches, then a further +75 with wider application
from there. These plans are currently being shaped with network colleagues
including a business case for 16/17.
Input Sought
We would welcome the GE’s support to shape a more detailed plan to take the key
learnings forwards and operationalise in the network in 16/17
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_GEUpdate
December 2015
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Concept Stores were developed to deliver our customer
promise through our branch environments
Context
. In FY 14/15 we have been focussed on delivering our customer promise (Helping you get life’s
important things done) in all the key areas shown in our 4 box model.
. To trial how we best deliver the customer promise in our Environments pillar, we developed 5
customer focused concept stores this year which vary in cost, scale and ambition.
. They have all been designed to test the impact of a better branch environment on customer
satisfaction, brand perception, effort metrics and NPS.
. The purpose of trialling different components in the concept stores was to try and isolate the value of
the different elements - i.e. their relevance, impact and hierarchy of importance to customers.
. The pilots have been designed to impact 3 of the Nunwood six pillars of customer experience
excellence: Expectations, Time and Effort, Personalisation. The others are Integrity,
Resolution, Empathy and we will endeavour to impact these through other initiatives in 16/17 as part
of the wider customer strategy work.
. The components of the concept stores have been evaluated using Voice of the Customer against our
usual metrics as well as Nunwood’s six pillars. We will use this evaluation to develop cost effective, ay
repeatable models for roll out to drive profitable growth.
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Kennington Park was our flagship concept branch
z~
ennington Park ‘test and learn’ components included the following:
+ New store front and facia to impact on Expectations:
* Customers can see into the store so they feel it is more relevant to them and their expectations of
better service are improved.
+ They can see the store is more modern and appealing, increasing perceptions of credibility.
* Digital screens to drive Personalisation by advertising products relevant to customers in that area
(we ran analysis of local customer demographics, product requirements to achieve this)
+ In addition, screens promote products and raise awareness even when the store is closed, driving
increased consideration from passing ‘potential customers’
* Clear zoning to impact on Time & Effort by dispersing the queue into appropriate service areas
+ Self - service customer journey was improved by clear signposting and ordering the journey in a
logical sequence (retail display, wrapping station, SSK, postal slots) improving ease for the
customer.
+ Slower paced transactions were also given their own zone, ensuring that customers received a
higher level of staff attention because of open plan desking
+ Teller cash recyclers (automated cash desks) introduced to improve speed of service and reduce
cash losses
* More prominence given to PO Money throughout the store, with a branded ATM outside the store. There
is also a private consultation room enabled to run ‘virtual advisor’ (ie remote selling of FS products (trial
pending) .
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Kennington Park
Before
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Oxford was our low cost model concept branch model to
understand the impact of way-finding and signage alone on the
same metrics as Kennington Park
Oxford
. The Oxford concept store was different to Kennington Park in that it was limited to a one month trial in
September.
. No exterior structural changes made to the store.
All changes were intentionally restricted to interior way-finding signage and in branch communications
The purpose of this was to identify low cost improvements which could positively impact the customer
journey and be more cost effective to roll out at scale across the network.
. The customer journey was evaluated using state of the art heart rate monitors to measure the pain
points, resulting in recognition that there are 4 phases to the customer journey in store
1. Approach 2. Welcome 3. Wait 4. Achieve (completion of your mission)
. Improvements were made to each phase of the customer journey
9)
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Oxford - 4 week trial only
After
Before
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1. Approach : From an empty vestibule to one that communicates
our customer promise and set expectations for the journey
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2. Welcome: From cluttered and confusing wayfinding signage to
clearly demarcated zones that helps customers navigate their
optio i issi
©
POST
OFFICE
8 Clarity of navigation and consistent language - Translating customer experience
into user experience
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3. Wait: Simplified communications around the branch to
make product messages more memorable and impactful.
: ~ ®
Utilising a screen to deliver key messages and helpful product
g information and drive sales
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4. Achieve : Using counter positions to complete the mission and
leveraging messaging to prompt a colleague conversation and drive
consideration.tather over helMiNg With A855 mmm
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OFFICE
: = you gO...
a fox Offce Money* Morqagesareprovded by Banko eland UK.
Focused messaging that informs rather than advertises
services
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The final three concept stores have gone live at the end of
October
The purpose of the remaining three stores is to test and learn similar components as KP and Oxford, in very different
customer contexts (customer demographics, priority products, store shape/size) in order to evaluate whether the
learnings are repeatable and therefore relevant to the broader Post Office network
We are testing combinations of the different components in the remaining three stores in order to drive isolation of
impact of these components so we can evaluate them more robustly
East Dulwich:
. Improved Shop Front - New and more open shop front with digital screen and clearly highlighted ATM.
. Improved Signage Over clad old and damaged counters, make counter screens less cluttered and introduce
tablets and screens to promote our products and services and educate and inform customers whilst they wait.
There is no space to do more than this internally
Raynes Park:
. Improved Signage Over clad old and damaged counters, make counter screens less cluttered and introduce
tablets and screens to promote our products and services and educate and inform customers whilst they wait
° SSK Signage Improvements through a more logical self service area layout
. Shop Front Improvements In order to isolate the impact of the shop front components, changes will be
implemented in two phases
+ Phase 1 - Fascia added in early Q4 to test the impact vs without
+ Phase 2 - Shop Front added in late Q4 to test the impact vs without
Port Talbot
. New retail proposition developed with the Retail Team taking learnings from the new ‘Stationary by WHSmitI
as per Paddington Quay
. Improved Signage Over clad old and damaged counters, make counter screens less cluttered and introduce a
screen to promote our products and services and educate and inform customers whilst they wait
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East Dulwich - Completed in P7
Befor
Test & Learn:
Improved Shop Front
- New and more open
shop front with digital
screen and clearly
highlighted ATM (collar
to be installed - date
TBC)
Improved Signage Over
clad old and damaged
counters, make counter
screens less cluttered
and introduce tablets and
screens to promote our
products and services
and educate and inform
customers whilst they
wait
Improved area behind
the counters More ©
organised and tidy,
reflect a more
professional image
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Raynes Park — Completed P7
Test & Learn:
Before
Improved Signage Over clad old and
damaged counters, made counter
screens less cluttered and introduced
tablets and screens to promote our
products and services, educating and
informing customers whilst they wait for
service
SSK Signage improved to be more
informative and the layout of the journey
has been done in line with KP learnings.
