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one
5
Costcutter
ES
Post Office Limited
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"Sinc@starting the Batley tuition club for
local youngsters, I've had new customers
Visiting the branch and knowing who lam
through their children. It's worth putting
the effort in with youngsters because
they are the customers of the future"
ISMAIL LOONAT Batley
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contents
Overview / 04
Our year in numbers / 04
Chairman's foreword / 06
Chief Executive's statement / 08
Strategic report / 10
The business of the Post Office / 1]
Choice and value for our customers / 12
Convenience for our customers / 14
Efficient and effective support / 16
People, values and responsibility / 17
Financial review / 21
Business risk / 26
Governance / 29
Board of Directors / 30
Corporate governance / 34
Directors’ report / 45
Directors remuneration report / 46
Financial statements / 58
Statement of Directors’ responsibilities / 59
Independent Auditors report / 60
Consolidated income statement / 62
Consolidated statement of comprehensive income / 63
Consolidated statement of cash flow / 64
Consolidated balance sheet / 65
Consolidated statement of changes in equity / 66
Notes to the financial statements / 67
Parent Company financial statements / 99
Corporate information / 122
corporate postoffice.co.uk/annualreportli5. 3
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Our year in ees
n U m be rs visits to the Post Office’ I
website in 2014/15
ofour branches are o
now open ona Sunday, »
the bale ci building
societies combined
S registered Drop and
“Go customers of the UK population
live within 1 mile of a
Post Office branch
Almost
124,0
extra opening
hours per week
- equivalent to
about 2,600 new
branches open
traditional hours.
cash aioe by
security equipmer
4 corporate postoffice.co.uk/annualreportl415
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ee Overview
Post Office Key
Performance Indicators
2015 2014 Change
£976m = £979m (£3m)
£100m £107m —(£7m)
of the UK population Operating Ic
live within 3 miles of ;
a Post Office branch
(€60m) (£93m) —£33m
et cashflow" £184m (£270m) £454m
, (E12m) (£26m) —£14m
tomer satisfacti 88% 87% 1%
4097 2,058 2,039
—= 62% 58% 4%
* This metric is abbreviated and known internally as “EBITDAS
most trusted
brand in the UK"
Nearly
> branches within 5 Ps
@our network are £ 70 b [ [
open 24/7 I I O N
passed through our network in
payments and receipts last year
4 09 J
branch es modernised
Qam
1s When our earliest
branch opens. Our latest
closes at midnight
ainey Kelly Camp s aged 18-74, from inhouse database, By
corporate postoffice.co.uk/annualreportl 415
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Chairman’s foreword
Before I stand down as Chairman in July this year, I am glad
to have the opportunity of the third Annual Report of the
Post Office as an independent business to reflect on what
has been achieved since I took up the role in July 2011.
Our goal is financial sustainability, to secure the future of the Post
Office so that it can continue to provide relevant, efficient and
convenient services to people in all corners of the UK, drawing on
our strong and valued heritage
Alice Perkins
Chairman
3E6
corporate postoffice.co.uk/annualreport 415
We have made significant progress in
achieving that goal despite the business's
newly independent status and tough,
fast-moving market conditions. This
year, the operating loss we made before
taking account of our annual subsidy
{the Network Subsidy Payment) from
the Government, was £60 million
- nearly half what it was in 2011/12.
The Network Subsidy Payment was
£160 million, reduced by £40 million
from last year, and is now on a clear
downward track. Clearly, there is further
to go but we are well on the way.
There are five aspects of change
which I would highlight as major
contributors to this progress.
First, the creation of an independent
Post Office, separate from Royal Mail
with its own Board structure, has given
the organisation a clear focus, a fresh
energy and a new confidence with which
to tackle its imperatives. It now has an
effective governance structure with a
strong Board and, over the past four years,
the capability of the senior management
has been transformed with significant
appointments made in the last financial
year. Disentangling the Post Office systems
from those of Royal Mail and making them
fit for our purposes has been a major
undertaking. It is almost complete and
has been managed relatively smoothly.
Second, the Post Office has taken great
strides in tackling its cost base which
was both inflexible and too high. The
business is transforming its ways of
working thereby making costs increasingly
variable as well as reducing them.
POL-BSFF-0155891_0005
ithas transformed a very large part of
its network and is doing so at
increasing
pace, lengthening opening hours and
improving customer services. Over 4,000
branches have now been
modernised, of which almost
half were completed in 2014/15,
\d we now have 2,276
branches open on Sundays -
to face the future by adapting to the changing
competitive market conditions in which it
operates. There is much more to be done
before our goal of financial sustainability
is realised, critically, on
greater profitable revenue
generation and further cost
reductions, The path ahead
is far from straightforward
an important and iconic change We now but these important changes
showing how focused we are have 2,276 _xe essential to it
on putting our customers first
ae branches Many have contributed to these
the Post Office is open on achievements. Our shareholder,
adapting its products and
the way it delivers them in
the context of the very fast
changing world - reflecting the icon
movement of services online he
and the increased speed and
convenience which customers
expect. Our network is critical
to us. We have maintained our
physical reach with over 11,600
branches while we expand the
products which are available
online and through mobile applications
all this is being done against a
backdrop of better relationships with
our people, our unions and the National
Federation of SubPostmasters (NFSP}:
and through more active conversations
with our key stakeholders through
our Advisory Council which has
further strengthened last year.
The Post Office looks, feels and is different
four years on. It is more capable, confident
and credible and therefore better equipped
custo}
Sundays
~ an important and
the Government, has given us
the investment through to April
2018, on which our ability to
ange showing complete our modernisation
cused we IS dependent. Our colleagues
are on putting our
ers first
in the Shareholder Executive
in the Department of Business,
Innovation and Skills have
supported us well throughout
this period, My fellow Board
members have given their
time and expertise most
generously. Paula Vennells, our Chief
Executive since independence, and her
team have worked with great commitment
and resilience to tackle a wide range of
sues. The new office in Finsbury Dials
s a symbol of their more cost-effective,
modern and flexible way of working,
am most grateful to all of them, as well
as to all ou
leagues, whether they are
directly employed by us, our postmasters,
or our commercial partners on whom the
daily delivery of our wide range of services
up and down the country depends.
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"We can't continue
to be the best-
kept secret in the
country. We need
to tell people about
what we do"
JENNY BEDDARD
Basingstoke
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Chief Executive’s statement
Paula Vennells
Chief Executive
Operating loss before depreciation,
amortisation, exceptional items and Network
Subsidy Payment (EBITDAS) (Emillion)
Year
PAGE8 corporate postoffice.co.uk/annualreport 415
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The Post Office made significant strides during 2014/15
towards delivering the financial stability necessary to
ensure it can continue to provide services that really
matter to customers and communities throughout the UK.
The operating loss before subsidy of £60 million was £33
million lower than in the previous year while the annual
subsidy from the taxpayer was reduced by £40 million. Our
cash position is in line with expectations and the Post Office
continues to invest strongly to improve customer service
cost efficiency and revenue potential for the future
The Post Office’s clear goal is to achieve
commercial sustainability and move
beyond the current reliance on
Government funding. The accelerating
reduction in operating loss before network
subsidy is a critical measure and clearly
indicates progress. This has almost halved
in three years. At the same time the size of
the branch network has been maintained
with overall accessibility for customers
increasing through significant extension of
opening hours, combined with growth in
online and digital channels.
These improvements in our business
reflect the commitment of our postmasters
and of all our people. However, its stll
work in progress. We work in challenging
and disruptive markets and the Post Office
must continue to change and improve - we
cannot let up on our effort or commitment.
Our revenue performance in 2014/15 (see
pages 12-13 and 21-23), has been mixed
across a number of tough markets. It was
encouraging that, after the prior year’s
decline, Mails held its revenue broadly flat
ina highly competitive environment. The
drop off in Government Services income
as the DVLA withdrew tax dises presented
an unexpected shortfall, which will
continue in 2015/16. However, through
very focused efforts in the second
half-year, we recovered sufficiently to end
nearly flat on the prior year: £3 million
down ona turnover of nearly £1 billion.
Atthe same time, we have continued to
invest in the growth markets in our
portfolio, One of these areas is Personal
Financial Services (comprising Post Office
Money branded personal financial service
products, ATMs and travel services) and its
performance illustrates our potential with
over 10% growth this year, continuing the
strong trend seen in the previous three
years.
We have launched the Post Office Money
brand to continue this momentum and raise
the profile of our wide range of financial
products, from current accounts and
savings through to insurance and
mortgages. As a challenger financial
services business in a highly competitive,
fast moving market, our growth
demonstrates the unique capabilities of the
Post Office in combining unparalleled
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Personal Financial Services Turnover (Emillion)
New main and local format branches
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Crown branch losses (Emillion)
mo 201302018
Year
2013 rove 2015
Year
20 08 2001S
Year
nationwide accessibility and trusted, good
value products for customers.
Our infrastructure supports a branch
network which handled almost £70 billion in
payments and receipts in 2014/15. The Post
Office plays an important role in ensuring the
availability of cash to customers across the
UK, particularly in those areas where other
organisations have withdrawn.
Targeted investment remains central to our
strategy. This has driven the acceler:
the pace of the transformation of our branch
network over the past year. We now have
over 4000 modernised branches - delivering
better environments, additional opening
hours, a more flexible cost base for the Post
Office and a more commercial business
model for our postmasters. Customer
satisfaction remains high, particularly in
transformed branches.
Albeit slower than desired (I had wanted to
see breakeven this last year), progress is also
seen in the financial transformation of our
Crown network of larger branches. This
directly operated part of the network,
located primarily in the centres of cities and
large towns, was losing £46 million three
years ago. The loss in this last year has
reduced to £12 million. With the hard work
and commitment of our colleagues in these
branches, we have invested and modernised,
introduced automation, improved customer
service, and we have franchised a number of
outlets.
Our financial, commercial and strategic
momentum extends to the development of
‘our infrastructure. Strong, long-term
partnerships are vital given the scale of our
‘operations. Our branch IT refresh programme
will deliver one of the largest IT network
transformations in Europe.
Creating a sustainable business involves
difficult but necessary changes and cost
efficiency has been a priority. In the last six
months of the financial year, staff and
non-staff costs were taken out to fund
investment in customer service and produce
a net saving of £33 million. As a result, over
the last year, around 900 people have left the
business. These changes were sensitively
handled in conjunction with our unions and
staff associations.
Difficult decisions are a necessary part of
transforming a business; but at the same time
improved engagement with our people is
also a key part of our strategy. And so it was
heartening in a tough year that engagement
scores in the business rose by 4 points in 2015
to 62%, and understanding what customers
want from the Post Office rose to 88%, as
colleagues see that we are serious about
protecting our public purpose and
determined to continue the necessary
progress for commercial sustainability. We
are also proud to have been named by The
Times as one of the top 50 Employers for
Women in recognition of our work in
embracing diversity and equality.
corporate postoftice.co.uk/annvalreportl415
Itis my aim to forge a future for the Post.
Office, which is financially sustainable,
commercially competitive and which
safeguards the social and community value
that the Post Office provides throughout the
UK. We play a unique role as part of the UK's
infrastructure. But in changing times the Post
Office must continue to adapt to be able to
fulfil this crucial purpose from a sound
commercial base. Although challenging, the
past year has seen continued good progress
to this end.
This progress has been achieved through the
efforts of postmasters and colleagues
throughout the country who provide great
service to the millions of customers the Post
Office serves each day. This review is a great
opportunity to express my appreciation for
their energy, professionalism and dedication.
I would also like to thank Alice Perkins, as she
leaves us after four years as Chairman. With
unremitting commitment and dedication,
Alice has helped drive the Post Office
forward; my management team and I are
grateful for her guidance, challenge and
support throughout this period. Alice will
hand over to her successor in July 2015 a
confident business making clear progress and
with the appetite to push harder still to
complete its
THEsM@&TIMES transformation.
TOR 30
WOMEN
—
‘opportunitynow
PAGE 9
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Strate
reper
Business and Strategy Review
Il // The business of the Post Office
j 12 // Choice and value for
"Today's generation our customers: developing
are used to doing f business in our key markets
everything in one 14 // Convenience for our
place Or on one customers: modernising and
Mevice Ag Swann developing our network
VI we W:
to show them the
Pog Office can be 17 // People, values and responsibility:
their destination the essence of the Post Office
of choices"
16 // Efficient and effective support
for our service to customers
21 // Financial Review
RUBI DEO 26 // Business Risk
Wolverhampton
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Business and Strategy Review
The business of the Post Office
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For 17 million customers every week, the Post Office helps to get
the important things in life done.
With a presence in communities throughout the UK, over 93% of the population
living within a mile of a Post Office branch, and a growing digital presence,
the Post Office provides a unique role in our customers lives.
The Post Office creates commercial and social
value by meeting customer needs through
applying professional standards, working to
clear corporate values and forging high-
quality, long-term commercial partnerships.
Critical among these are the postmasters
in over 11,000 branches- typically locally
based retail business owners but also national
and regional multiple retailers who, along
with our directly employed branch teams in
326 Crown branches, provide essential and
convenient services to their communities.
We work with world class partners
to support our service infrastructure
and contract with quality product
and service partners to ensure we
meet the needs of customers.
The Post Office's strategy is to achieve
and embed commercial sustainability that
enables the delivery of its public purpose.
We are pursuing this by developing the
following:
Choice and valve for our customers
in our key markets ~ Mails and Retail,
Financial Services, Government
Services and Telecoms
Convenience for our customers
including investing to transform our
network of Post Office branches
and expand our digital services
Delivering efficienciesin our
organisation and infrastructure to
reduce costs and better support
colleagues who serve our customers
People, valves and responsibility - the
positive engagement of our people,
whether directly employed or serving
under the Post Office brand.
corporate postoffice.co.uk/annualreportl 415
During 2014/15 there has been material
progress in the delivery of our strategy.
Significant strides have been taken in
each area and the underlying EBITDAS
result of the business has improved
year on year with the Government
subsidy reducing at the same time.
The Post Office is unique:
a commercial business set
apart by its public purpose.
We believe in the importance of
connecting communities and enhancing
the powerful role they play in all our lives
We will stay true to this commitment by
meeting customer needs through our
unrivalled local and digital presence.
PAGEN
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Business and Strategy Review
Choice and value for our customers
developing business in our key markets
The Post Office and individual Post Office branches offer a portfolio of products across
four main marketplaces.
Our products and services are linked by the convenience, trust and value that the
Post Office brings to customers through its branches, telephone and digital services.
Each of these markets is dynamic and very
competitive and each provides commercial
challenges and distinct opportunities. Across
the portfolio, the Post Office has retained
year on year revenve levels, balancing
gradual structural decline in some more
traditional markets with growth in newer
areas. This is the case both across markets —
decline in Government Services, for instance,
is outweighed by growth in Financial
Services, and within markets - for example
the Mails market where stamps are in decline
and home shopping returns are growing,
The Post Office, with its partner Royal
Mail, has maintained a strong market and
revenue position in Mails services ina
market that is seeing major change through
competition, new distribution models and
structural shifts from letters to parcels.