Next: Improved Shop Front-(we will
make these changes in phases in order to
evaluate impact on customer of the
different component parts)
Phase 1 - Fascia added in early Q4 to
test the impact vs without
Phase 2 - Shop Front added in late Q4
to test the impact vs without
@
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Port Talbot - Completed P7
Test & Learn:
New retail proposition
developed with the Retail
Team taking learnings from
the new ‘Stationary by
WHSmith’ as per Paddington
Quay
Improved Signage Over
clad old and damaged
counters, make counter
screens less cluttered and
introduce a screen to
promote our products and
services and educate and
inform customers whilst they
wait
®
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Questions
This presentation seeks to answer the following questions in order to
update the GE:
* How have all the branch pilots performed?
« What have the key learnings from the pilot been?
* What are the next steps?
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Conclusion - How the different pilots performed
All concept stores are live and there has been a variety in the performance of different components in
the trials with vital learnings from each at this stage:
Positive Learnings and elements that were effective:
Open glazed store frontage has had a very positive impact on perceptions of modernity,
appeal, ease and credibility as a financial service provider.
Improved way finding, signage ad creation of clear zones for different types of transactions
is a low cost and easy solution which has seen an 8% uplift in sales performance (ROI £5 at
the Oxford concept store)
Opening up the store facades (ie glazed frontage) and new prominent signage have
positively impacted perceptions of modernity (+38%), ease (+26%), appeal (+31%) and
credibility as an FS provider (+23%)
Digital screens have been very positive in creating a more modern perception for the brand
and therefore we will be integrating learnings across the existing technology roll out of
AMScreen, and are currently evaluating the income potential of selling media space using
these screens.
Elements that were less effective:
Open plan desks & use of teller cash recycler instead of normal cash drawer has been less
successful and therefore withdrawn. Learnings are that the TCR would be excellent to ©
reduce till cash losses and speed up transaction times, however we cannot realise these
benefits with the existing horizon terminals and therefore we have withdrawn these &
components until such time as new front office is live
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Research conducted Sept 2015 shows that reception to the new Kennington branch
front was very positive; almost all customers preferred the new design, while scores
for all aspects of design were significantly more positive vs. the old one
Old Design -
% completely/strongly agree
Looks modern (Rij?
Appealing to me (Ri?
Clear what kind of I
transactions/services [ey
can do :
Makes it easier for I d
customers i
PO is a credible
provider of financial [bck
services
Kennington Park Before
External Branch Front
Kennington Park After
prefer Old Design
prefer New Design
New Design -
% completely/strongly agree
Stands out
Appealing tome I
Clear what kind of
transactions/services
can do
Makes it easier for
customers
PO is a credible
provider of financial I
services
QB1/2. Thinking about the element you have just seen, how far do you agree with the following statements? Base: all seeing elements 1-3 (1'
Kennington Park performance metrics
Voice of the customer data is the lead measurement tool for
customer feedback in branch:
+ NPS has increased by 30% YOY. This is significant as this was previously a ‘problem
branch’. NPS is now at 55% and the network target is 57%
* Easy to do business with (Effort) has increased by 46% vs same period last year
Impact on sales performance is masked by underlying sales
decline YoY. What we are seeing however, is a reduction in
income decline which we believe is attributable to the better
branch experience reported through VoC data:
* Income is down YTD @ P8 vs P8 in 14/15 by -12.1%, however this deficit has
narrowed since P6 when it was -15%.
* Income in P8 15/16 is down 3.8% vs P8 14/15
* But average weekly sales are up 13% in P8 compared with the rest of 15/16
+ Average weekly footfall over the last 4 weeks in Kennington is up 12% versus the rest
of 15/16 despite being 4% down on the same period last year compared to the overall
crown network which has seen static figures.
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Oxford concept store pilot results were strong
Number of customers served in under 5 mins up by 35%
Continued levels of SSK migration (exceeding Crown KPI's)
+24% increase in customers agreeing the branch offered an easy experience
+49% increase to customers agreeing that store signage was very clear
+34% customers correctly recalling current campaign materials
+8.4% increase in branch sales during the period of the trial
Branch sales up 8.5% and overall ROI of £5 for every £1 spent
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Reduction in
queues
Customers served in <5 minutes
35%
QQ procnn nnn rrr nen nnn nnn nnn nnn nnn nnnnn nnnnnnnnanannnnannnnamannnnnnanan manana mamma Crown network KPI
(71%)
Clarity of store zoning
and simple service
messages direct
customers through the
ticketing process in the
most efficient way,
maximising the efficiency
of a system that had
been previously lost or
obscured.
(% of customers served within SLA)
gs
Pre-trial
‘Sources: VOC data, PO measurement in store research
2015
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Increased use of
services &
systems
Network KPI 60%
High usage of the ticket
machine needed to be
maintained in order to
Pt (eo7) ensure customers were
identifying and using the
store systems correctly
(ot customers served successfully)
Pre-trial T Week 1 T Week 2 T Week 3
ClipboardPageNumber
‘Sources: VOC data, PO measureimient in store research 201
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Improvements
to customer
satisfaction
100
90
Significant
increases
throughout the
trial as clarity of
information and
access have
been improved.
(in store
research n=120)
(% of customers who
B
Pre-trial
0
Sources: VOC data, PO measurement in store research 2015 7
(%)
10
0
90
70
Recall of campaign
Pre-trial
Sources: VOC data, PO measurement in store research 2015
Better
awareness of
key product
campaigns
_.. Clarity
KPI (80%)
Recall
KPI
(40%)
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reased sales I
Avg increase of 49% of
customers agreeing
signage by store zone
as being clear or very
clear
Avg increase of 34% of
customers correctly
identifying current
campaign information
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Increased sales
Sales income
Overall the
Last 4 weeks Full Network
vs same branch sales
weeks last “10.2% were up 8.7%
year Crown network “se
YOY, the best
results yet
8.7%
mAvg. wkly Oxford
income last
4 weeks vs
YTD Control group
-15.0% -5.0% 5.0% 15.0%
Uplift
Sources: VOC data, PO measurement in store research 2015
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Our final three concept stores have gone live in P7
« We do not yet have any data for these stores as they have only been live
for a month.
¢ We will be evaluating the performance monthly and reporting them ona
dashboard similar to that for Kennington Park.
ss @
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Conclusion: Next Steps
The learnings from the Oxford pilot on changes to in branch communication
has already been put into action in all branch comms developed to support
product campaigns, including Christmas
The zoning, wayfinding and signage learnings are being rolled out into new
WHSmith franchises (working in conjunction with Julie Thomas’ team). We are
now working with the network team on their broader application
We have rolled out learnings from Kennington Park concept store to the
remaining three concept branches but it takes a couple of periods for the
changes to bed in so we do not yet have robust evaluation to report.