This has been achieved through a focus
‘on customer service, good Christmas
Turnover 2014/15
trading and more competitive product
offers following Royal Mail price changes.
The continued growth of online retailing
has helped deliver strong growth in home
shopping returns made through our branches
(19% growth year on year). Itis also assisting
‘our Mails pickup business - Local Collect,
a service provided with Royal Mail where
customers can opt to collect their parcels
from a branch of their choice and which has
now been enabled for Amazon customers.
It also drives growth for small businesses
who use Post Office branches to send orders
to customers; 79,000 businesses are now
registered to use our Drop and Go service.
The role of the Post Office as a trusted,
reliable, convenient location for customers
is also reflected in the continued demand
for Government Services. The award by
the Department for Work and Pensions of
a seven-year contract for the Post Office
Card Account in late 2014 ensures that
customers can continue to collect state
pension and benefits at a Post Office. This
contract, and the future revenves it will
provide, will be a major source of stability
for the network as it modernises. Overall,
the Government Services portfolio saw
revenue decline in 2014/15 - primarily
driven by decline in car tax renewals where
the shift online has accelerated since the
removal of the tax disc in October 2014
As the Government's approach to service
provision develops, there are opportunities
for the Post Office in both digital services
and in those instances where face to face
interaction is still needed. The Post Office has
retained key income for passport Check and
Send services, photocard licence renewal
and biometric residence permits during
2014/15 and there are further development
opportunities for these products.
Turnover 2013/14
Telecoms ~ £120m
Government
Services -
£141m
inanci
‘ial Services - £290m.
Other-£37m — Telecoms - £124m
Mails and
Retail - £388m
Government
Services —
£146m
Other - £40m
Mails and
Retail - £390m
Financial Services - £279m
PAGE 12
corporate postoffice.co.uk/annualreport 415
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The Post Office is positioned to continue
to play a significant role in both the Mails
and Government Services markets by
responding to emerging market conditions,
reflecting the increasing convenience
offered by our network and maintaining the
trust that customers have in our brand,
Our Telecoms range includes fixed line
and broadband packages and is offered
in a mature and competitive market
characterised by customer switching
The business is carefully managed as
a valve, price competitive proposition
for our customers. The year saw a slight
revenve but 2014/15
ended with a net increase in the customer
reduction in overal
base, compared to the previous year, to
454,000. We are continuing to develop.
and enhance our offering to customers
including piloting a mobile product in 2015.
The Post Office's role as a fast-growing
challenger in the financial services market
continues to be a source of growing revenue.
The sector is highly competitive and
faces increasing regulatory requirements
Itis also streamlining, with more bank
branches disappearing from the high
street. Following the wind down in debt
of recent years and the re-emergence of
growth in real earnings there is increased
consumer confidence, These all create
opportunities for a challenger organisation
that combines online capabilities with an
accessible, trusted physical network
Our personal financial services products
have seen revenue growth of more than
10% this year ~ in part driven by a doubling
of mortgage sales following the rollout of
100 specialist mortgage advisors and entry
into the mortgage broker market. During
2014/15 Post Office Management Services
commenced trading, This 100% subsidiary
company is an independent insurance
broking business and during the year
has operated in travel insurance. Savings
products picked up into the second half of
the year with increased ISA allowances
Foreign exchange also increased due to
growing customer appetite for travel and
the strong pound. Bill payment revenues
benefited from the retention of major clients
in a competitive market, although revenues
from energy payments were lower due to
the warm winter. Transactional banking on
behalf of other banks (over 95% of all UK
current accounts can now be accessed at
Post Offices) continued to grow as banks
closed branches. Through the development
of commercial arrangements with banks,
the Post Office, with its unrivalled network
of branches in local communities and
ts cash supply infrastructure, would be
able to step in as the accessible point
to handle customers’ banking needs
The successful launch of the Post
Office Money brand in January 2015
demonstrated the Post Office's ambition
and drive for growth in financial services.
The brand increases customer awareness
of the Post Office position in financial
services as well as enabling targeted
marketing campaigns detailing the
ange of financial services on offer.
Across the overall portfolio of services,
in Mails and Retail, Financial Services,
Government Services and Telecoms,
the Post Office has held its position
in competitive commercial markets. It
continues to invest strongly in infrastructure
support and customer convenience
This positions the overall business and
branch network to grow profitable
revenue by addressing developing
customer needs in emerging markets
as well as ensuring a continued, valued
service in more mature sectors.
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"We've signed up
170 customers as
a direct result of
pi g and I
cant mend it
enough. The team
is always looking
for conversations to
promote products."
CHERYL BERRY
Whittington Moor
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PAG
Business and Strategy Review
Convenience for our customers
modernising and developing our network
At the end of March 2015, there were 11,634 Post Offices trading in the network with
over 93% of the UK population living within one mile of a Post Office and over 99%
living within three miles.
Our programme of investment to modernise environments, increase opening hours and
deliver more efficient operating arrangements for postmasters has accelerated through
the year.
The Post Office network provides unique
accessibility across the country and the
convenience it offers customers is being
enhanced through longer opening hours
and online facilities. Convenience and
modernisation provide the platform for
high levels of customer satisfaction and for
revenue growth in the markets we serve.
Crown Branch Transformation
The part of our network directly managed
by the Post Office (currently 326 branches)
has historically lost money: £46m in
2011/12. A structured programme of
refurbishment, investment in self-service
kiosks, implementation of operating.
efficiencies, franchise and merger of selected
locations, and focus on revenue saw the
loss reduced to £26m in 2013/14. Over the
past year the programme has continued
and the annual loss was reduced further
to £12m. With flat year on year revenues
across the business it is taking longer than
anticipated to reach break-even for this
part of the network. However, the strong
trajectory of yearly reduction of the loss
continues and projects a move through
break-even for this revitalised part of the
network. This positions the Crown branches
to deliver future revenue growth for the
Post Office - particularly with the support
of our growing Financial Services portfolio.
Network Modernisation
The mainstay of the network are the
branches that are run on an agency
or franchise basis by either individual
postmasters who typically manage a local
convenience retail business or multiple
corporate postoffice.co.uk/annualreport 415
retail companies (such as WH Smith, RS
McColl and Co-op). The programme of
investment to modernise this part of the
network accelerated during 2014/15. A
further 2,039 branches were transformed
through investment during the year a
pace of nearly 40 a week - creating better
environments and opening hours for
customers and more efficient operating
models for postmasters. By the end of
March 2015 a total of 4,097 branches within
the network had been transformed with a
further thousand postmasters committed to
future change and others in the pipeline.
‘Average opening hours in these branches
increased by 73%. The programme as a
whole has delivered over 120,000 additional
opening hours per week to the network. This
has enhanced convenience ~ adding greater
‘time accessibility’ to the ‘geographical
accessibility’ for customers. Over 2,200
Post Office branches are now open ona
Sunday. Customer satisfaction with the
refurbished branches is consistently above
95%. Postmasters typically operate a retail
business alongside their Post Office and
those who have modernised the Post Office
are reporting an average uplift in sales of
5% to 12% in the allied retail business.
The high street convenience market in which
‘our postmasters trade is fiercely competitive,
with retail revenues under pressure and
costs such as rates, wages and property
all rising. However, the impact of online
retailing pickup and the switch to local,
top up shopping provides countervailing
opportunities to agile and efficient retailers
In the local convenience retail environment
the Post Office offers a sustainable agency
and franchise proposition for retailers built
ona strong product portfolio. Through its
transformation programme, the Post Office
is investing strongly in local high streets
and communities. Investment, a strong
retailer proposition and a commitment to
local communities demonstrate how the
Post Office is positively delivering its public
purpose at a time when other organisations
are leaving the high street or the village.
Community Branches
The Post Office network also includes over
3,000 branches serving communities where
there is no other retailer in the vicinity. These
are often rural branches located in the ‘last
shop in the village’ which provide critical
services to the communities concerned.
These branches are characterised as
‘community branches’ and often serve a
small customer base constraining the
amount of available retail business and the
opportunities new operating models, with
their accompanying investment, can offer.
In these cases the branches are continuing
on traditional Post Office operating models.
However, they also have the opportunity
to take advantage of investment to
improve their service to customers or
their future viability via the £20m Post
Office Community Investment Fund. This
was established during 2014/15 and by
the end of the financial year investment
applications had been approved for around
10% of community branches. The Fund will
continue to serve this part of the network
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The Post Office is therefore assisting
mmunities that might not have any other
retailer or bank ~ making sure Post Office
services continue to be provided. Moreover,
itis investing into these locations. This is
consistent with the role of the Post Office as
a commercial business set apart by its public
purpose with its emphasis on the importance
of communities and local service provision.
The Post Office is investing significantly in the
IT infrastructure that supports our branches
In the year ahead, working with world-class
partners, we will commence the full refresh
of our network IT infrastructure including the
physical network and the applications and
terminals in our branches. This investment
will mean that the business maintains its,
secure and reliable infrastructure while
enhancing service levels (including online
capabilities), enabling greater commercial
flexibility in product development and
delivery, improving the service for
postmasters and delivering cost efficiencies
The network of branches is accompanied by
a digital infrastructure for customers who
want to access Post Office services online.
The development of digital capabilities is
a key part of the cost efficiency, revenue
growth and customer access strategies
of the Post Office. We see the physica
and digital presence of the business as
complementary, both commercially and in
respect of our public purpose, enhancing
service levels (including online capabilities)
enabling greater commercial flexibility
in product development and delivery,
improving the service for postmasters
and delivering cost efficiencies
This year’s digital
progress
© Restructured technology behind both
the website and e-commerce platforms
© Redesigned online applications which
are quicker to complete (examples
include a new rod fishing online licence
application which received 507,000
successful applications and a simpler
process for travel insurance led to
more annual policies being taken out)
* Added functionality so that
customers can apply for more
produets online (for example ISAs
were launched online in January)
* 68 million visits to the Post
Office website in 2014/15 (a 7%
increase on previous year)
* Increased integration between the
digital and physical network (for
example Travel Money ordered online
grew 50% with 220,000 Click and
Collect currency pickups in branch)
* Developments in our mobile apps
(examples include simplified apps
for foreign currency and banking as
well as the first currency converter
app for the new Apple Watch)
* 00 digital self-service kiosks handling
s and bill payments rolled out
offering increased functionality to
provide choice and convenience
for customers in our branches
© Developments in digital approaches to
reach out to new potential employees
(examples include increasing our reach
on Linkedin to over 10,000 and using
video interviewing for recruitment
activity for Paid Work Experience at
Christmas gaining positive feedback
and achieving savings of £50,000)
* Currently piloting an approach
for prospective postmasters to
complete their applications to run
Post Office branches entirely online
* Consistent with our public purpose,
we work with Go On UK (the digital
inclusion charity) to help customers
develop the skills and confidence to
participate more fully in the digital world,
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a Strategic Report
r Sunday business
was practically
non-existent at
first because it was,
unheard of, but
overall business is up
25 per cent now."
JAVED IQBAL
Westlands
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Business and Strategy Review
Efficient and effective support for our
service to customers
The service to our customers through our branch network, online and call centre
facilities is underpinned by a comprehensive infrastructure. Our aim is to ensure
that these critical support services are operated as efficiently as possible, and
are flexible and responsive to customer needs and business requirements.
Cash Supply
The nationwide network of Post Offices is
supported by a cash supply infrastructure
that provides an efficient and flexible service,
processing, provisioning and transiting cash
and other tradable stock products to and
from Post Offices. Itis therefore a substantial
enterprise in its own right operating cash,
coin, bureau de change and stock centres
across 26 sites throughout the country
and utilising 410 specialist vehicles. It also
provides valuable commercial services to
other retailers and businesses for their cash
supply, collection and bank processing needs.
The supply and handling of cash is a key
service that the Post Office provides to
communities across the UK. With banks
reducing branch numbers, Post Offices,
with their supportive cash infrastructure
provide a critical anchor point for customers
and small businesses - helping maintain
liquidity in local community economies.
1a;
Organisational Efficiencies
As part of the drive for efficient and
effective support to the branches that
serve customers, the Post Office has
restructured its former Head Office functions
~ vacating its previous building in a move
that will save £2 million per annum.
These changes have been part of
organisational and efficiency developments
resulting in employee numbers reducing by
over 900. A carefully structured programme
of change, working within frameworks
agreed with our unions, has ensured that
the financial benefits of investment and
restructuring activity can be realised in lower
operating costs - which in turn support
competitive pricing, further revenue growth
and funding for further investment.
Increasing efficiency from Business
Transformation activities is associated with
improved ways of working, support and
responsiveness to the needs of frontline
colleagues. During 2014/15 we improved
‘our Network Business Support Centre to
assist postmasters with operational queries.
We have established a Branch User Forum
which meets six times a year and enables
postmasters and Crown colleagues to
raise issues and insights thereby helping
to develop more efficient processes.
The Post Office's support functions
are increasingly focused on the
needs of our customers and our
colleagues who serve them
The 990 central support colleagues
who volunteered to work in branches
over the Christmas period to ensure a
good service for our customers at this
busy time is an excellent example.
"We've seen footfall and Post
Office revenue increase and
I'm enjoying my job as I get to
in a brighter, more sociable
and modern environment."
H WOODFIELD Caerwent
j
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People, values and corporate responsibility
the essence of the Post Office
The Post Office is changing. As it completes its
transformation, it does so with a set of core values and
principles - defined in its public purpose - at heart.
Our people are the essence of the Post Office and
success is dependent on engaging and empowering
all who work under the Post Office brand.
Those who do so have the opportunity of
working for a commercial business while
at the same time delivering a vital public
service. This includes frontline service
to customers in every community in the
land, delivery of cash to communities, and
support to the branch network, telephone
and online services. The Post Office does
not ‘cherry pick’ where it operates.
Together, there are around 55,000
people, employees, postmasters and
their assistants delivering the Post Office
brand across more than 11,600 branches
The experience of working in the Post
Office combines the reward of public
service, on which the business was
founded, with the vibrancy and excitement
of supporting one of the UK's most
trusted brands to thrive in the future.
Progress has also been made through the
year in relation to diversity, developing
and engaging with our people, as well as.
the necessary continued improvement
made in keeping our people safe at work.
An engaged workforce is a key driver to
achieve our business strategy. We track
engagement levels through our annual
employee and postmaster opinion surveys
and 2014/15 has seen improvements in the
engagement levels of both employees and
postmasters. We continue to transform
the way we work with our unions - the
Communication Workers Union and Unite.
This goes well beyond negotiations on
pay and business change - a new Business
Consultation Forum has brought together
senior union officials and Post Office leaders
for strategic dialogue and the building of
mutual trust. We similarly work closely with
the National Federation of SubPostmasters
in developing support mechanisms to
help postmasters grow their businesses.