Once we start to get data back in Q4 on these stores, we propose that for the
next financial year we would develop a roll out plan in two phases.
Phase 1 will test and validate the benefit of the above solutions across a more diverse range of branch
environments and customer’s demographics. As agreed with Kevin Gilliland, this is critical to ensure that
the learnings from the concept stores are validated and stress tested. This would be for 20 branches
(which have all been identified in partnership with Roger Gale and Julie Thomas)
Phase 2 will then roll out further to the top 75 crown stores (strategically essential and most profitable)
as this will give us the most impact.
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Input Sought
We would welcome GE's support to shape a more detailed plan to take
the key learnings forwards and operationalise in the network in 16/17
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POST OFFICE PAGE 1 OF 7
Performance Report —- Health
and Safety
Author: Simon Eldridge Sponsor: Neil Hayward Date: 17'” December 2015
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. This
paper gives the Board a comprehensive update on our health & safety
performance and our work to promote wellbeing.
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 2015/16 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 How are we doing against the four key safety metrics?
2.2 What are we doing to mitigate the key risks of driving and robberies?
2.3 What are we doing to improve the health and wellbeing of all employees?
2.4 Are there any significant emerging risks?
Conclusion
3. There is strong performance against three of the four key health and safety
metrics. The exception is days lost, which is adverse to target due to 3 longer
term absences resulting from sprain/strain injuries associated with relatively low
risk activities. There is an extensive range of mitigating activities to reduce road
risk although current performance remains slightly adverse to target. The
majority of incidents are minor bumps and scrapes. There is also an extensive
range of controls to reduce the risk of robberies and the number of robberies is
currently at an all-time low.
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4. The roll-out of a second programme of health checks to all employees via face-to-
face clinics and the use of stand-alone digital wellbeing kiosks continues across
the Post Office with positive feedback from all areas. The emerging non-
compliance and health and safety risks related to facilities management are
assessed as low and are being mitigated by a programme of checks and
inspections.
Input Sought
4 We ask the Group Executive to note the current safety and wellbeing
performance.
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The Report
Looking Back
WHAT HAS GONE WELL?
« Accident and lost time incident performance for the half year remains relatively
strong. Accidents and ‘lost time’ accidents are down 29.7% and 23.1%
respectively, on last year. (APP. I - Table 1)
e The volume and value of injury claims is another indicator of the effectiveness of
the safety Management system. The number of personal injury claims over the
5 at_a very low level both from employees and members of the publi
IRRELEVANT
e Robberies involving Post Office Cash and Valuables in Transit (CViT) crews are
significantly down on last year from 20 to 4 for the first 7 months of the year - an
unprecedented low level of robberies. One of the incidents involved a robber with
a gun. We are pleased to report that there were no significant physical injuries.
e A programme of wellbeing activity has been running for the past 12 months. Part
of the plan has been to raise awareness of mental health conditions and the
support available to those affected and those supporting them. Mental health
conditions remain the single most common cause of longer term absence. The
trend is positive with a reduction in days and incidents of 36% and 30.5%
respectively.
WHAT HAS NOT GONE WELL?
« The number of days lost due to accidents has gone up compared to last year. Last
year’s performance was exceptionally strong. The increase relates primarily to
three minor incidents involving low risk activities. The injuries have taken longer
to heal than anticipated. Two of the three have now returned to work. The
increase in days lost is not considered to be an indicator of a longer term overall
increase in risk. In all cases the incidents were investigated and mitigating action
taken to prevent a repeat including re-training, improved housekeeping and
contact with the customer on whose premises the incident occurred. (App I -
Table 2)
e The total number of road traffic collisions (RTCs) for the first 7 months of 2015/16
is up 8 from 159 to 167 compared to last year, Post Office driver ‘at fault’
incidents are up 18 from 82 to 100 on last year. (App II - Table 3)
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Looking Ahead
OPPORTUNITIES?
Road Risk: Driving activities have the potential for high impact/loss and therefore
remain as a significant residual risk. We are mitigating this risk through the following
opportunities:
> Road risk forum to scope and develop road risk reduction initiatives and
activities supported by the risk management division of our insurers;
> Analysis and deployment of interventions for reversing incidents to mitigate
the increased incidence rates, including yard assessments and _ technical
accident reduction interventions on new vehicles e.g. Reversing aids to reduce
accidents;
Analysis and evaluation of data including risk profiling to identify drivers who
need additional support and to determine further generic accident reduction
interventions;
>» Weekly case conferences to ensure consistent approach to accident
investigation, follow up activity and sharing of good practice;
>» Programme of driving and road risk communications to raise awareness of
current and emerging risks;
On-site coaching to improve slow manoeuvring skills e.g. reversing;
Revised approach to incident management to be introduced in April including:
- Driver welfare discussion;
- In depth incident analysis with driver and risk profiling;
- Training needs analysis and provision; and
‘“How’s my driving’ initiative introduced to provide other road users with a
feedback channel via a contact number.
> Governance of all three areas of vehicle use (commercial, business car and
private vehicle) is being tightened to mitigate the associated risks.
e In addition, A ‘road risk’ manager is to be appointed within the Post Office Fleet
Team to manage all aspects of road risk and driving safety within Post Office.
Road risk remains one of the more significant ‘residual risks’ for Post Office.
Robbery Risk: Robberies have the potential for high impact/loss and remain as a
significant residual risk. We are mitigating this through the following opportunities:
> Active liaison activities with the police to understand ‘at risk’ areas and to
deploy surveillance teams;
> Increased use of ‘advertising’ on vehicles of new deterrent technologies e.g.
DNA taggant - a solution that contains a unique identifier that is released
automatically in the event of a robbery, spraying those involved and enabling
identification of the individuals involved in the robberies;
> Piloting new point of transfer arrangements to reduce exposure at Post Office
counters as the majority of robberies take place at the point of transfer which
in Post Office’s is the counter. The new arrangements allow for the cross
pavement protection box to be emptied or filled in a secure location;
>» Significant reduction in opportunities for duress-type robberies linked to the
introduction of single person vehicles - single person vehicles eliminate the
opportunities for Supply Chain employee duress incidents which historically
have been the most violent and likely to involve significant injury; and
» Reduced access to ATM cassettes to mitigate the ‘high prize’ risk
>» Ongoing monitoring of the risk profile to inform the assessment of the need,
or otherwise, of body armour.
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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. Examples are:
>» Second wide ranging programme of visits to Crown branches, Supply Chain
units and Admin offices to offer health checks using equipment that provides a
wide range of indicators on physical wellbeing. The anonymised data is used to
develop future health and wellbeing campaigns and targeted interventions.
>» Piloting of electronic health check kiosks for use in larger units
> The programme of visits is supported by an online ‘Lifestyle on line’ health
check tool as a ‘self-help’ option. Active use is above the expected ‘norm’.
> Ongoing campaign of communications to promote a range of different wellbeing
issues
>» Wellbeing events to promote general health, exercise and dietary initiatives —
recent event at Finsbury Dials attracted significant interest
> Working with our Occupational Health Service partners to enhance the service
provision and increase value for money
RISKS OR CONCERNS?
Property: Following the change in facilities management from ROMEC to Norland an
element of regulatory non-compliance remains in terms of certification for lifts, lifting
equipment, electrical testing etc. An urgent programme of lift inspections has taken
place and a schedule for further 6 monthly inspections is being developed. A
programme of 5 yearly electrical system testing is being undertaken. To date there
have been no reports from the inspections and testing that has been carried out that
would suggest that a significant health and safety risk exists.
In Conclusion
There remains some residual risk in relation to driving operations and CViT/Network
robberies, both of which have the potential for high impact/loss. Any significant
change in Supply Chain risk profile or service provision will require a full re-
assessment of the position on body armour. Recognising this, we have robust
mitigating activities in place to control these risks. All metrics indicate health, safety
& wellbeing performance remains generally strong with effective safety management
and mitigating activities where significant residual risks do exist.
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Appendix I.
Table 1: Accidents and Absence (Lost Time) Accidents (Cumulative).
250
200
2 2014/15 Al
150
2 —e~ 2015/16 All
xs
3 100 a 2014/15 Absence
< 2015/16 Absence
50
0
P1 P2 P3 P4 P5 P6 P7 P8& P9 P10 P11 P12
Period
Table 2: Days Lost as a result of absence accidents (Cumulative).
500
450
400
350
300
eo 2014/15
2015/16
250
200
Days
150
100
50
0
P1 P2 P3 P4 PS P6 P7 P& P9 P10 P11 P12
Period
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Appendix II.
Table 3 Road Traffic Incidents
300
250
200 + 2014/15 All
—e-2015/16 All
150
—t— 2014/15 ‘at fault’
ee 2015/16 ‘at fault’
100
Number of RTCs
50
0
P1 P2 P3 P4 PS P6 P7 P8& PQ P10 P11 P12
Period
Table 4 - Injury Claims - Pre and post separation from RMG.
Pre 2012
Underwriting I Policy Class I Open Incurred
Years I Reserves
£502,593 _ £273,940 £776,533
£63,376 £130,700 ‘£194,076
£565,969 £404,640 I £970,608
Post 2012
Underwriting I Policy Class I Open Incurred
Year I I Reserves
£62,189
£113,045 £135,922
—-20-«£36,785 «£94,128 £130,913
£11,591 — £158,456 — £170,047
£0 £45,387 £45,387
83 £167,472 £487,321 £654,793
Note: 13 of the 22 claims during 2014 relate to minor respiratory conditions
associated with dust during Crown Branch Office improvement work at three offices.
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Risk and Compliance Committee (R&CC) -
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Reference: R&CC Oct 15
Date: 26 October 2015
I Venue: Boardroom, Finsbury Dials
Time: 12:00 - 14:00
Attending:
Dave Carter (DC)
Jane MacLeod (JM)
IGeneral Counsel
I Financial Controller
_I Chair —
On behalf of CFO
Paula Vennells (PV) I Chief Executive Officer Member
Neil Hayward (NH) I Group People Director _ Member
Alwen Lyons (AL) I Company Secretary Member
Nick Kennett (NK) Financial Services Director Member
Mike Mol rel I Head of Risk and Assurance Report _ _ —
Steve Miller (SM) I Head of Risk Report
Garry Hooton (GH) I Head of Internal Audit Report
Georgina Blair (GB) ___——_—'I Risk Business Partner I Minutes ;
Ola Omoyele (OO) I Portfolio Risk Manager Report (Item 5).
John Scott (JS) I Head of Security Report
Julie George (JG) I Head of Information Security Report (Item 7)
Jonathan Hill (JH) I Head of Risk, Banking Regulation & Report
Apologies:
David Hussey _
__I Chief Financial Officer
I Transformation Director _
Alistair Cameron
The Committee agreed the minutes of the previous meeting and the attached actions.
Re Action 1684, JM noted that a paper on the approach to compliance with the Corporate Governance
Code would be going to the November ARC, but would be discussed at GE rather than RCC due to
timing constraints.
Agenda Item 2, Risk framewo implementation timetable _ =
MMF explained the next steps in the implementation of the risk framework, “which included working
with GE and SLT to
° finalise the PO risk universe
« re-prioritise the risks on a net basis (after the application of controls) to produce a revised PO
Risk Profile
e review our existing risk practices (tools and techniques) to determine what we need going
forward and making sure this is used consistently across the business.
In addition, MMF explained that the Risk team were reviewing our General Control Framework (the key
pervasive controls we have to direct and control the business) so that we can ensure we are gaining
best benefit from it in managing our risks. The Committee noted that this control framework would be
a useful input into the Total Operating Model.
‘Agenda Item 3, Policy framework
SM explained the proposed approach to developing a policy framework, a “top-down” view of our key
policies. It was noted that the business was receiving an increasing number of due diligence requests
from our banking partners and that many of our policies were no longer fit for purpose and needed to
be reviewed. Having suitable policies is fundamental to demonstrating that POL is a well-controlled
business in the regulated world in which POL now operates.
The Committee discussed the timetable, noting that it seemed ambitious given how much else was
I going on in the business at the same time. It was clarified that the timetable was split into two
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phases, i) defining the policy framework, and ii) remediating policies, and that the timetable applied to
policies belonging to Corporate Services, who would be trialling the approach. The timetable for
remediating policies for the rest of the business was yet to be determined.
The Committee noted that completing the policy framework and refreshing the key policies in the
business would depend on engagement from the business and policy owners having resource available
to update policies, and that the real challenge would be at the end of the timeline when it came to the
implementation and training of policies.