The Post Office's investigations into a
small number of complaints about the
Horizon computer system were completed
in early 2015 anda report published
These investigations underlined that
the system is robust and reliable.
‘The mediation scheme, established
to review individual concerns, has
been accelerated and is expected to.
conclude later in 2015. A branch support
programme set up to review and enhance
training and support for postmasters
continued to make important progress.
This year’s progress
© Free health checks through site visits
and access to online wellbeing zone
* The Times Top 50 Employers
for Women 2015
* Winner of the Employee Network
for Equality and Inclusion (ENE!)
"Representative Workforce’ award
© Post Office Learning Centre, supported
by Ashridge Business School
* Post Office Money Academy to support
colleagues in Financial Services
© Interactive online product training so
our postmasters now have access to
their core training at any time or place.
* Crown Leadership Excellence
Programme to support the development
of our Crown Branch Managers
* Development schemes for successful
postmasters and members of their teams
to mentor and support other postmasters
in increasing their sales revenue
* Refreshed Talent development and
graduate recruitment programmes
* Engagement Champions to drive
local action planning based on
engagement survey results. Engagement
results in 2014/15 improved
* Accidents reduced by 10.9%
* Communication frameworks with
employees and postmasters were further
developed with regular teamtalk sessions
and enhanced digital communications
© Paid work experience schemes
introduced for 16-25 year olds.
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POST OFFICE I Annual Report and Financial Statements 2014/15
8 corporate postoffice.co.uk/annualreport!415
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Strat report
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Mutual ways
of working
In 2014, Post Office established its public
purpose statement, created the Post Office
Advisory Council and identified four
stones to mutualisation’ which would
assist in embedding more mutualised
ways of working into all its activities
In so doing the Post Office intends to
improve both its commercial prospects
and its relationship with stakeholders in
striving to meet its public purpose. There
has been solid progress with respect to
these milestones through 2014/15:
* Commercial sustainability must be
achieved, building on the successful
delivery of our new strategy -
The Post Office continues to
implement its modernisation strategy.
In 2014/15 it improved its EBITDAS
loss by £33million at the same time as
the subsidy was reduced by
£40million. Progress is being made
towards commercial sustainability
A clear funding relationship with
Government will be defined and
maintained - A clear funding
relationship has been put in place
until 2018 with appropriate State
Aid clearances in place. Activity will
need to be undertaken for the post
2018 period in the light of progress
towards commercial sustainability
The Post Office will deliver
measurable success in embedding
its purpose statement throughout its
business. Following establishment
of the purpose statement, the Post
Office Advisory Council met on
three occasions in 2014/15. Network
accessibility requirements are being
fulfilled (as covered in the Post
Office Network Report submitted
annually to Parliament) including
establishing the Community Fund
for community branches. There has
been a strong commitment within
the business to charity and local
community initiatives (see Charity
and Appeals section on page 19)
A culture of mutual engagement
will be developed, demonstrated by
strong performance in key engagement
measures. The development of the
business culture over 2014/15 has
been seen in the improvements
in engagement measures across
employees and postmasters. The
approach to working within the
business is evidenced by revised
engagement frameworks being
considered with the unions
Stakeholder liaison is fully embedded
in key programmes such as Network
Transformation through a full process
of customer engagement and
consultation around changes to local
branches. Internal communications
structures and branch support
mechanisms have been restructured
with branch user forums established.
The Community Fund to support
branches that are the last shop in
the village has been established.
Within the context of the corporate
ownership arrangements set out in
the Postal Services Act 2011, and the
commercial markets in which the
business operates, Post Office is pursuing
a strategy that reflects and develops
the strong elements of mutualism that
are fundamental to the organisation.
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The viability of the Post Office is rooted
in the success of a range of relationships
~ customers, employees, postmasters,
Government as shareholder, local
communities, commercial clients - each
with needs and goals. The Post Office
approaches these relationships by
promoting mutual endeavour to ensure
financial and commercial sustainability
and the achievement of strategic goals.
Mutual endeavour is hard wired into the
organisation. Our approach has been to
recognise this and strengthen it as part
of the necessary process of achieving
commercial and financial sustainability.
The milestones to mutualisation will be
kept under review through 2015/16.
Environment and
Sustainability
The Post Office is committed to minimising
its adverse environmental impact
through continuous improvement.
Examples of improvements in 2014/15
include:
© 80.2% of waste recycled
© 100% of paper is from Forestry
Stewardship Council (FSC)
accredited sources
3.8% reduction in our CO, emissions.
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Financial Review
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Paving the way towards financial sustainability
Alisdair Cameron
Chief Financial Officer
Summary results
The Post Office has maintained turnover with growth in Financial
Services almost offsetting decreases in the other core product pillars.
Akey metric is EBITDAS, operating profit before interest, taxation,
depreciation, amortisation, subsidy and exceptional items which
reflects the underlying performance excluding the Network Subsidy
Payment. EBITDAS for the year was a loss of £60 million, an
improvement of £33 million from the loss of £93 million in 2013/14.
The costs of transformational change continued to be significant as
the network modernisation accelerated.
Key Financial Performance
Indicators
2015 2014 Change
Turnover £976m = £979m (3m)
Operating profit before f100m £107 ~—(E7m)
exceptional items
Operating loss before
depreciation, amortisation,
exceptional items {£60m) — (£93m) —-£33m
and Network Subsidy
Payment (EBITDAS)
Net cash flow* £184m —(£270m)_—-£454m
*2014 restated ~ see page 68 for details
Profit and Loss Summary
2015-2014.“ Variance Variance
im im £m %
Turnover 976 979 (3) (0.3)
Network Subsidy -_ = (40) (200)
Payment
Revenue 1136 1,179 (43) (3.6)
People costs (238) (255) v7 67
Other operating (634) (850) ra P
costs -
Total costs (1,072) (1,105) 33 3.0
Share of profit
from joint ventures 36 3 J 91
and associates
Operating
profit before 100 107 (Ue)
exceptional items
Revenue
The Post Office’s revenue decreased by £43 million (3.6%) to £1,136
million including the decrease of £40 million in the Network Subsidy
Payment from the Government.
The Post Office segments income into four pillars: Mails and Retail,
Financial Services, Government Services, and Telecoms. The pillars
and their performance are detailed on the next pages.
2015 2014 Variance Variance
£m £m £m %
Mails and Retail 388-390 Q (05)
Financial Services 202279 139
Government ul 146 6) 34)
Telecoms 120 124 @ 62
Other income 37 40 @) (75)
Turnover 97% «= (979 @) (0.3)
Netwarktsubsldy 160 200 (40) (200)
Payment
Revenue 11361179 (43) (3.6)
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Financial Review
Mails and Retail
Mails and Retail includes all the services provided by the Post Office
for Royal Mail and Parcelforce. It also includes Lottery and retail
services such as sales of collectibles as well as packaging and
stationery.
2015 2014 Variance
im im %
Mails services 340 342 (0.6)
Retail and Lottery 4 48 ~—~—SC«O
Mails and Retail 388 390 (0.5)
Mails and Retail revenue of £388 million decreased by £2 million
(2014: £390 million). OF this, turnover in relation to Royal Mail
products decreased by £2 million, driven primarily by lower
stamp sales. Overall parcel revenues were broadly flat with strong
performance in home shopping returns. Revenue from sales of Lottery
tickets and retail products was flat
Financial Services
The Financial Services pillar includes Post Office Money products,
ATMs and travel products as well as more traditional services
such as bill payment and over-the-counter banking transactions.
Government Services
The Government Services pillar covers services provided under
contract to Government departments. They include the Department
for Work and Pensions (DWP), the Driver and Vehicle Licensing
Agency (DVLA) and the Home Office including Her Majesty's
Passport Office (HMPO) and UK Visas and Immigration (UKV)).
2015 2014 Variance
£m £m %
Dwe 87 87 0.0
Home Office 30 30 0.0
DVLA 20 23 (13.0)
Other Government i 6 (333)
Services
Government Services 1 146 (3.4)
Government Services revenue decreased by £5 million to £141 million
(2014: £146 million). Revenue from the DVLA decreased by £3 million
as customers increasingly used other payment methods, a trend
which was accelerated when the paper tax disc was withdrawn in
October 2014. Our Identity Assurance proposition launched in March
2015. The signing of a new Post Office Card Account contract at the
end of the year has given longer term certainty to our benefits and
state pensions payments business.
2015 2014 Variance
im im %
Personal Financial Services 127 m5 10.4
Bill payment, banking and
other Financial Services ba laa (08)
Financial Services 290 219 39
Across Financial Services in aggregate, revenue increased by
£11 million to £290 million (2014: £279 million), a rise of 3.9%.
Personal Financial Services revenue increased by £12 million (10.4%)
driven by strong growth in savings commissions (particularly ISAs
and online savings), insurance and new mortgage products.
Revenue from traditional financial services products, including
bill payment services, business banking services and Postal
Orders declined by £3 million. This reflected a continuing shift
from paper-based to electronically-delivered products and
the increasing use of alternative payment methods. Revenue
from sales of National Savings and Investments (NS6l) premium
bonds grew by £2 million following the increase in the
maximum limit for holdings which took effect in June 2014.
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Telecoms
The Telecoms pillar includes Post Office HomePhone and Broadband
as well as e-top up services and phonecards.
2015 2014 Variance
£m im %
HomePhone and
Broadband ib eal (2s)
E Top-ups and
phonecards ° ‘ hea)
Telecoms 120 124 (3.2)
Telecoms revenue of £120 million (2014: £124 million) decreased by
£4 million. The revenue from HomePhone and Broadband decreased
by £3 million, primarily due to lower average customer numbers
through the year and price promotions offered to new customers.
Although average customer numbers were lower, we ended the year
with 454,000 customers, 4,000 higher than at March 2014. Revenue
from e-top ups was £1 million below the previous year as more
customers moved away from pre-pay onto contracts. However, the
Post Office continues to be a significant provider in the top-up market.
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Other income Joint venture
Other income decreased by £3 million to £37 million (2014: £40 Post Office Limited has a joint venture with the Bank of Ireland,
million). Revenve from an historical agreement with the Bank of First Rate Exchange Services Holdings Limited, whose principal
Ireland is included in other income. This is being recognised over the _ activity is the supply of foreign exchange in the UK.
life of the contract and reduced this year in line with expectations. The share of operating profit from the joint venture was £36 million,
£3 million higher than in 2014, First Rate Exchange Services Holdings
Limited results improved mainly through revenue growth and a lower
effective tax rate.
Other income is generated primarily from the Supply Chain business
that manages and distributes cash for Post Offices and for third parties.
It also offers warehousing services, mainly to Royal Mail. The revenue
generated by the Supply Chain business remained broadly flat.
Costs Exceptional items
Total costs decreased by £33 million to £1,072 million (2014:£1,105 Exceptional items are shown below:
million)
2015 2014
Costs prior year to current year (Emillion) on iis
e ) Operating exceptional items:
Restructuring costs including
postmasters’ compensation (2) (259)
Impairment of intangible assets,
property, plant and equipment Ue) (ns)
Amendment to the terms of RMPP E 102
Government grant 37
Subtotal operating exceptional items. (185) 45
Non-operating exceptional items:
Profit on disposal of property, - ’
plant and equipment
Net exceptional items (185) 48
~—
I Restructuring costs
2014 2015
Restructuring costs are shown below:
People costs
2015 2014
Other fi fi
operating costs ani ”
People costs Network Transformation programme
People costs of £238 million (2014: £255 million) decreased by -Postmasters’ compensation o7 94
£17 million reflecting efficiency savings, particularly in the Crown -Programme costs 73 97
network driven by the Crown transformation programme. There Crown Transformation programme 77 "
was a reduction of 91 in the number of people employed during
the year, mainly from the Crown network and support functions. IT Transformation programme 16 al
Other operating costs
Business Transformation programme 12 -
Other operating costs decreased by £16 million to £834 million (2014:
£850 million), driven by cost saving initiatives as well as lower cost of I_ Redundancy costs cee 23
sales for Telecoms. Business Transformation payments 1 5
Other exceptional items 10 10
Restructuring costs 214 259
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Impairment
Due to on-going operational losses (excluding the Network
Subsidy Payment) the carrying value of intangible assets
and all property, plant and equipment other than freehold
and long leasehold property has been impaired to nil.
Network Subsidy Payment and
other Government grants
The Network Subsidy Payment is Government grant
revenue put towards the costs of maintaining the Post
Office network. The payment decreased by £40 million in
the year to £160 million and is recognised in revenue.
In addition to the Network Subsidy Payment, the Post
Office receives Government grant funding towards the
transformation programme. Government grant funding of
£170 million was received in the year (2014: £215 million).
The additional Government grant funding is included within
operating exceptional items to match the associated costs.
£102 million of the 2012/13 grant also remained available for
use in the prior year and the entire balance of £317 million of
this government grant Funding was utilised in 2013/14
The grant was allocated to cover £59 million capital expenditure
(2014: £94 million), £43 million network transformation related
postmasters’ compensation (2014: £88 million) and £68 million
network and IT transformation programme costs (2014: £135 million).
The level of grants will continue to reduce as set out in the current
funding agreement with the Government. State Aid approval for the
funding from 2015/16 to 2017/18 was received on 19 March 2016.
Government grants
203 «20140 S207 2018
Year
BB other Government Grants
[BB Network Subsidy Payment
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Cash Flow and Net Debt
Post Office Limited operates its own Treasury function and
manages its own financial assets (including network cash)
and financial liabilities (mainly Government loans}.
The Treasury function derives its authority from the Board and
provides reports for Board review. It has the authority to undertake
financial transactions relating to the management of the underlying
business risks, however, it does not engage in speculative
transactions and does not operate as a profit centre. The principal
financial instruments utilised are deposits and borrowings.
Cash and cash equivalents amounted to £821 million (restated 2014
£637 million) at the year end. There was a net cash inflow during
the year of £184 million (restated 2014: outflow £270 million). The
inflow was driven by an increase in the Department of Business,
Innovation and Skills (BIS) loan balance to £310 million. In the
prior year the outflow was driven by repayment of the BIS loan
balance in full. Net debt (excluding cash in the Post Office network)
increased by £174 million year on year as shown in the table below.
2015 2014
im im
Net cash (outflow//inflow (15) -
from operating activities
Income tax recovered i il
Net cash outflow from
investing activities (Hts) (66)
Net cash (outflow)/inflow
before financing activities (2) aad
(Deduct)/add movement in cash in the
network included in net cash inflow (By) =
Finance costs paid (3) (2)
Net (increase)/decrease in net debt (174) 183
Net debt brought forward at
the beginning of the year (28) (206)
Total net debt carried forward (197) (23)
at the end of the year
* see page 68 for details
Post Office Limited's borrowing facility from the Government
and the associated Framework Agreement imposes constraints
on the availability of external borrowing and limits the purposes
for which the facility can be used to funding the cash and near
cash items held within the Post Office Limited network.
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Post Office Limited's treasury policy is to minimise the amount
drawn down on the loan in order to reduce its interest cost. The
facility is limited to a maximum of £1.15 billion or the amount of
security available (mainly network cash), whichever is the lower.
The maximum drawn down under the facility during the year was
£500 million on Il to M4 December 2014. The maximum available
facility reduced to £950 million from 30 March 2015 and is
available at two days’ notice with an end date of 31 March 2018.
Pensions
Post Office Limited is a participating employer within the Post Office
Section of the Royal Mail Pension Plan (RMPP), until 31 March 2015
and was a participating employer within the Royal Mail Defined
Contribution Plan (RMDCP}
Royal Mail Group Limited is the principal employer of the Royal Mail
Senior Executives’ Pension Plan (RMSEPP) and Post Office Limited is a
participating employer within RMSEPP. RMPP and RMSEPP are both
defined benefit plans.
On1 April 2012 - after the granting of state aid by the European
Commission on 21 March 2012 - almost all of the pension liabilities
and pension assets of the Royal Mail Pension Plan (RMPP), built up
until 31 March 2012, were transferred to HM Government.
On this date, the RMPP was also sectionalised, with Royal Mail Group
Limited and Post Office Limited each responsible for their own
sections in future. This pensions transfer left the RMPP fully funded
‘on an actuarial basis in respect of historic liabilities at this date.
During 2013/14 there was a consultation exercise with members of
the defined benefit Royal Mail Pension Plan on proposed changes to
the terms.
These changes were agreed and implemented on 15 October 2013.
The key change is to the definition of pensionable pay, which broadly
will increase in line with RPI (capped at 5%) in future regardless of
actual pay growth. The changes resulted in a one-off exceptional gain
of £102 million in 2013/14
The balance sheet pension position moved from an asset of £148
million at March 2014 to an asset of £205 million at March 2015. The
movement is primarily due to an improvement in asset values,
reflecting increases in equity and bond prices partly offset by an
increase in the long-term liability, largely caused by changes in the
financial assumptions, which in turn were driven by a reduction in real
corporate bond yields.
Both defined benefit plans closed to new members in March 2008,
and RMSEPP closed to future accrual on 31 December 2012. New
employees were offered membership of the RMDCP, during the year.
With effect from 1 April 2015 they are offered membership of the Post
Office Pension Plan.
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Pension cash payments for all plans
The future funding of ongoing pension contributions into
RMPP and deficit payments into RMSEPP was agreed with the
respective pension trustees during the year and payments
were made in accordance with the agreements.
2015 2014
im im
Regular pension contributions (22) (23)
Payments relating to redundancy 2) 0)
Net cash payments (25) (25)
The regular future service contributions cash rate for RMPP
expressed as a percentage of pensionable pay remained
at 17.1% (2014: 17.1%). The regular rate of employee
contributions for the RMPP remains unchanged at 6%.
Events after the reporting period
In accordance with the funding agreement with Government
announced on 27 November 2013, for which State Aid
approval was received on 19 March 2015, Post Office Limited
received £280 million of funding on I April 2015.
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Business Risk 2014/15
The information below details the key business risks, their
potential impact and how the Post Office manages them.
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Risk Title
Impact
Mitigation
Risks to underperformance in income
Post Office faces both opportunities
for and threats to income. The Mails
and parcels market remains intensely
competitive and has seen some high
profile failures due to inadequate margins.
Government Services are impacted
by increased use of digital channels
and reduced public spending
Both Mails and Government Services
have historically been key components
of the Post Office income base. While
declining trends have been built into
business planning, any acceleration of
this decline could impact achievement
of commercial sustainability.
The business strategy is focused
on developing new customer
based revenues embracing
market and technological
developments and moving away
from reliance on traditional Mails
and Government business lines.
These developments are aligned to.
key business accelerator areas
The Group Executive and
Board regularly monitor
business performance and track
implementation against plan.
Business transformation
not delivered in full
Savings may be delayed or not achieved,
or overall service compromised
due to inadequate capability,
capacity and scale of change.
Delays to transformation and/or savings,
and material increases in costs could
threaten delivery of services to customers
resulting in reputational damage, and
achievement of commercial sustainability.
Any major project issues would damage
our reputation with stakeholders
including suppliers and our shareholder.
Anew programme management
office is being established and
assurance and oversight enhanced.
There are detailed plans in place
to manage the transformation,
and identify risks to ensure
transformation activities are delivered
within budget and on time.
A comprehensive engagement
programme is in place with unions,
staff and postmasters to engage
our people in our vision and
strategy around transformation
IT development programmes
not delivered in full
IT replacements and upgrades not
implemented in time leading to increased
costs or infrastructure failure
Failure of, or delay in implementation of
IT programmes could result in operational
failures which would adversely impact
delivery of services to customers.
Delays or increased costs may
impact the timetable for achieving
operational sustainability.
Material project issues would damage our
reputation with stakeholders including
suppliers, customers and shareholders.
Anew design framework is being
created for the Front Office application,
which includes testing and training in
accordance with best practice, and
will be subject to the transformation
assurance and oversight plan
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Risk Title
Impact
Mitigation
Operational, Legal and Regulatory risks
The Post Office operates under an
extensive regulatory environment,
covering areas such as financial and
postal services, telecoms, procurement,
competition law and data security.
This environment continues to
evolve, particularly in the financial
services arena and we need to ensure
that the changing requirements
continue to be identified and met.
Market, macro-economic and
environmental risks
Market developments, competitors’
response and consumer needs
are changing at a rapid pace.
The 2015 actuarial valuation of the RMPP
is due to complete shortly and there isa
risk that, as a result of the prolonged low
interest rate environment, substantially
increased contributions will be required.
Failure to comply with the regulatory
framework could result in customer
losses and inconvenience, financial
losses, regulatory censure, fines,
or litigation, which in turn may
adversely affect our ability to trade
in our target markets or products.
Regulatory censure or fines
would damage our reputation
with customers and suppliers
Failure to keep pace with changing market
developments may result in strategic
plans becoming outdated and sub optimal
Material increases in required
contributions may adversely affect
the ability of the Post Office to
achieve commercial sustainability.
Our corporate services team
works closely with the relevant
business owners to identify
new regulatory obligations.
We ensure ongoing training
and development of staff on
regulatory requirements.
Regular compliance tests and
monitoring are conducted
There is a programme in place of
internal and external assurance
(Including by our regulatory principals)
including in relation to our financial
services business, its sales practices
and products to ensure that on an
ongoing basis these continue to
meet regulatory requirements
Post Office works closely with
its commercial partners to
meet market and technological
developments and to roll-out an
improved customer experience
across all distribution channels.
Business diversification gives
Post Office different response
options if there are significant
threats to one business area
Post Office is working with its
professional advisers to develop
options to minimise the impact
of an adverse valuation.
Strategic development and sust
The cost of delivering the public
purpose of the Post Office to meet
the expectations of stakeholders
may exceed current forecasts.
Balancing conflicting strategic objectives
may impact operational efficiency
and reduce our ability to become a
commercially viable enterprise
Post Office engages proactively with
stakeholders to ensure there is full
understanding of, and alignment with,
the strategic goals and the investment
case required to deliver them
Industrial action
Significant progress has been made
in industrial relations, however, the
withdrawal of support from our
staff or postmasters to the ongoing
implementation of Post Office strategy
via industrial action remains a risk.
Disruption and delays due to industrial
action would adversely impact
our customers, business partners
and suppliers. It could also provide
opportunities for competitors that
could undermine the ability of the to
achieve commercial sustainability.
Material disruption could also damage the
reputation and brands of the Post Office.
Post Office seeks to engage proactively
with staff, unions and sub-postmasters
s0 as to ensure that there is alignment
with our vision and strategy.
Contingency planning is in
place to minimise the impact of
potential industrial action
Alisdair Cameron
Chief Financial Officer
Post Office Limited
1 July 2015
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POST OFFICE I A
"Our targets are more relevant than ever before.
I want the Post Office to return to profit and
that's one of the many things that drives me"
NICOLA HUGHES Breck Road, Liverpool
_—_——
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<n
Governance
30 // Board of Directors
34 // Corporate Governance
5
45 // Directors’ report
46 // Directors’ remuneration
orate.postol
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“mM,
POST OFFICE I Annual Report and Financial Statements 2014/15
Soca of Direet
4 Alasdair Marnt
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Board responsibilities
The responsibilities of the Board include setting the business’ strategic aims,
putting in place the leadership to deliver them, supervising the management of the
business and reporting to the Shareholder. There are a number of Board committees
which deal with specific topics requiring independent oversight, including audit,
risk and compliance, nominations, pensions and senior remuneration.
Each committee is chaired by a Non-Executive Director and operates
within its own agreed, documented Terms of Reference.
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Alice Perkins CB,
Chairman
Joined the Board in July 2011
Chairman of the Nominations
Committee and Member of the
Remuneration Committee
Alice had a wide-ranging career in the
civil service, which included policy and
operational roles in health, social security
and public spending in the Treasury.
Alice was also the Civil Service's Group
HR Director in Cabinet Office between
2001 and 2005. Before joining Post Office
Limited as Chairman, she served as Non-
Executive Director on the boards of
Littlewoods, BAA and TNS, where she also
chaired the Remuneration Committee.
Alice was an external member of the Oxford
University Council until summer 2014.
She is currently a business coach at the
JCA Group, and a member of the faculty
at Meyler Campbell where she teaches
senior executives how to coach. Alice was
appointed as a Non-Executive Director of
the BBC Executive Board on I April 2014.
Neil McCausland,
Senior Independent
Director
Joined the Board in September 2011
Chairman of the Remuneration
Committee and a Member of the Audit,
Risk and Compliance Committee and
the Nominations Committee; Member
of the Post Office Advisory Council
Neil has had a portfolio of non-executive
roles over the last 10 years. He is currently
Chairman of four companies: Snow
and Rock, a retail chain selling skiing
and outdoor brands, bikes and running
gear; Joules, an outdoor lifestyle brand;
Create Fertility, a chain of IVF clinics and
Skin, a chain of skin treatment clinics
Until recently he was Chairman of footwear
company Kurt Geiger, and a Governor of
NuffieldHealth, which operates hospitals
and health clubs. Neil began his career
at Marks & Spencer, before becoming
Managing Director of CBA and Chief
Executive of NAAFI (an MOD agency).
Paula Vennells,
Chief Executive
Joined the Board in October 2010
Paula has worked for Post Office Limited
since 2007 in a number of senior roles
including Managing Director. She became
Chief Executive on I April 2012. Previously
Paula spent five years with Whitbread ple,
latterly as Group Commercial Director.
She began her career with Unilever and
LOreal and held directorships in sales and
marketing with a number of major retailers
including Dixons Stores Group and Argos
She is currently a Non-Executive Director
and Trustee for Hymns Ancient and Modern
Group, a Trustee of Go ON UK anda
member of the Future High Street Forum.
Alisdair Cameron,
Chief Financial
Officer
Joined the Board in January 2015
Member of the Pensions Committee and
the Financial Services Committee
Alisdair became the Chief Financial Officer
of Post Office in January 2015. He is also
a Non-Executive Director on the Board of
Oxford University Hospitals. From 2002
to 2014 Allisdair worked in a variety of
roles for Centrica ple, a FTSE 100 company,
including Director of Audit & Risk, Group
Financial Controller, Finance Director
of British Gas and Managing Director of
British Gas Enterprise. Previously he was a
partner with Arthur Andersen and served
as a trustee of the e-Learning Foundation.
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Richard Callard, Non-
Executive Director
Joined the Board in March 2014
Member of the Pensions Committee
Richard Callard is the representative of
the Department for Business, Innovation
and Skills (BIS) on the Post Office Limited
Board, and is an Executive Director at the
Shareholder Executive (ShEx) in BIS
Richard is a Chartered Accountant by
background and joined ShEx from Deloitte
corporate finance in 2007, where he advised
the public and private sector on public
private partnerships and other infrastructure
and project finance deals. In addition to his
role on the Board of Post Office Limited,
Richard leads the Post Office and Green
Investment Bank shareholder teams at BIS.
Alasdair Marnoch,
Non-Executive
Director
Joined the Board in May 2012
Chairman of the Audit, Risk and
Compliance Committee
Alasdair Marnoch joined the Board of Post
Office Limited as a Non-Executive Director
on 23 May 2012. A Chartered Accountant,
he chairs the Board's Audit, Risk and
Compliance Committee which reviews the
statutory accounts and financial controls
Alasdair has had wide experience as Finance
Director of a number of FMCG and service
businesses, including listed companies. He
was appointed as Chief Financial Officer at
CPA Global, the world’s leading provider
of intellectual property management
software and services, in January 2014
Previously Alasdair served as CFO of
the Equiniti Group, a leading provider of
complex administration and processing
services to the public and private sectors
Tim Franklin, Non-
Executive Director
Joined the Board in September 2012
Member of the Audit, Risk and
Compliance Committee and Financial
Services Committee; Chairman of
the Post Office Advisory Council
Tim Franklin joined the Board of Post
Office Limited as a Non-Executive Director
on 19 September 2012. Tim's executive
career spans both building societies
and banking, Prior to his board roles in
the mutual sector, he was Director of
Customer Programmes and Loyalty and
Managing Director of Savings at Barclays.
Tim’s experience extends across the
private and public sectors too. He is Senior
Independent Director at HM Land Registry
where he chairs the Audit Committee
and was previously on the Boards of
Reclaim Fund Limited, Mutual Plus Limited
and the Link Cash Machines Network
Alwen Lyons,
Company Secretary
Appointed in July 2011
Alwen Lyons joined Royal Mail Group
in 1984 as a graduate entrant and has
worked at senior levels in both Royal
Mail Group and Post Office Limited
She is a qualified accountant and in her
career spanning more than 30 years with
Royal Mail Group and Post Office Limited,
she has worked in several areas of the
business, including network, finance and
marketing. Alwen became the Company
Secretary in July 2011, after leading the
project to separate Post Office Limited
from Royal Mail Group. Alwen served as
a trustee on the Royal Mail Pension Plan
Board for 8 years and was Chair of the
Audit and Risk Committee for 7 years.
Virginia Holmes,
Non-Executive
Director
Joined the Board in April 2012
Chairman of the Pensions Committee
and the Financial Services Committee
Virginia brings to the Board extensive
knowledge of the financial services industry,
including both investment management
and banking. Her experience includes
serving as Chief Executive of AXA
Investment Managers UK and more than
a decade with the Barclays Bank Group,
where she ultimately served as Managing
Director of Barclays Bank Trust Company.
Virginia is currently the Chair of USS
Investment Management Limited and
serves on the boards of the Alberta
Investment Management Corporation
in Canada, Standard Life Investment
Holdings Limited and the Investor Forum
CIC. She also sits on the Zurich UK Life
Independent Governance Committee
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Corporate governance
The Post Office is
committed to conducting
its business ethically
and in accordance with
appropriate standards of
corporate governance.