The Committee discussed whether cybersecurity should be pulled out as a separate category because
of its importance, but noted that the risk categories were those which had been presented to the Board
in January.
DC asked whether there was a code of conduct for the business which covered things like conflicts of
interest; he had newly joined the business and had not yet seen one. NH confirmed that there was a
Code of Business Standards which had been refreshed this year. The Committee requested that NH
ensure that an introduction to the Code of Conduct is part of the employee induction programme; that
it is prominent (and easily located) on the intranet, and that it is reviewed regularly (annually) to
ensure that it remains appropriate (Action 1689).
SM explained he was now starting to collect details of policies and that he would report back to the
next RCC with an update on progress (Action 1690).
Agenda Item 4, Risk incidents _ :
SM presented the summary of risk incidents which had been “reported since the last RCC, noting that in
particular two (restricted internet connectivity and limited SharePoint capacity in Leeds) incidents
highlighted risks to the timetable of the Network Transformation Programme.
The Committee discussed the incidents, and asked if these issues had been known for some time, and
if anything was being done about them. GB confirmed that the connectivity problem had been going on
for up to a year, but that the problem with the SharePoint site was that it was slowing down as it was
near capacity, and when it reached capacity the results could be very severe as the site held a lot of
material that was key to achieving the aims of the NT programme. Enquiries had been made as toa
solution but the SharePoint package was not supported by a third party at the moment so there was no
support to help in moving any data out of the existing site.
The Committee noted that it was unclear where operational risks, for example the Leeds SharePoint
capacity issue, were flagged and resolved in the business. The Committee discussed whether it was
intended for the RCC to discuss operational issues and whether representatives from Network and IT
should be present. The Committee agreed that it was important for the Committee to have an
overview of the sorts of things that go wrong in the business, and to understand the processes in place
to resolve them.
JM asked members to consider how the Committee should address its two objectives: (1) oversight of
the management of risk across the business, and (2) review of papers before they are submitted to
ARC. JM to review membership and function and provide updated annual agenda (AP1691).
The Committee requested that the incident reporting table be modified to include an update from the
incident owner on current status (AP 1692).
‘Agenda Item 5, Business Ti Transformation risk report
OO presented an update on Business Transformation risk. The Committee discussed the “report and
recommended modifications before it was presented to ARC.
I Agenda Item 6, Security and Financial Crime risk report —
JS presented an update on Security and Financial Crime risk. The Committee discussed the report and
recommended modifications before it was presented to ARC.
Risk and “Compliance ‘Committee minutes — ~ October 2015 _ 2
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JG presented an update on Information Security risk. The Committee discussed the report and
recommended modifications before it was presented to ARC. Committee requested that the
communications readiness (both message and resources) to respond to a potential data security breach
should be reviewed to ensure we are well prepared (AP 1693).
ended
“JH presented the Financial Services risk report. ‘The Committee discussed the report and recomm
modifications before it was presented to ARC.
JM explained that the Pensions Committee had now been disbanded sO the pensions risk update would
now go to the ARC, and therefore to RCC. The latest valuation of the pension had not been available
for RCC, but would be included in the next update to ARC.
GH updated the Committee on recent audit activity and asked Committee members for input into the.
audit planning phase, which was about to begin. GH to send NH the forward plan (AP 1694).
The Committee agreed that the Board Intelligence reporting format needed further modification.
team to work with report authors to improve risk report format (AP 1695).
The Committee were asked to note the POMS RCC minutes.
The Committee were asked to note the BCP update.
The Committee were asked to note the briefing on the Modern Slavery Act.
Risk and Compliance Committee minutes October 2015 3
Action
Post Office Ltd - Confidential
Lead
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26/10
Work with risk report authors
to improve risk report format
Steve
Miller
12 Jan
Risk and Compliance Committee minutes
of employee induction
programme; that the Code
prominent (and easily
located) on the intranet, and
that it is reviewed regularly
annuall
Clarify how POMS will assure
itself that POL is complying
with POM’s compliance
requirements
Susie
Hayward
October 2015
26/10 I 1693 Review communications Neil 12 Jan
readiness (message and Hayward
resources) to respond to a
potential data security breach
and update Committee.
26/10 I 1692 Include update from incident I Steve 12 Jan
owner on current status in Miller
incident reporting table
26/10 1691 Review membership and Jane 12 Jan
function of RCC and provide MacLeod
updated annual agenda for
review
26/10 I 1690 Provide an update on Steve 12 Jan
progress of Policy Framework I Miller
26/10 1689 Ensure that introduction to Neil 12 Jan
the Code of Conduct is part Hayward
Paper is being prepared
for POMS Board and will
be shared with RCC when
ready.
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Meet individually with Mike
Committee members and risk I Morley-
champions to improve Fletcher
articulation of top risks
Provide a regular short Martin Work is underway —
update on Vulnerable George update will be given in
Customer approach until this January
work is completed
Next Meeting - 12 January 2016 Room 1.19 Wakefield 14.00 - 16.00
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Group Executive
New Prosecutions Policy Proposal
Author & Sponsor: Jane MacLeod Date: 17 December 2015
Executive Summary
Context
Prior to separation, RMG prosecuted suspected criminal activity in the Post Office
network in England and Wales. Since separation, Post Office has assumed this
function, adopting essentially the same policy as previously applied by RMG.
Prosecuting suspected criminal activity in the Post Office network assists the
protection of Post Office assets by deterring criminal activity.
As good housekeeping following separation from Royal Mail, and in light of public
criticisms of Post Office which arose in relation to ‘Project Sparrow’, we have reviewed
the Post Office prosecutions policy to ensure that the policy is robust and meets best
practice.
Questions addressed in this paper
1. What are the key points to note about the new policy?
2. What are the implications for the board and the business?
3. What happens to cases that are not approved for prosecution?
Conclusion
1. The new policy replaces the previous policy which was inherited from Royal
Mail. It sets out the requirements which much be met before Post Office can
launch a prosecution including in particular, the Code for Crown Prosecutors
(issued by the Director of Public Prosecutions) which require the prosecution to
be in the public interest, and for there to be evidence sufficient to provide a
realistic prospect of conviction
2. The fact of adoption of the new policy will not materially change the approach
adopted in practice by Post Office. Set out in the Appendix is a summary of the
approach being taken by Post Office where losses are suspected in branch.
3. Where a case is not approved for prosecution in accordance with the Policy, it is
likely that civil proceedings would be brought for recovery of debts as well as
other steps as described in the Appendix.