Corporate Governance Statement
Shares in Post Office Limited are not listed or
traded on a public exchange and therefore
Post Office is not required to report on
its compliance with the UK Corporate
Governance Code (the Code). However,
the Board of the Post Office believes the
Code to be an appropriate benchmark for
reporting on corporate governance and as
such, endeavours to comply with the spirit
of the Code where appropriate, in so far as
it can apply to a Government-owned entity
which has no private or institutional external
shareholders. The Post Office regularly
reviews its governance procedures to
ensure their continuous enhancement and to
progress towards fuller compliance with the
Code and with best practice developments.
Asa Government-owned entity, the
Post Office is also committed to acting
in accordance with the Nolan Principles
of Public Life, namely: selflessness,
integrity, objectivity, accountability,
openness, honesty and leadership. The
Board is mindful of these principles,
both in its decision making and in its
responsibility for organisational culture.
Legal Ownership Structure
The Post Office is a wholly owned
subsidiary of Postal Services Holding
Company Limited (formerly named
Royal Mail Holdings plc). The Secretary of
State for Business, Innovation and Skills
(BIS) holds a special share in Post Office
and the rights attached to that Special
Share are enshrined within the Post Office
Articles of Association (the Articles).
PAGE 34
Neither Postal Services Holding Company
Limited nor BIS, through its Shareholder
Executive (ShEx), have any day to day
involvement in the operations of the
Post Office or the management of its branch
network and staff. However, Richard Callard,
the ShEx representative, sits on the
Post Office Board as a Non-Executive
Director.
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A strong commercial link remains
between the Post Office and Royal
Mail, underpinned by a contractual
agreement, which is at arm’s length, to
continue to supply Royal Mail products
and services through the Post Office.
Secretary of State for Bus
jiness Innovation and Skills
Postal Services Holdi
ing Company Limited
30% investment in shares
(as at 29 March 2015)
I
Royal Mail ple
Post Office Limited
First Rate Exchange Services
Holdings Limited (FRESH)
50% owned joint venture
with Bank of Ireland
Post Office Management
Services Limited
100% owned
First Rate Exchange
Services Limited
100% owned by FRESH
corporate postoffice.co.uk/annualreportl415
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Governance
The Board
The Board is responsible for setting the strategy of the Post Office, providing the
leadership to implement the strategic objectives and determining the Post Office's vision,
values and organisational culture.
Membership
The Board is comprised of an independent
Chairman, the Chief Executive, the Chief
Financial Officer and five Non-Executive
Directors, one of whom is designated
the Senior Independent Director. Short
biographies of all members of the Board
appear on pages 32-33 of this Annual
Report and further information on
certain key roles can be found below.
Non-Executive Directors are not
employees of the Post Office but provide
services under the terms of an individual
Letter of Appointment, signed at the
commencement of their directorship. The
Executive Directors’ contracts provide
for six months’ notice of termination to
be given by the Director and 12 months’
notice to be given by the Post Office.
Directors’ statutory duties are set out in
the Companies Act 2006. The primary duty
of the directors is to promote the success
of Post Office Limited as a Company for
the benefit of its Government shareholder
and the wider stakeholder community.
The Post Office seeks the most suitable
candidates as directors and considers
diversity of appointments. This is in keeping
with the belief of the Post Office that a
diverse balance of backgrounds, experience
and insights and a culture of inclusivity across
the entire workforce is in the best long-term
interests of the Post Office and should reflect
the communities it serves. In terms of gender
diversity, at 29 March 2015 the Board was.
comprised of 375 per cent women and in
April 2015 the Post Office was included in
The Times’ top 50 employers for women.
All Board members receive a comprehensive
induction on appointment, which includes
training on their responsibilities as statutory
directors. Members also receive regular
briefings to update and refresh their
skills and knowledge and in 2014/18 this
included a briefing on cyber security. As
the branch transformation programme
progressed throughout the year, members
were invited to attend transformed
branch openings in their local areas.
Alisdair Cameron was appointed
as Chief Financial Officer on 28
January 2015 following Chris Day's
resignation on the same date.
Chairman
As Chairman, Alice Perkins is responsible
for leadership of the Board and for ensuring
its effectiveness on all aspects of its role
Senior Independent Director
The Board has appointed Neil McCausland,
one of its independent Non-Executive
Directors, as the Senior Independent
Director. He provides a sounding board for
the Chairman and serves as an intermediary
for the other directors when necessary.
Company Secretary
Alwen Lyons, the Company Secretary, is
responsible for advising the Board, through
the Chairman, on all governance matters
and ensuring good information flows
within the Board, its committees and senior
management. The Company Secretary also
facilitates the induction process, assists
with professional development and ensures
compliance with Board processes, Directors’
interests, indemnity arrangements and other
significant agreements. During the period,
corporate postoftice.co.uk/annvalreportl415
none of the directors had a material interest
in any contract of significance with the Post
Office or any of its subsidiaries. At all times
during 2014/15, Alice Perkins (Chairman),
Tim Franklin, Virginia Holmes, Alasdair
Marnoch and Neil McCausland (Senior
Independent Director) met, and continue
to meet, the criteria for independence
as set out in the Code, and are therefore
considered by the Board to be independent.
The Post Office has arranged appropriate
insurance cover in respect of legal
action against directors of the Post
Office and its subsidiaries.
Time commitment
All Board directors should allocate sufficient
time to the organisation to enable them to
discharge their responsibilities effectively.
There is an implied term within all the Non-
Executive Directors’ Letters of Appointment
that they will devote an appropriate amount
of time to their role, which will enable
them to fulfil their functions satisfactorily.
As part of the Board effectiveness review,
referred to below, all the Non-Executive
Directors were determined to have devoted
sufficient time to their role to enable
them to perform that role satisfactorily.
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Non-Executive Directors’ Terms of Office
Unexpired
Non-Executive Date of Term of Committee
Director appointment office term at 29 memberships
PPS March 2015 is
Alice Perkins 21 July 2011 Rolling N/A* Nominations
12 month (Chairman)
contract
Richard Callard 26 March 2014 Until removal N/A Pensions
Tim Franklin 19September 4 years lyear, ARC
2012 S months, — Financial Services
22 days (see note 1)
Virginia Holmes 4April2012 3 years 6days** Financial Services
(Chairman)
Pensions (Chairman)
Nominations
Remuneration
Alasdair Marnoch 23May 2012. 3years SS days*** ARC (Chairman)
Neil McCausland 22 September A years 5 months, Remuneration
20m 24 days (Chairman)
ARC
Nominations
(see note 2)
“The Chairman has decided to stand down in July 2015, at which time she will have been
in post for four years, The process to recruit a new chairman is in hand.
**Virginia Holmes has been offered and has accepted a new three year term from the expiry
of her existing terms of appointment.
***Alasdair Marnoch has been offered and has accepted a new term, expiring 31 July 2015,
from the expiry of his existing terms of appointment.
Note 1 - Tim Franklin is also Chairman of the Post Office Advisory Council
Note 2 - Neil McCausland is also a Member of the Post Office Advisory Council
PAGE 36
corporate postoffice.co.uk/annualreportl415
Board Meetings
The Board meets at least eight times a year.
During 2014/15 it met 12 times (including
meetings by telephone for time critical
issues). A record of Directors’ attendance is
set out in the table below.
Meetings
— Attended
{attended eligible
to attend)
Alice Perkins 12/2
Richard Callard 12/12
Chris Day* 10/10
Tim Franklin ne
Virginia Holmes Wi
Alasdair Marnoch 12/12
Neil McCausland Wi2
Paula Vennells ; 12/12
Alisdair Cameron** 7 2/2 :
* Resigned 28 January 2015
** Appointed 28 January 2015
The Non-Executive Directors also met twice
during the period without the Executive
Directors.
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Governance
Role and
responsibilities
The Board is accountable to the Secretary
of State for BIS for the performance of
the Post Office and is required to notify
the Shareholder of certain actions, as
set out in the Articles of Association.
The Board is also responsible for ensuring
compliance with all legal and regulatory
requirements, supervising the management
of the business, providing constructive
challenge to the Group Executive and
communicating with the Shareholder. It
has a Schedule of Matters reserved for
its decision and has approved terms of
reference for its Committees which are
provided on the Post Office website.
The Board approved the Business Plan in
March 2014 and regularly reviews reports
‘on performance against that Plan, together
with receiving periodic business reports
from senior management. Directors
are briefed on matters to be discussed
at Board and Committee meetings by
papers distributed in advance, as well
as by management presentations.
In setting the risk appetite for the Post Office
and establishing a framework to manage and
mitigate risk, the Board takes guidance from
its Audit, Risk and Compliance Committee,
to which it delegates oversight of risk
management. This committee receives
reports from the Group Executive's Risk and
Compliance Committee and from the internal
and external audit teams. Further detailed
information on the management of risk within
the Post Office, together with identification
of principal risks, their impacts and mitigation,
can be found elsewhere in this report.
The Board may, in the furtherance of its
duties, seek independent professional
advice at the expense of the Post Office.
During the period, no director sought
independent professional advice. The
Articles give the directors power to
authorise conflicts of interest. The Board
has adopted a procedure by which
situations giving rise to potential conflicts
of interest are identified to the Board,
considered for authorisation and recorded.
Accountability
The Board is accountable to its Shareholder
and to the Post Office's large and diverse
group of stakeholders. It fulfils these
accountabilities through regular briefings
by the Chief Executive and Chief Financial
Officer to the Shareholder and by the
provision of its annual report and financial
statements and its mid-year interim report.
Of particular importance for accountability
is its identification of principal risks,
their impacts and mitigations, and its
assurance of the existence of sound risk
management and internal control systems.
Directors had the requisite balance of skills,
experience, independence and knowledge
to enable them to discharge effectively
their respective duties and responsibilities.
No significant areas of concern were
identified. The review did identify some areas
where improvements could be made and,
in addressing these, the Board will continue
to review its committee structure and the
Group Executive will work on enhancing
the effectiveness of the Board papers
An externally facilitated Board effectiveness
review will be carried out in 2016.
Key focus and
achievements
in 2014/15
During the year to 29 March 2015 the Board
focused on Strategy, Financial Performance,
Network and Crown Transformation,
and the capability of the business. It also
approved the commencement of trading of
Post Office Management Services Limited,
to support the Group's expanded and
enhanced financial services offerings.
Board effectiveness
The effectiveness of the Board is vital
to the success of the Post Office.
An internal Board effectiveness review
was carried out during January and
February 2015. The Chairman conducted
one to one interviews with all the Non-
Executive Directors, the Chief Executive,
the Chief Financial Officer and the Company
Secretary, as well as receiving written
input from the Group Executive. Following
completion of the interviews, the Chairman
correlated the results and presented her
findings to the Board on 25 March 2015.
An appraisal of the personal effectiveness
of the Chairman was undertaken by Neil
McCausland, Senior Independent Director.
The review concluded that the Board, its
individual directors and its Committees.
continued to be effective and that the
corporate postoftice.co.uk/annvalreportl415
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Board committees post Office Limited
Post Office Management
To assist in the execution of its corporate Board ; Services Ltd (POMS)
governance responsibilities, the Board has (at least 8 meetings (100% owned)
established a governance structure which per year)
includes the following committees: Audit,
Risk and Compliance; Financial Services;
Nominations; Pensions; and Remuneration,
The Board delegates certain authorities
to its Committees, according to their Remuneration Audi & Compliance
respective Terms of Reference. Committee Committee(ARC) I I pos arc
{at least 3 meeting (at least 3 meetings
per year) per year)
100% owned
Reporting line
Nominations .
Pensions Committee
ware reee-e Flow of information Comimittes, {at least 3 meetings
{at least 2 meetings First Rate
per year)
per year) Exchange
Services Ltd
(V with Bank
of Ireland, 50%
Post Office
Financial Services == =I Limited owned)
Committee
L} etnies ee
me Limited/
Bank of
Ireland Senior
Executive
Committee
PAGE 38 corporate,postoffice.co.uk/annualreport 415
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Audit, Risk and
Compliance
Committee
During 2014/18, the main focus of the Audit,
Risk and Compliance Committee was
oversight of the financial statements and
review of the risk management procedures.
Membership
The Committee is chaired by Alasdair
Marnoch and the other members are Tim
Franklin and Neil McCausland. All are
independent Non-Executive Directors. There
were no changes to the membership during
2014/15.
The Board considers that the Committee's
members have broad commercial knowledge
and extensive business leadership
experience, and that this constitutes a broad
and suitable mix of business and financial
‘experience and expertise.
Meetings
The Committee's Terms of Reference require
that it meets a minimum of three times a year
and that two members must be in attendance
for a meeting to be quorate. In 2014/15 there
were five meetings of the committee and the
members’ attendance is set out below:
eae gs Attended
eae (attended /eligible
to attend]
Alasdair Marnoch 5/5
Tim Franklin 5/5
Neil McCausland 5/5
The Head of Internal Audit attended all
committee meetings and also met the
Committee Chairman, as required, through
the year. The external auditor was also
invited to attend Committee meetings as
appropriate,
Role of the Committee
The Committee operates in accordance with
its Terms of Reference which were last
reviewed by the committee in November
2013 and approved by the Board. A copy of
the Terms of Reference can be downloaded
from postoffice.co.uk.
The Committee's purpose is to assist the
Board in fulfilling its fiduciary responsibilities
by:
© Contributing an independent view on the
accounting, financial control and financial
reporting practices of the Post Office:
© Taking all reasonable steps to ensure
accurate and informative corporate
financial reporting and disclosures which
meet appropriate accounting and
corporate governance standards; and
© Providing oversight of the Post Office risk
management systems, operational
controls and key systems, including the
steps taken to mitigate those risks.
The Committee is also tasked with the
governance of the auditing services, which
includes reviewing and making
recommendations to the Board on the
nomination or discharge of the independent
external auditors. The committee reviews
and agrees the annual audit plans for both
external and internal audit, ensures the
appropriateness of Post Office relationship
with the external auditor is managed,
considers the external auditor's
independence and endorses its remuneration
and terms of engagement for approval by the
Chief Financial Officer.
The Committee receives reports, as
appropriate, from the Executive Risk and
Compliance Committee. Further detailed
information on the management of risk within
the Post Office, together with identification
of principal risks, their impacts and mitig:
can be found elsewhere in this report.
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Work carried out by the
Committee in 2014/15
During the year, the Committee reviewed
and recommended that the Board approve
the annual report and financial statements for
2013/14 and the interim report for 2014/15. It
also approved the annual audit plans for both
the internal audit function and the external
auditors, Ernst & Young LLP.
The Committee oversaw the continuing
development of the Post Office risk
management, internal control and internal
audit procedures, moving towards further
compliance with the provisions of the Code.
It also oversaw the development of the Post
Office Risk Appetite Statement, which has
now been adopted by the Board.
The Committee considered a risk update on
financial services compliance and reviewed
the arrangements for disaster recovery.
During the year, 29% of the total fees paid to
Ernst & Young was for non audit services, an
increase on the 23% paid in 2013/14.
Evaluation of the Committee
In January 2015 the Committee noted the
results of the self-assessment of its
performance which had been carried out at
the end of 2014, and concluded that there
had been an improvement in processes
during the year.
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Financial Services Committee
During 2014/15, the main focus for the
Financial Services Committee was to support
and challenge the acceleration and growth of
the financial services business.
Membership
The Committee is chaired by Virginia
Holmes and the other members are
Tim Franklin, non-executive director and
Alisdair Cameron, Chief Financial Officer.
There was one change to the membership
during 2014/15, when Alisdair Cameron was
appointed on 25 March 2018, following the
departure of Chris Day, former Chief
Financial Officer, on 28 January 2015.
Meetings
The Committee's Terms of Reference require
that it meets a minimum of four times a year
and that two members must be in attendance
for a meeting to be quorate. In 2014/15 there
were seven meetings of the Committee and
the members’ attendance is set out below:
Meetings Attended
Committee Member (attended/eligible
to attend)
Virginia Holmes v7
Alisdair Cameron* 0/0
ae ae
“Tim Franklin 6/7
*appointed to Committee 25 March 2015
**resigned 28 January 2015
Role of the Committee
The Committee operates in accordance with
its Terms of Reference, which were approved
by the Board in January 2014 when the
Committee was established. A copy of the
Terms of Reference can be downloaded from
postoffice.co.uk.
The Committee's key responsibilities are to:
* Provide guidance on, oversight of and
authorisation for, the development of the
Post Office's financial services;
© Review key activities of the Financial
Services strategic programme, including
those activities of First Rate Exchange
Services Limited (a 50 per cent joint
venture with the Bank of Ireland);
* Provide guidance to the Financial
Services management team;
* Consider Risk Management matters prior
to consideration and decision by Audit,
Risk and Compliance Committee; and
© Receive a quarterly report on Financial
Services, including a copy of the Risk
Register.
Work carried out by the Committee in
2014/15
During the period, the Committee oversaw
and monitored all activity concerned with
financial services, including considering the
annuities and investments strategy, business
updates, sales, risk management, customer
conduct, compliance matters, managing the
relationship with strategic partners and
general financial services strategy. It also
oversaw the planning and implementation of
the commencement of trading of the Post.
Office's subsidiary, Post Office Management
Services Limited.
Evaluation of the Committee
The performance of the Committee was not
evaluated during 2014/15.
Nominations
Committee
During 2014/15, the main focus for
the Nominations Committee was the
appointments of a new Chief Financial
Officer and a new General Counsel.
Membership
The Committee is chaired by Alice Perkins,
Chairman and the other members are Virginia
Holmes and Neil McCausland, the Senior
Independent Director. There were no
changes to the membership during 2014/15.
Meetings
‘The Committee's Terms of Reference require
that it meets a minimum of twice a year and
that two members must be in attendance for
a meeting to be quorate. In 2014/15 there
were six meetings of the Committee and the
members’ attendance is set out below:
Meetings Attended
Committee Member (attended/eligible
to attend)
Alice Perkins 6/6
Virginia Holmes 6/6
Neil McCausland 6/6
Role of the Committee
The Committee operates in accordance with
its Terms of Reference, which were last
reviewed by the Committee and approved by
the Board in March 2015. A copy of the Terms
of Reference can be downloaded from
postoffice.co.uk.
The Committee's key responsibilities are to:
* Make recommendations to the Board
regarding any changes in Board
membership;
© Keep under review the balance of skills,
experience and diversity available within
the Board and each of its committees;
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© Manage the process for recruiting
and replacing Board Directors
(excluding the non-executive director
nominated by the Shareholder as their
representative), members of the Group
Executive, the Company Secretary and
Directors of Post Office Management
Services Limited;
* Actively manage succession planning for
high level appointments; and
© Oversee the process for Board and
committee performance evaluation.
Work carried out by the Committee in
2014/15
During the period, the Committee oversaw
the appointment of a new Chief Financial
Officer and a new General Counsel and
considered appointments to the Board of
Post Office Management Services Limited. It
also provided oversight for the Board and
committee performance evaluations.
The Committee used the services of Russell
Reynolds Associates to undertake market
searches for executive appointments, and
Saxton Bamfylde to undertake similar
searches for non-executive appointments
and to advise on succession planning, Neither
firm had any other connection with the Post
Office.
Evaluation of the Committee
In January 2015 the Committee noted the
results of the self-assessment of its
performance which had been carried out at
the end of 2014. The positive results had
shown an improvement in processes during
the year.
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Pensions Committee
During 2014/18, the main focus for the
Pensions Committee was the agreement to
create the Post Office Pension Plan for all
new employees and existing members of
the Royal Mail Defined Contribution Plan.
Membership
The Committee is chaired by Virginia Holmes
and the other members are Richard Callard
(the ShEx representative) and Alisdair
Cameron, Chief Financial Officer. There
were two changes to the membership during
2014/15, Richard Callard was appointed on
8 October 2014 and Alisdair Cameron was
appointed on 25 March 2015, following
the departure of Chris Day, former Chief
Financial Officer, on 28 January 2015.
Meetings
The Committee's Terms of Reference require
that it meets a minimum of three times a year
and that two members must be in attendance
for a meeting to be quorate. In 2014/15 there
were six meetings of the Committee and
the members’ attendance is set out below:
The Committee's key responsibilities are to:
* Make recommendations to the
Board in respect of pensions
and pre-retirement risk benefits
provision within the Post Office;
* Put into effect appropriate investment
strategies for the Post Office section
of the Royal Mail Pension Plan (RMPP)
‘on behalf of the Board and in line with
the Board's investment beliefs; and
* Continue to monitor and keep under
review, with the assistance of AON
Hewitt, the investment of RMPP
assets by actively engaging with the
Royal Mail Pension Trustees Limited
and its Investment Subcommittee.
Work carried out by the Committee in
2014/15
2014 saw the agreement to create the
Post Office Pension Plan for all new
employees and existing members of the
Royal Mail Defined Contribution Plan. On
1 April 2015 the new plan was launched,
Meetings Attended
Committee Member (attended/eligible
marking a milestone in the separation of
the Post Office from Royal Mail Group and
to attend)
Virginia Holmes 6/6
Richard Callard* 4/4
Alisdair Cameron** 0/0
Chris Day*** 5/5
enabling the Post Office to have its own.
dedicated scheme for the first time.
Evaluation of the Committee
In March 2015, the Committee noted
the results of the self-assessment of its
“appointed to Committee 8 October 2014
**appointed to Committee 25 March 2015
resigned 28 January 2015
Role of the Committee
The Committee operates in accordance
with its Terms of Reference which were
last reviewed by the Committee in July
2014 and approved by the Board. A
copy of the Terms of Reference can be
downloaded from postoffice.co.uk.
performance which had been carried out
in the preceding months. As a result of the
evaluation, the Committee agreed to some
changes to enhance its performance
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Remuneration
Committee
During 2014/15, the main focus for the
Remuneration Committee, in addition to its
standard business, was the remuneration
packages for the new General Counsel
and the new Chief Financial Officer.
Membership
The Committee is chaired by Neil
McCausland, the Senior Independent
Director, and the other members are
Alice Perkins, Chairman, and Virginia
Holmes. All members are independent
non-executive directors. There were no
changes to the membership during 2014/15.
Meetings
The Committee's Terms of Reference require
that it meets a minimum of three times a year
and that two members must bi
for a meeting to be quorate. In 2014/15 there
were six meetings of the Committee and
the members’ attendance is set out below:
attendance
Meetings Attended
Committee Member _(attended/eligible
to attend)
Neil McCausland 6/6
Virginia Holmes 6/6
Alice Perkins 6/6
The Chief Executive may attend meetings,
at the invitation of the Chairman, to discuss
matters relating to the remuneration of
the Chief Financial Officer and members
of the Group Executive. However,
the Committee is careful to recognise
and manage conflicts of interest when
receiving views from the Group Executive
and upholds the principle that no
individual may be involved in discussions.
concerning their own remuneration.
Role of the Committee
The Committee operates in accordance
with its Terms of Reference, which were
last reviewed by the Committee and
approved by the Board in March 2015. A
copy of the Terms of Reference can be
downloaded from postoffice.co.uk.
The Committee's key responsibilities are to:
make recommendations to the Board
on the remuneration strategy and
any changes to individual elements
of the remuneration package for
Executive Directors; members of
the Group Executive who report
directly to the Chief Executive; and
other senior level appointments
with comparable remuneration;
© provide an oversight function for
the remuneration of the Directors
of the Post Office Management
Services Limited Board;
© obtain information on salary levels
across the business and within external
organisations of comparable size, in order
to set remuneration levels within an
appropriate context, while being mindful
that any remuneration increases should
correspond with corporate and individual
performance improvements; and
© have oversight of, approve and make
recommendations to the Board in
respect of remuneration levels for
new senior executive appointments.
In doing so, it liaises and works closely
with the Nominations Committee.
However, any changes in remuneration for
directors of Post Office Limited must be
approved in advance by the Shareholder,
while the remuneration of the Chairman
and of the Non-Executive Directors is
set by the Shareholder. Also, no material
changes can be made to Directors’
base salaries, benefits or incentives
without Special Shareholder consent.
Further details of the incentive
schemes now in place, anda table
setting out the remuneration paid to
all Directors in the year to 29 March
2015, are provided in the Directors’
Remuneration Report on pages 46-57.
Work carried out by the Committee in
2014/15
The Committee is permitted to consult with
external consultants and in the year under
review, advice was primarily obtained from
New Bridge Street Consultants on market
practice and benchmark development. New
Bridge Street Consultants is part of the
Aon Consulting Group that, under its Aon
Hewitt brand, acts as investment adviser
to the Post Office section of the Royal Mail
Pension Plan. The Post Office is satisfied
that these two provisions of advice, from
different parts of the Aon Consulting Group,
are managed separately and therefore
present no compromise of independence.
During the period, the Committee
considered and made recommendations.
to the Board in respect of the
remuneration for the Chief Financial
Officer and the General Counsel.
Evaluation of the Committee
In January 2015 the Committee noted
the results of the self-assessment of its
performance which had been carried
out at the end of 2014. The positive
results had shown an improvement
in processes during the year.
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The Group Executive
Below main Board level,
the Group Executive is the
most senior management
body and is comprised of
the Chief Executive, each
of her direct reports and
the Company Secretary.
Membership
The Group Executive is chaired by
Paula Vennells, Chief Executive
and the other members are:
Alisdair Cameron
Chief Financial Officer (joined the
Post Office in January 2015)
Martin George
Commercial Director
Kevin Gilliland
Network and Sales Director
Neil Hayward
Group People Director
Nick Kennett
Financial Services Director
Alwen Lyons
Company Secretary
Jane MacLeod
General Counsel (joined the
Post Office in January 2015)
Other members of the Group
Executive during 2014/15 were:
Chris Aujard
General Counsel (left the
Post Office in March 2015)
Chris Day
Chief Financial Officer (left the
Post Office in January 2015)
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Role of the Group Executive
The Group Executive implements the
strategy agreed by the Board and monitors
business performance and development at a
day-to-day level. It meets regularly to discuss
latest developments, to discuss proposals
for new business development, to receive
financial and other performance reports,
and to monitor business transformation
and commercial development. It will also
address any urgent issues that have arisen
within the business and which require senior
level resolution. Twice yearly, it reviews the
results of personal performance assessments
undertaken throughout the organisation.
The Chief Executive, Chief Financial Officer
and the Company Secretary also attend
meetings of the Board which facilitates
and strengthens the communication
channels between the senior leadership,
the Board and its Committees
The Group Executive is supported
by four Committees: Transformation:
Cost Reduction; Risk and Compliance;
and Pay and Reward
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Risk Management
Risk Governance
The Post Office Board is responsible for
the risk management and internal control
systems in the Post Office, for reviewing
their effectiveness and for determining the
nature and extent of the principal risks
Responsibility for day-to-day operations
rests with members of the Group Executive
The risk management and internal control
systems are considered appropriate by
the Board for Post Office activities and are
designed to manage rather than eliminate
the risk of
strategic objectives and expansion in its
chosen markets. The risk management
and internal control systems provide
reasonable, but not absolute, assurance
re to achieve the Post Office
against material misstatement or loss.
The Board confirms that there is an on-
going process of identifying, evaluating and
managing the principal risks faced by the Post
Office, that it regularly reviews the process
and that this has been in place for the year
under review and up to the date of approval
of the annual report and financial statements.
The year ahead will see further
evolution of the framework to ensure
it continues to meet requirements and
support the aims of the strategic plan
and transformation of the Post Office.
Risk Management Framework
In order to deliver its objectives, the
Post Office is required to identify, assess
and manage a wide range of risks. These
are managed through an overarching
framework in order to apply consistency
and transparency of risk management
across the organisation. The framework
identifies roles and responsibilities of key
parties in the risk management process,
the policies for how risks are managed,
the tools and processes used and the
reporting outputs that are generated.
Risk Oversight
Oversight of risk management is carried
out by the Audit, Risk and Compliance
Committee on behalf of the Board. The
Risk and Compliance Committee provides
oversight on behalf of, and reports to, the
Group Executive in relation to the risk
management policy and the management
of the principal risks for Post Office. This
Committee is chaired by the General
Counsel and membership includes the Chief
Executive and the Chief Financial Officer.
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Progress
The Group Executive ha:
and manages the principal risks in the
organisation, focusing on those that
affect the 2020 strategy. These risks,
with their response plans, are reviewed
at the Risk and Compliance Committee
and the Audit, Risk and Compliance
lentified
Committee to assure the robustness of
risk assessment and management.
Risk Appetite
The Post Office has articulated its risk
appetite in relation to the most material
risks with a view to managing better
the key strategic risks and assessing the
risks in relation to new opportunities
During the year, the Board adopted
this Risk Appetite Statement.
Business Continuity
The Post Office brings together a wide
range of business continuity arrangements
throughout the Group under one central
policy and governance framework, to ensure
that the business is capable of withstanding
any significant threat to its on-going
operations. The Post Office is committed to
ensuring its business has adequate resilience
and planning that protects its customers,
clients, brand and reputation from business
continuity threats, risks and incidents.
POL-BSFF-0155891_0043
Directors’ report
The Directors
present the Group
Annual Report and
Financial Statements
for the year ended
29 March 2015.
Expected future developments
Expected future developments are detailed
in pages Il to 17.
Results and dividends
The loss after taxation for the year was £54m.
(2014: profit £170m). The Directors do not
recommend the payment of a dividend (2014:
£nil dividend)
Political contributions
No political contributions were made in the
year (2014: Enil).
Research and development
There was no research and development
expenditure during the year (2014 Enil).
Directors and their interests
The following served as Directors during the
year:
RJCallard
CM Day (resigned 28 January 2018)
TA Franklin
VAHolmes
AMarnoch
NW McCausland
A Perkins CB
PA Vennells
A Cameron (appointed 28 January 2015)
No Director has a beneficial interest in the
share capital of the Post Office. The
emoluments of Directors are set out in the
Directors’ Remuneration Report which
appears on pages 46 to 57.