Input Sought: The Group Executive is requested to approve the Policy.
Input Received: The draft policy has been reviewed by Post Office legal,
Cartwright King (Post Office Limited’s legal advisers on criminal matters to) and Brian
Altman QC
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The Report
Why do we need to create this policy?
1. On 26 February 2014, the Post Office Board formally approved “pursuing a
prosecutions policy focussed only on high value cases/cases involving
vulnerable members of society, and engaging with the police in relation to other
matters”. Adopting the updated Prosecution Policy Post Office will enable
continue to be able to bring private prosecutions focussing on high value cases
and/or those involving vulnerable members of society..
2. The proposed policy sets out the approach that Post Office will take when
considering whether to commence a prosecution. The final decision as to
whether Post Office Limited should commence prosecution will be taken by the
General Counsel.
What are the key points to note about our new policy?
3. The draft Policy:
e explains Post Office’s approach to suspected criminal activity against Post
Office business in England and Wales;
e expressly states that a prosecution can only be brought where the evidence
in the case passes the same two-stage test used by the CPS;
e lists a number of public interest factors which might support bringing a
prosecution; and
« empowers Post Office’s General Counsel to authorise prosecutions.
What are the implications for the board and the business?
4. No particular steps are required to roll out and embed the policy as this will be
the responsibility of Post Office Legal and its external advisers on criminal law.
5. However we have been advised that the policy should be available on the Post
Office Limited website, and that this is consistent with the practice of other
organisations which conduct their own prosecutions.
6. Where an investigation is conducted and there is deemed to be sufficient prima
facie evidence to support a charge and meet the public interest test, the
investigation case papers are referred to Post Office’s external lawyers who
review the case against the same criteria and provide formal advice/opinion and
a recommendation on whether to prosecute or not. The General Counsel is the
business decision maker on the final decision of prosecution.
7. Where a prosecution is commenced, the case is kept under constant review to
ensure that it continues to meet the evidential and public purpose tests; if not,
the case is withdrawn.
How will we monitor compliance with this policy?
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8. It will be the responsibility of the General Counsel to ensure compliance with
the Policy. A report will be provided to the Risk & Compliance Committee and
the Board Audit & Risk Committee annually detailing the number of cases that
have been referred to prosecution and confirming that in each case the
requirements of the Policy have been complied with.
What will the impact be on our wider business?
9. We do not expect there to be any adverse impact on Post Office business,
however the existence of the Policy may assist in discouraging criminal
activities within Post Office.
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APPENDIX
What happens to cases that are not approved for prosecution?
1. As a result of lessons learned through Project Sparrow, Post Office has sought
to identify potential issues earlier, provide more training and support to
postmasters, and seek other responses to irregularities before considering
prosecutions.
2. Two key objectives have been to (a) improve the way that we identify and
monitor high risk branches, and (b) adapt the way that we deal with any
subsequent interviews and recoveries. This is to ensure that the current
resource and systems are utilised as effectively as possible to target
intervention at high risk branches. There has also been more collaborative
working within various teams in the business to drive this approach forward.
This has been achieved through a Quarterly Governance Forum consisting of
representatives from Security, Audits, Contracts and Cash Management and is
responsible for ensuring that the risk of loss in branch is monitored, managed
and mitigated in a consistent and effective manner, whilst maintaining an audit
trail of investigation and decision making. This also provides a supportive forum
to ensure a joined up approach in dealing with high risk branches.
3. In addition, the following have also been introduced or improved:
e HORice (a Fujitsu development) is a tool which facilitates the earlier
identification of losses, and although it hasn't proved to be fit for purpose in
identifying risk branches across the network, it does give further depth to
individual branch analysis / problem solving and allows access to 6 months
of data rather than the 3 months of data available on Credence.
e FAT reports / processes - review and re-engineering of identification and
analysis processes, improved management information and measurement of
results.
e Security / Agent Debt Team - Security Financial Investigator is supporting
the Agent Debt Team in respect of debt recovery by sharing access to Land
Registry, Equifax and Companies House. Agent Debt Team has shared
access to 192.com.
e Branch Technology Transformation Programme - input into requirements
and attendance at workshops to try and simplify some of the transactional
and process issues and to reduce areas where losses can occur or be hidden.
4. Where losses are identified in branch as a result of risk profiling, there are a
series of options available to Contract Advisors including further training,
inclusion on a watch list, audit and (precautionary) suspension. In all cases the
objective is to minimise losses and where possible, recover actual losses from
the Sub-Postmaster.
5. Depending on the outcome of an investigation, and depending on whether the
sub-postmaster is on a New Model or Traditional Contract, there are further
options, the ultimate contractual sanction being termination.
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Impact of Sparrow on Prosecutions
6. Up until 2013, Post Office averaged c.250 investigations into possible criminal
conduct each year, of which c.50 resulted in prosecutions.
7. Post Office supported many of these prosecutions with expert evidence
provided by a Fujitsu employee. Following the publication of Second Sight’s
first report in July 2013, Post Office was advised that in order to successfully
prosecute cases that relied on Horizon data, it would need to identify and
instruct a new, independent expert who could provide evidence confirming the
reliability, integrity and robust nature of the Horizon system.
8. Post Office was also advised that the new expert should produce a report
collating all known information about Horizon (including defects and their
resolution). Without such a report, Post Office would be unlikely to satisfy the
“evidential stage” of the CPS two stage test (such that the prosecution should
not be started) and would be unable to comply with its duties of disclosure as a
prosecutor which include recording and retaining information relating to the
integrity and robustness of equipment.
9. Obtaining this expert evidence has proved difficult given Horizon’s age and
complexity. Without it, Post Office’s ability to bring prosecutions is severely
proscribed. For example, only two prosecutions were brought in 2015, neither
of which required evidence from Horizon.
10. Accordingly, Post Office increasingly relies on civil remedies (e.g. contract
termination and debt recovery action) to address wrongdoing and recover
losses.
11. Investigations and prosecutions have significantly dropped since the publication
of the Second Sight report. The investigation resource has also reduced
accordingly, from 30 FTEs down to 15 FTEs (Wave 1). These roles are multi-
skilled with the primary focus on situation crime prevention for physical attacks
and post incident management, with limited capacity for investigations.
Risks
12. There are a number of resource constraints on Post Office’s ability to detect,
monitor, and investigate potentially criminal activity:
e Within the Security team this is the responsibility of the Financial Crime
Team who are also responsible for monitoring money laundering activity;
e The team currently responsible for conducting branch audits have
Transformation activity as their primary responsibility. Accordingly, the
number and timing of risk based audits is constrained. For example, the
number of scheduled audits (110 audits) has been reduced from 50 to 30
per month, and in each of the last 2 years no 110 audits have been
conducted between December and March.
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THIS DOCUMENT IS SUBJECT TO LEGAL PROFESSIONAL PRIVILEGE AND MUST NOT BE DISCLOSED TO ANY PERSON WITHOUT
THE EXPRESS AUTHORITY OF ITED
[TO BE REMOVED ONCE FINALISED
POST OFFICE LIMITED
PROSECUTION POLICY FOR ENGLAND AND WALES
Post Office Limited 1
Prosecution Policy
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TABLE OF CONTENTS
Section Page
1. Introduction 3
2. Policy Scope 4
3. Policy Objectives 5
4. Enforcement Options 6
5. General Principles of Criminal Enforcement 7
6. The Decision to Prosecute 9
7. Decision Making uu
8. Recovery: Confiscation, Compensation and Costs 12
9. The Acceptance of Guilty Pleas 14
10. Review 15
Post Office Limited 2
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1. INTRODUCTION
11 Post Office Limited is a private limited company, wholly owned by
Government.
1.2 It has been entrusted by Government to provide a number of services of
general economic interest to the public through its branches across the UK.
1.3. Criminal offences against Post Office Limited’s business, in particular theft,
fraud and false accounting, adversely impact its customers and commercial
partners, and challenge the viability of the services Post Office Limited
provides.
1.4 Post Office Limited is committed to deterring and reducing criminal
offending against its business by investigating offences, and by taking such
action as it considers appropriate in the circumstances of the case.
Post Office Limited 3
Prosecution Policy
2.2
2.3
2.4
2.5
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POLICY SCOPE
Post Office Limited has been an independent company since its separation
from Royal Mail Group on 1* April 2012, retaining an investigative and
prosecution function.
In England and Wales, Post Office Limited performs both investigative
and prosecuting functions using external service providers for some of
these functions.
In Scotland and Northern Ireland, Post Office Limited’s Security Team
carries out investigations and decides whether to refer a matter to the
Crown Office and Procurator Fiscal Service in Scotland, or to the Public
Prosecution Service in Northern Ireland. Post Office Limited does not
make the decision to prosecute, nor does it carry on prosecutions, in
Scotland or Northern Ireland.
The present policy is intended to explain the approach that Post Office
Limited will adopt when it is suspected that crime has been committed
against its business in England and Wales.
This policy applies equally to Post Office Limited employees, postmasters,
operators, contractors and customers, as well as to any other person
alleged to have committed a criminal offence against its business in
England and Wales.
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Prosecution Policy
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3. POLICY OBJECTIVES
3.1 The general objectives of this policy are to:
3.1.1 ensure that Post Office Limited takes a fair, consistent and
proportionate approach to criminal enforcement;
3.1.2 provide Post Office Limited decision makers with guidelines
enabling them to reach appropriate criminal enforcement decisions;
3.1.3 inform the public and our commercial partners of the general
principles Post Office Limited will use to guide its criminal
enforcement decisions;
3.1.4 deter and reduce the commission of criminal offending against Post
Office Limited’s business;
3.1.5 preserve and maintain the viability and integrity of the services Post
Office Limited provides to the public which criminal conduct
comprises;
3.1.6 protect Post Office Limited’s physical and financial assets; and
3.1.7. recover monetary losses and assets resulting from criminal conduct
committed against its business.
Post Office Limited 5
Prosecution Policy
4a
43
4.4
45
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ENFORCEMENT OPTIONS
Post Office Limited’s “Contract Breach” policy document ' sets out how
Post Office Limited decision makers may act in relation to serious breaches
of contract by postmasters operating postmaster contracts, and by
operators of the New Model Contracts.
Where applicable, Post Office Limited will have regard to the terms of the
“Contract Breach” policy before considering whether or not prosecution
will be the most appropriate response to an allegation of crime.
If a criminal investigation is considered appropriate, it will be conducted
by Post Office Limited’s Security Team in accordance with the “Conduct
of Criminal Investigations Policy” document.?
Post Office Limited often works in partnership with police forces and other
enforcement agencies, particularly in cases where offences are alleged to
have been committed by persons who are not Post Office Limited staff,
agents or contractors, or where violence is alleged to have been threatened
or used against Post Office Limited personnel or property, or where
offences are alleged to have been committed against both Post Office
Limited assets and/or personnel and assets of another agency.
In cases of the type referred to in paragraph 4.4, Post Office Limited may:
4.5.1 invite the police and/or other enforcement agencies to investigate the
allegation(s);
4.5.2 pursue a joint investigation with police and/or other enforcement
agencies;
4.5.3 investigate the allegations without recourse to police or other outside
agencies;
1 Version 5.0 dated 7 April 2014, as revised or re-issued from time to time.
2 Issued 29' August 2013, as revised or re-issued from time to time.
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4.5.4 invite another prosecuting agency to prosecute the matter;
4.5.5 pursue a joint prosecution with another prosecuting agency; or
4.5.6 pursue a prosecution without recourse to another prosecuting agency.
4.6 The choice of enforcement option may depend on factors such as, but not
limited to, those matters set out in paragraphs 5.7 and 6.3 below, as well as
the likelihood of non-compliance with, and the likely effectiveness or
consequences of, any other enforcement options available.
4.7. Where the nature of the offence is so serious or the shortage or loss so
substantial that enforcement action other than criminal action is
inadequate and might lead to delaying criminal investigation and
enforcement, Post Office Limited may move expeditiously to take criminal
enforcement action.
Post Office Limited 7
Prosecution Policy
5a
5-3
5.4
5:5
5.6
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GENERAL PRINCIPLES OF CRIMINAL ENFORCEMENT
When making any decision whether to prosecute a person for a criminal
offence, Post Office Limited will apply the Code for Crown Prosecutors
issued by the Director of Public Prosecutions,3 as well as the further
considerations set out in this policy document.
The decision whether to prosecute in any individual case will be taken with due
diligence and expedition.
Post Office Limited will have regard to the Human Rights Act 1998 and the
European Convention on Human Rights.