People
Our goal is to ensure that all employees,
postmasters and their assistants are engaged
and involved in the business and are aligned
and equipped to meet our shared objectives.
As part of our commitment to drive better
service for customers we continue to focus
‘on improving the quality of our leadership,
professionalising key roles and achieving
greater involvement from employees,
postmasters and their representative bodies.
Learning and development programmes have
been put in place to support our ambition to
improve sales capability, creating a high
performance customer-oriented culture. This
ambition is further supported by a range of
bonus schemes that are based on the
achievement of business targets.
Underpinning all of this, is a need for dignity
and respect in the workplace, where
everybody feels valued, is treated fairly and
equally, and all our people play a full part in
helping the business to achieve its goals.
We conduct regular employee engagement
surveys, which provide employees and
postmasters the opportunity to express their
views and opinions on important issues. This
two-way communication encourages all our
people to contribute towards improving the
business and delivering our strategic
objectives.
To engender greater engagement, Post Office
has structured and systematic communication
channels in place, ensuring employees and
postmasters are informed on matters which
impact them.
Corporate Responsibility
Details of the Post Office corporate
responsibility activities are contained within a
separate report on page 17.
Disabled employees
The Post Office's policy is to give full
consideration to applications for employment
from disabled persons. Employees who
become disabled while employed receive full
support through the provision of training and
special equipment to facilitate continued
employment where practicable. The Post
Office provides training, career development
and promotion to disabled employees
wherever appropriate.
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Post balance sheet events
In accordance with the funding agreement
with Government announced on 27
November 2013, for which State Aid
approval was received on 19 March 2015,
Post Office Limited received £280m of
funding on 1 April 2015.
Going concern
After analysis of the financial resources
available and cash flow projections for the
Post Office, the Directors have concluded
that it is appropriate that the financial
statements have been prepared on a going
concern basis. Further details are provided in
ith the fundamental accounting
concept in note I to the financial statements.
accordance
Financial Instrument Risk
The exposure of the Group to market risk,
credit risk and liquidity risk has been
disclosed in Note 17 of the annual report on
page 84-85.
Audit information
The Directors confirm that, so far as they are
aware, there is no relevant audit information
of which the auditor is unaware, that each
Director has taken all reasonable steps to
make themselves aware of any relevant audit
information and to establish that the auditor
is aware of that information.
Auditor
The auditor, Ernst & Young LLP, is deemed to
be reappointed under section 487(2) of the
Companies Act 2006.
By Order of the Board
Alwen Lyons
Secretary
Post Office Limited
(Company Number 2154540)
Finsbury Dials
20 Finsbury Street
London
EC2Y 9AQ
July 2015
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Directors’ Remuneration Report 2014/15
Statement by the Chair of the Remuneration Committee.
Neil McCausland
Chair, Remuneration Committee
I welcome the opportunity to outline the
progress made during the Post Office's third
year as an independent business.
Our remuneration framework overall, and
our approach to Executive Remuneration in
particular, remains focused on our aim of
becoming a commercially sustainable
business with a strong public purpose. We
continued to make progress last year, despite
challenging market conditions, and the
performance of our short term and long term
incentive plans reflects this,
We are following a clear strategy to reduce
our reliance on Government funding, whilst
investing to create a business which is both
commercially successful and financially
sustainable, and which will remain at the
heart of communities across the nation
‘The performance criteria used to determine
both short term and long term incentives for
the 2014/15 financial year were stretching as
in previous years.
Bonus performance outturn in 2014/15 was
similar to that in 2013/14, and was driven in
particular by significant progress in
transforming our network, improving levels,
of engagement from our employees, along
with a sustained focus on managing and
reducing our cost base.
The remuneration framework for 2015/16 will
continue to maintain these broad principles.
The short term incentive plan is based on a
balanced scorecard of measures that ensures
continued alignment with our business
strategy and transformation activities. The
performance measures for the long-term
incentive plan continue to focus on our
becoming a sustainable commercial business
over time measured predominantly by
financial results
A benchmarking exercise carried out during
the recruitment of our new Chief Financial
Officer reveals that in making this hiring
decision we have set his pay in line with the
lower quartile of our comparator group. A
similar review undertaken for the role of
Chief Executive suggests that her pay is now
© 30% below the lower quartile for the same
comparator group.
The Chief Executive has not received a pay
increase since her appointment and this
presents an increasing challenge in terms of
salary compression within the business. The
Post Office is owned by the Government and
we maintain a regular dialogue with our
Special Shareholder on all matters related to
the remuneration of our Executive Directors.
The Remuneration Committee is confident
that the current policy and the adjustments
we have made will ensure that there
continues to be a strong link between reward
and performance. This will support the
transformation of the Post Office towards
becoming a commercially successful and
sustainable business with a reduced reliance
on Government funding, I commend this
report to our stakeholders,
The Remuneration Report
This report has been prepared in accordance
with the provisions of the Large and
Medium-sized Companies and Groups
(Accounts and Reports) Regulations 2008, as
amended in 2013, to the extent that they are
applicable for Post Office in its capacity as an
unlisted company.
The remuneration report has been split into
two sections. The Remuneration Policy
Report sets out the Committee's policy for
remuneration and its link to the business
strategy. The Annual Report on
Remuneration sets out how this policy was,
applied during the year under review, the
remuneration received by directors in the
year under review and how the Committee
intends to implement the policy in the
current financial year.
Both sections of the report (pages 46 to 57)
have been approved by the Remuneration
Committee and the Board
Neil McCausland
Chair, Remuneration Committee
Post Office Limited
V July 2015
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Governance
Remuneration Policy Report
The Committee is responsible for setting the remuneration packages for the Chief Executive and Chief Financial
Officer as well as determining the remuneration policy for the Group Executive.
The Committee’s intention is that the remuneration policy aligns with the business strategy and risk profile so that
individuals are motivated to deliver the Post Office’s objectives and protect its value. The Post Office remuneration
strategy is based on the following:
© Attracting and retaining the right people within an agreed policy to lead and deliver the strategic plan;
© Using incentives appropriately to reward the achievement of the turnaround strategy and promote the long-term
viability of the organisation;
© Reinforcing an emerging culture of mutual ways of working and partnership; and
© Providing a transparent approach to the disclosure of pay.
Remuneration Policy Summary
The table describes the current remuneration and the breakdown of the packages for the Executive Directors, which
comprise fixed pay (base salary, benefits and cash in lieu of pension contributions) and pay at risk (STIP and LTIP}.
The remuneration framework for the Executive Directors requires consent from the Special Shareholder each year
corporate postoffice.co.uk/annualreportl415. PAGE 47
POL-BSFF-0155891_0046
Remuneration policy table
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Element Link to strategy
Operation
Maximum values
Base salary Determined by reference to
the skills and responsibilities
of the individual.
When determining base salary
increases, consideration is given
to (i) pay and employment
conditions elsewhere in the
Post Office and (ii) market
data on comparable roles
Directors’ salaries are reviewed
annually in July of each year. The
external pay benchmarking group is a
basket of comparators, selected and
agreed with the Special Shareholder.
There is no formal cap
set on salaries. However,
when reviewing salaries,
the Committee also pays
close attention to the level
of salary increases across
the rest of the workforce.
Participation in life insurance,
health cover schemes and
company car schemes are
part of Post Office wide
benefit programmes.
Benefits
The value of the benefits package
is monitored by the Committee
and benchmarked against
comparator organisations.
The value of the core
benefit is reasonable and in
proportion with the market.
Pension Pension provision is provided by
the Post Office ands available
to all eligible employees to help
them meet their retirement
needs and provide a competitive
remuneration package.
Executive Directors receive
a salary supplement in lieu of
pension scheme membership.
A contribution in lieu of pension is
paid as a cash supplement to the Chief
Executive and Chief Financial Officer.
25% of salary
Non-Executive
Directors’ fees
To attract and retain a high
calibre Chairman and Non-
Executive Directors.
The fees for the Chairman are reviewed
by the Committee and approved by the
Special Shareholder. The fees of the
Non-Executive Directors are reviewed
by the Executive Directors and
submitted to the Special Shareholder.
The Chairman is paid a single fee
to cover all her duties. The Non-
Executive Directors are paid a basic
fee together with additional fees for
chairing Board Sub-Committees or the
role of Senior Independent Director.
No fees to the Chairman or Non-
Executive Directors are pensionable.
The fees have not been increased
since appointment.
There is no prescribed
maximum annual increase.
The Committee is guided
by the general increase
for employees and the
Executive Directors.
Notes to the policy table
The framework is approved by the Special Shareholder.
Differences i
Executive
remuneration policy for the
ctors and employees generally
The remuneration policy for the Executive Directors
takes account of their level of responsibility and their
nfluence over the Post Office's performance. Accordingly,
a higher proportion of their total remuneration package
s at risk and subject to performance (under the STIP and
LTIP). The incidence and potential amounts payable under
such incentives across the workforce are determined
by their role and grade within the organisation.
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Element
Link to strategy
Operation
Maximum values
Long-term
Incentive
Plan (LTIP)
The LTIP is designed to reward
and retain key executives
and senior managers and to
incentivise the achievement of
longer term performance goals
The payout of the award is
based on the achievement of
strategic targets linked to the
longer term development growth
of a sustainable business.
Performance measures for
the LTIP are drawn from the
Post Office Strategic Plan agreed
with the Special Shareholder.
LTIP awards are made annually. The
performance targets are agreed with
the Special Shareholder in advance
of each grant and will be described
annually in the Report on Remuneration
LTIP awards may be subject to clawback
as described in more detail on page SI.
The maximum LTIP
opportunity for the Chief
Executive is 98% of salary
for maximum performance,
on target is 70% of salary,
the threshold is 56% of
salary and minimum of 0%.
The maximum LTIP
opportunity for the Chief
Financial Officer is up to
70% of salary for maximum
performance, on target is
50%, threshold is 40% of
salary and minimum is 0%.
Short-term
Incentive
Plan (STIP)
The STIP drives and rewards
performance over a single
financial year, against a set of
key financial and operational
targets taken from the
balanced scorecard, set each
year according to the current
priorities for the business
STIP awards are also linked to
the achievement of personal
performance objectives.
The metrics and target ranges are agreed
annually with the Board and the Special
Shareholder as part of the annual
business and budget planning cycle.
80% of the target STIP award is based
ona balanced scorecard and 20%
is based on individual performance
objectives which are agreed with
the Board and require approval
by the Special Shareholder.
The balanced scorecard is set annually
to include a mix of financial and
non-financial measures (including
customer, modernisation and
employee engagement measures)
The precise metrics and their
weightings are determined at the
start of each financial year.
STIP awards may be subject to clawback
as described in more detail on page 51
The maximum STIP
opportunity for the Chief
Executive is 73.6% of
salary (with 48% of salary
being payable for on
target performance, with a
threshold of 3.8% of salary
and a minimum of 0%)
The maximum STIP
opportunity for the Chief
Financial Officer is 61.4%
(with 40% payable for on-
target performance, with a
threshold of 3.2% of salary
and a minimum of 0%).
Choice of performance measures and approach to target setting under the STIP and LTIP
# Under the STIP, performance is based on achievement against
a balanced scorecard and delivery of personal objectives. The
balanced scorecard measures achievement of the Post Office's
key operational objectives and includes metrics for financial
performance and commercial sustainability, customer, people
and modernisation. The Committee reviews the components
of the scorecard each year and varies them as appropriate
to reflect the priorities for the business in the year ahead
Under the balanced scorecard, a sliding scale of targets is
set for each metric to encourage continuous improvement
and challenge the delivery of stretch performance.
@ Under the LTIP, a minimum level of EBITDAS (Earnings Before
Interest, Tax, Depreciation, Amortisation and Subsidy) must
always be met in order for any payment to be made. In addition
a ‘gateway’ measure of Access Criteria must be met to trigger
any payment. The metrics were carefully chosen to align
with the Post Office's long-term strategic plan, as agreed with
the Special Shareholder. The metrics are reviewed annually
for each new scheme to ensure that they remain aligned to
the longer term strategic objectives of the Post Office.
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Performance scenarios 2015/16
The chart below shows the quantum and composition of the current
remuneration policy for the Executive Directors under three
performance scenarios.
‘These are scenarios showing potential remuneration assuming there is
no STIP or LTIP pay-out, (fixed pay only), on-target performance (STIP
and LTIP paying out at a target level) and maximum performance (full
pay-out of STIP and LTIP}.
( »
800000 I~
600000
500000
400000
Minimum Maximum Minimum Maximum
On-Target
Paula Vennells
Chief Executive
On-Target
Alisdair Cameron
‘Chief Financial Officer
TEST? BLU? iced pay (satry, tenets 6 pension)
PAGE 50
corporate postoffice.co.uk/annualreportl415
Approach to recruitment
remuneration
The remuneration package for a new Executive Director would
normally be set in accordance with the terms of the Post Office's
remuneration policy in force at the time of appointment.
The salary for a new Executive Director may be set below the normal
market rate, with phased increases over the first few years as the
Executive Director gains experience in their new role. Sometimes, to
facilitate an external recruitment, it may be necessary to consider
reasonable compensation for remuneration relinquished at a former
employer (buyout award). Should this be the case, the terms of any
buyout award would reflect (as far as is reasonably possible) the
nature, performance conditions and time horizons attaching to the
remuneration foregone with the overall package tailored to the
individual. Any such award would require approval by the Special
Shareholder.
For an internal appointment, any variable pay element awarded in
respect of their previous role will be allowed to pay out according to
its terms, adjusted as relevant to take into account their appointment.
Statement of pay considerations
elsewhere in the Post Office
The Committee takes into account the pay and employment
conditions of employees elsewhere in the Post Office when setting
the remuneration policy for the Executive Directors. The balanced
scorecard used for the STIP for Executive Directors is also used to
assess performance in the annual bonus for Post Office managers,
providing alignment between performance and reward for all
employees at manager level and above.
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Governance
Contracts and loss of office
payment policy
Each of the Executive Directors has a signed contract with the Post
Office.
Service contracts normally continue until the Executive Director's
agreed retirement date or such other date as the parties agree.
The service contracts contain provisions for early termination.
In summary, the contractual provisions are as follows
Other than for certain events such
as gross misconduct (in which
no notice must be provided by
the Post Office), twelve months
to be given by the Post Office
and six months by the Director.
Notice period
Remuneration-
related provisions
Payments in lieu of notice
of salary only.
Payments in lieu of notice
are not pensionable.
Change of control There are no enhanced provisions
ona change of control
The Committee may, at its discretion, approve payment of
a bonus to an Executive Director under the STIP and LTIP,
pro rata for the period they were in office. The Committee
will take into account the reason for leaving and the
contribution made to the performance of the business.