Post Office Limited will comply with the: 4
° disclosure obligations under the Criminal Procedure and Investigations Act
1996 (and the Code of Practice issued thereunder);
. Protocol for the Control and Management of Unused Material in the
Crown Court;
e Attorney General's guidelines on Disclosure and on the Disclosure of
Digitally-Stored Material;
. Criminal Procedure Rules and the Criminal Practice Directions;
e Attorney General’s guidelines on the Acceptance of Pleas; and
Each case will be approached according to general principles of fairness,
consistency and proportionality.
Fairness and consistency do not require Post Office Limited to take a
uniform approach in every case; rather it means adopting a similar
approach in similar circumstances to achieve similar ends, taking into
account the particular circumstances of each case.
3 Currently the 7‘ Edition, issued January 2013, but revised and re-issued from time to time.
4 As may be revised and re-issued from time to time
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5.7 Proportionality means that Post Office Limited action will be
proportionate to the seriousness of the offence, the strength of the
evidence against the alleged offender, the harm done by the offence, the
impact of the offence on the community and on the services Post Office
Limited provides and its business, taking into account the costs to Post
Office Limited of investigation and prosecution as weighed against the
likely outcome.
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6. THE DECISION TO PROSECUTE
6.1 A prosecution can only be brought where the evidence passes the two-stage
test for prosecution set out in the Code for Crown Prosecutors. 5
6.2 Inorder to satisfy the two-stage test referred to above (the “Full Code test”):
6.2.1 there must be evidence sufficient to provide a realistic prospect of
conviction (the “evidential stage”); and
6.2.2 the prosecution must be in the public interest (the “public interest
stage”).
6.3 Where the evidential stage of the Full Code test is satisfied, in addition to the
public interest factors set out in the Code for Crown Prosecutors, additional
public interest factors that might justify a prosecution by Post Office Limited
include where:
. members of the public have suffered loss;
« a victim of the offence was particularly vulnerable (for example by
reason of age, infirmity or physical or mental disability);
e the offence involves a serious or significant breach of trust;
. the actual amount of the shortage or loss to Post Office Limited, in
particular where the conduct has resulted in a significant or
substantial financial shortage or loss;
e the offence has or is likely to have an adverse impact on Post Office
Limited’s business, brand, image or reputation;
. the offence (or the concealment of the offence) is sophisticated,
involves multiple transactions, or was committed over a lengthy
period of time;
e there is a history of similar past offences or misconduct;
* an innocent party has been falsely blamed or accused;
. the particular circumstances of the offender (such as his/her age,
physical or mental condition, his/her general character or
5 Currently the 7 Edition, issued January 2013, but revised and re-issued from time to time.
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reputation, whether there is an absence of evidence of any previous
offending or default);
e the particular circumstances of the offence (such as the pattern of
offending, and whether it was, for instance, the result of deliberately
calculated acts to benefit the offender);
e whether any or all of the shortage or loss has been (or realistically
will be) repaid to Post Office Limited;
. any early voluntary disclosure or confession by the offender;
e the deterrent effect of a prosecution on the offender and others;
. any unreasonable or inordinate delay by Post Office Limited in
reaching a decision;
e the cost of prosecution to Post Office Limited relative to the likely
penalty on conviction and likely recovery of loss or shortage
(although no decision will be made on this factor alone).
Following a decision to prosecute, Post Office Limited will keep the case under
continuous review. Should it appear to Post Office Limited at any time that the
case no longer satisfies the evidential stage of the Full Code test, or should
Post Office Limited conclude that a prosecution no longer satisfies the public
interest stage of the Full Code test, then Post Office Limited will discontinue
the case without undue delay.
6.5 No prosecution will be commenced or continued in circumstances where it is,
or it becomes likely, that the courts may regard the prosecution as oppressive,
unfair or an abuse of the process of the court.
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DECISION MAKING
The decision to authorise prosecution, or any other decision under this
policy, will be taken by the General Counsel for Post Office Limited, or any
other member of the Post Office Legal Team to whom the General Counsel
may delegate that authority, acting from time to time on the advice of
external lawyers.
The decision to prosecute will be taken openly and transparently. The
decision and the underlying reasons for it will be recorded in writing and
retained by Post Office Limited until the expiry of a period of not less than
six years following the conclusion of the case.
Prosecutions in the Magistrates’ Court and the Crown Court are conducted
by Post Office Limited’s in-house lawyers, external lawyers or appointed
agents.
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8. RECOVERY: CONFISCATION, COMPENSATION AND COSTS
8.1 Post Office will in each case consider whether or not to exercise its rights to
recover any shortage or loss resulting from the offender’s criminal conduct,
as well as the costs of prosecution, subject to the general principles of
fairness, consistency and proportionality.
8.2 Where Post Office Limited seeks to exercise its rights to recover a shortage
or loss, it will do so by seeking orders for:
. Restraint against assets owned or controlled by suspects;
. Confiscation under the provisions of the Proceeds of Crime Act
2002;
. Compensation;
° Costs covering the investigation and prosecution; or
e Any combination of such or similar orders.
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THE ACCEPTANCE OF GUILTY PLEAS
In appropriate cases prosecutors will consider whether any offer of a plea to
any particular charge meets with the scope and objectives of this Policy.
The decision whether to accept any offer of a plea or pleas rests with Post
Office Limited only, acting on the advice of the prosecutor.
In cases where a defendant seeks to admit guilt on a basis other than that
advanced by the prosecutor, Post Office Limited will only consider an offer
of a plea or pleas where the offer is expressed in writing and in the form ofa
recognised ‘Basis of Plea’ document signed by the defendant or on his/her
behalf by his/her representative. Post Office Limited is not bound to accept
any such offer of plea or pleas.
In cases where the charges are expressed in the alternative and the
defendant accepts the prosecution case without qualification, Post Office
Limited will consider whether to accept a plea or pleas of guilty to
particular charges by reference to the scope and objectives of this Policy.
In cases where the charges are expressed in the alternative and the
defendant seeks to admit guilt to particular charges on a basis other than
that advanced by the prosecutor, paragraph 9.3 of this Policy will apply.
In any case where a defendant seeks to enter a guilty plea or pleas on a
basis not agreed by Post Office Limited, Post Office Limited will invite the
court to hear evidence to determine the facts upon which the defendant is
to be sentenced.
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10. REVIEW
10.1. This policy supersedes any previous Post Office Limited criminal
enforcement action or prosecution policy document.
10.2 This policy will be reviewed annually.
Policy version:
Policy owner:
Date of policy implementation:
Date for review of this policy:
Formal approval of policy by:
Signed: Name:
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