Under the LTIP, the default treatment is that any outstanding
awards will lapse on termination of employment. However,
in certain prescribed ‘good leaver’ circumstances, the awards
remain subject to performance conditions measured to, and
paid after, the end of the performance period, and reduced pro
rata to reflect the portion of the period they were employed.
The definition of good leaver status is set out in the rules.
Clawback provision
Executive Directors have clawback clauses in their contracts, as well
as the STIP and LTIP rules, which provide for the return of any over-
payments in the event of mis-statement of the accounts, error or gross
misconduct on the part of an Executive Director. These provisions are
structured in line with market best practice,
Non-Executive Directors
Non-Executive Directors’ Letters of Appointment are described
in the Corporate Governance statement (see page 35)
Statement of consideration
of shareholder views
The Chairman of the Committee communicates regularly
with the Shareholder Executive on behalf of the Special
Shareholder on all matters concerning executive remuneration
and the Special Shareholder approves all aspects of the
framework for Executive Director Remuneration.
corporate postoffice.co.uk/annvalreportl415._ PAGE 51
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Annual Report on Remuneration
Remuneration for each Director for the
Financial Year 2014/15 (audited)
Nam pe ie ” “ “ Benefits ones STIP LTP Total Total
e ary/fees salary/fee err
2014/15 2014/15 2014/15 2014/15 2014/15 2014/15 2014/15 2013/14
Non-Executive Directors
Tim Franklin £40,000 £37,097
: Virginia Hebe £40,000 "£40,000 - _— I - £40,000 £37,097
Alasdair Marnoch : £45,000 £45,000 a _- -f £45,000 £45,000
Neil McCausland £50,000 £50,000 - : - ~ "£50,000 £50,000
Alice Perkins £100,000 £100,000 - : - I ~~ £100,000 £100,000
Richard Callard (Note 1) £0 £0 * . - . £0 £0
Executive Directors
Paula Vennells (Note 2) £250,000 £250,000 £9,455 £62,500 £88,032 £112,000 «£521,987 £543,852
Chris Day (Note 3) £215,000 ‘£179,167 £7880 £44792 £48,275 £45,484 £325,598 £373,925
Albdele Camera £240,000 £57.419 £2,281 £14,953 £15,471 £0 £90,124 N/A
(Note 4)
Total 2014/2015 £76586 £19,616 «£122,245 £151,778 £157,484 £1,212,709_—£1,186,971
Note I: Richard Callard is an employee of the Shareholder Executive _ Note 4: Alisdair Cameron was appointed to the Board on
of the Department for Business, Innovation and Skills. 28 January 2015. As Mr Cameron joined the Post Office as Chief
Financial Officer (designate) on Sth January 2015, earnings are shown
Note 2: The salary for Paula Vennells remained unchanged from from the time he joined the Post Office.
2013/14.
Note 3: Chris Day resigned from the Board on 28 January 2015 and
left the business on 31 January 2015. In addition to the salary and Benefits comprise a company car (or cash equivalent), participation in
benefits shown he received a payment in lieu of notice of £179,167 life insurance and health cover schemes.
(see page 55).
PAGE 52 corporate postoffice.co.uk/annualreport]415
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Governance
Pay at risk paid to Executive Directors in 2014/15 (audited)
A) Short Term Incentive Plan 2014/15
Performance metrics
The STIP payable to the Executive Directors is based on the 2014/15 Post Office balanced scorecard (80%) and personal performance
(20%). Six measures in the scorecard were identified for use in the STIP. These relate to financial performance (45%), customer
experience (15%), our people (15%) and achievement of specific objectives related to the modernisation programme (25%).
Maximum opportunity Payouts as a % of
asa % of base salary ila base salary
Mens tees Oa
Net Income 12.8% 10.7% Below target 0% 0%
Operating Profit 16.0% 13.3% Above target 99% 8.2%
Customer Experience 9.6% “8.0% Below Target 0% «0%
People 9.6% 8.0% Above target 9.6% 8.0%
Crown profit loss 8.0% 67% Below Target 0% 0%
Modernisation 8.0% 61% Above target 8.0% 6.1%
Personal Objectives 9.6% 8.0% " 11% 40%
Total 73.6% 61.4% - 35.2% 26.9%
Note: The fall in operating profit is explained by the reduction in the Government subsidy. Earnings
before interest, tax, depreciation, amortisation, and subsidy (EBITDAS) increased by 35.5%.
Specific targets are deemed to be commercially sensitive and are not disclosed.
‘The personal objectives for the Executive Directors are agreed by the Board and approved by the Special Shareholder.
The Personal Objectives for the Chief Executive included building capability and talent of the Post Office leadership
team, strengthening external relationships and driving transformation of the business and a culture of change
The personal objectives for the Chief Financial Officers included a reduction in costs whilst building a finance function
to manage business performance. The Chief Financial Officer also took on additional responsibilities.
corporate postofice.co.uk/annualreportl4i5. PAGE 53
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B) Long-term Incentive Plan awards 2012 - 2015
Performance metrics
The LTIP award to pay out this year is based on the three-year performance period ended 29
March 2015. The award values were as follows:
oe Maximum value Vesting
Executive TPE Of aed Valueof of awardif all determined by
xecutive award an 4 award performance _ performance
leis targets are met over
70% of
Peal Cash Salary £175,000 £245,000
Vennells target Three
award financial
35% of hess
arc!
ChrisDay* Cash ml £71,069 £99,497
target
award
* 2012/15 LTIP award pro-rated for time in office, Chris Day resigned from the
board on 28 January 2015 and left the business on 31 January 2015
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Chris Day was treated as a ‘good leaver’
under the Scheme Rules for the 2012/15
award, with performance measured to.
the usual time and pro-rated for length
of service. Awards under the 2013/16
and 2014/17 schemes have lapsed.
The primary performance condition for
the 2012 award was operating profit
(sliding scales of targets) based on the
strategy plan. The secondary performance
condition was modernisation which
also acted as a secondary gateway (the
access criteria being the first gateway).
Operating profit before exceptional items for
the year-ended 29 March 2015 (£100 million)
was between the target and stretch level.
The STIP and LTIP paid out to the Chief Executive and Chief Financial Officer expressed as a percentage of salary is shown below.
STIP (payments as LTIP (payments as
a % of salary) a % of salary)
2013/14 2014/15 2013/14 2014/15
Chief Executive 31% 35% 58% 45%
CFO (Chris Day
to31 Jan 2015} 25% 27% 19% 25%
CFO (Alisdair
Cameron from N/A 27% N/A N/A
5 Jan 2018)
The 2014/15 STIP payments for Chris Day and Alisdair Cameron and the 2014/15 LTIP
for Chris Day are pro-rated for time spent in the business. The percentage figures
shown reflect actual payments as a proportion of actual salary received.
PAGE 54
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Governance
Outstanding interests in Long-term Incentive Plan
Under the remuneration policy, LTIP awards are granted annually. The Chief Executive and Chief Financial Officer have
the following outstanding awards:
Target award Stretch award Performance period
Paula Vennells, Chief Executive
2013 LTIP £175,000 £245,000 Three years to March 2016
2014 LTIP £175,000 £245,000 Three years to March 2017
Alisdair Cameron, Chief Financial Officer
2014 LTIP* £30,000 £42,000 Three years to March 2017
*pro rata for time in office
The 2013 and 2014 LTIP awards are subject to challenging financial and strategic performance conditions based
on business profitability and the financial sustainability in line with the Special Shareholder's objectives.
As mentioned above, the outstanding 2013 and 2014 LTIP awards for Chris Day (Chief Financial Officer to 28th January
2015) have lapsed
Total pension entitlements (audited)
Paula Vennells, Chris Day, and Alisdair Cameron all received a cash supplement of 25% base pay in lieu of pension
scheme membership.
Paula Vennells was previously an active member of the Royal Mail Senior Executives Pension Plan (an HMRC approved
defined benefit occupational pension scheme) until 5 April 2012 when she left the scheme. As a result she retains past
pensionable service up until the date she left. Any increases in the deferred pension amount are due to revaluation not
new accrual.
Payments for loss of office
Chris Day left the Post Office on 31 January 2015. Under the terms of his service agreement he received a payment of
£179,167, being 10 months’ salary as compensation for loss of office as follows
Chris Day was entitled to 12 months’ pay; however he worked for 2 months of his notice and was paid for the
remaining 10 months.
It was agreed he would retain the entitlement to the 2012/15 LTIP and the STIP for 2014/15 on a pro-rated basis. The
LTIP awards for 2013/16 and 2014/17 have lapsed.
corporate postoffice.co.uk/annualreportl4I5. PAGE 55
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Relative importance of the 2015 2014 % increase
spend on pay (audited) Total People Costs £238m £255m (6.7)%
The table to the right shows the change Ot which related to
in employee costs between 2014 and Directors’ pay (excluding £1.21 £119m 17%
2015 relative to total revenues: pay in lieu of notice)
Total revenue excluding
Network Subsidy Payment — £979m (0.3)%
Remuneration of the Chief Executive over time
The table to the right shows the total
remuneration of the Chief Executive over 2012! 2013 2014 2015
four financial years, together with her ;
STIP and LTIP payments in those years: Total £456,283 £696,413 £543,852 £521,987
remuneration
Percentage change in remuneration of .
STIP (% of
director undertaking the role of Chief . 86% 19% 38% 48%
maximum)
Executive lara _—
There has been no increase in the level of LTIP vesting (% No LTIP a eR, 153
base salary or benefits since 1 April 2012. of maximum) vested
Variations in pay are as a result of differing oe -
levels of payment under the STIP and LTIP. 1. The Post Office became independent from the Royal Mail on 1 April 2012. The
Committee has chosen to set out the Chief Executive's pay data since this date
How the Committee intends to implement the remuneration
policy in 2015/16
Salaries
The annual base salary for the Chief Executive for 2014/15 was unchanged from the previous year, at £250,000. The Chief Financial Officer
joined the Post Office in January 2015 on an annual base salary of £240,000.
The next salary review will take place in July 2015 for the Chief Executive.
The Chief Executive has not been awarded any increase in pay since April 2011. There was no increase in pay in April 2012, when the company
began operating independently from the Royal Mail Group and the role of the Chief Executive significantly increased. The remuneration of the
Chief Executive has been benchmarked and analysis shows her salary is below the lower quartile of the market.
Performance targets for the STIP and LTIP awards to be granted in 2015 and beyond
For 2015, the STIP will continue to be based on performance against a balanced scorecard (80%) and personal performance (20%).
The LTIP targets will continue to operate with a performance target. which is predominantly linked to the Company's EBITDAS performance.
The Committee has chosen not to disclose, in advance, the actual targets applying, as these are deemed to be commercially sensitive.
PAGE 86 corporate postoffice.co.uk/annualreport 415
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Recruitment of Chief
Financial Officer
Alisdair Cameron was recruited as Chief
Financial Officer on a base salary of
£240,000, with standard terms for STIP, LTIP,
and benefits. In addition, as part of Alisdair
Cameron's recruitment, he will be able to
earn an additional bonus of up to £75,000
during 2018. This bonus is subject to
achieving specific performance conditions
during his first 6 months of employment to
the end of June 2015. These performance
conditions are deemed to be commercially
sensitive and will be disclosed next year. This
arrangement was put in place to partially
compensate for remuneration relinquished
by his former employer.
Fees for the
Chairman and Non-
Executive Directors
The Chairman currently receives a single fee
of £100,000. The Non-Executive Directors
receive a base fee of between £35,000 and
£40,000 together with additional fees of
£5,000-£10,000 for chairing Board Sub-
Committees and for the role of Senior
Independent Director.
No annual increase is proposed to the fees to
the Chairman and the other Non-Executive
Directors.
Statement of
Consideration of
Shareholders Views
When setting the Remuneration Policy for
the Executive Directors the Remuneration
Committee take into consideration the views.
of the Special Shareholder. The policy for
pay at risk concentrates on ensuring
remuneration is performance led with targets
aligned with those of the Shareholder.
The current economic and political climate is.
taken into account in terms of restraint on
pay to reflect the current practice in the
public sector. Alll remuneration for the
Executive Directors requires Special
Shareholder approval.
Membership of the Committee
The members of the Committee are listed below. Alll of these are
independent Non-Executive Directors. In total, the Committee met
six times and all Committee members attended each meeting, either in
person or by conference call.
Committee members
Neil McCausland
Alice Perkins
Virginia Holmes
‘The Chief Executive attends the meeting by invitation of the
Chairman and assists the Committee in its deliberations, except in
matters relating to her own remuneration. No directors are involved
in deciding their own remuneration. The Committee also receives
advice from the Group People Director, along with other members of
the Human Resources team and external consultants.
External Advisors
In the year under review, advice on matters related to executive
remuneration was primarily obtained from New Bridge Street
Consultants (NBS). NBS is part of Aon Consulting Group. The total
fees paid to NBS in respect of its services to the Committee during
the year were £29,722. Fees are generally agreed in advance for each
piece of work carried out by NBS
NBS is a signatory to the Remuneration Consultants’ Code of
Conduct. The Committee has reviewed the operating processes in
place at NBS and is satisfied that the advice that it receives is objective
and independent.
Outside directorships
Subject to Board approval, the Executive Directors are permitted to
take on Non-Executive positions with other companies.
Paula Vennells is a Director of Hymns Ancient and Modern and
received a fee of £6,458 in respect of the year ended 31 March 2015.
Alisdair Cameron is a Non-Executive Director on the Board of Oxford
University Hospitals NHS Trust and received a fee of £1,539 in respect
of the period from 5 January to 31 March 2015.
PAGE 87
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"Colleagues
involvement with
BBC Children in Need
is so important. A lot
of money raisedjgoes
towards commipnity-
based projects and
‘ost Offi€e plays
a massive part at the
eart of co nities"
JULIE P' ATE
; yam
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59 // Statétgent of Directors’ responsibilities
60 // Ind nt auditor’s report
62 // Consolidated income statement
63 // Consolidated statement of comprehensive inco
64 // Consolidated statement of cash flows
65 // Consolidated balance sheet
66 // Consolidated statement of changes in equity
67 // Notes to the financial statements
99 // Parent Company financial statements
122 // Corporate information
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Financial statements
Statement of Directors’ responsibilities
The Directors are responsible for preparing the Strategic Report, Directors’ report and the
financial statements in accordance with applicable law and regulations.
Company law requires the Directors to prepare financial statements for each financial year. Under that law the
Directors have elected to prepare the Group consolidated financial statements in accordance with International
Financial Reporting Standards (IFRS) as adopted by the European Union, and the Parent Company financial
statements in accordance with United Kingdom Generally Accepted Accounting Practice (United Kingdom
Accounting Standards and applicable law). Under company law the directors must not approve the financial
statements unless they are satisfied that they give a true and fair view of the state of affairs of the Group and
of the Parent Company, and of the profit or loss of the Group and of the Parent Company for that period.
In preparing those financial statements, the Directors are
required to:
Select suitable accounting policies and apply them
consistently;
¢ Make judgments and accounting estimates that are
reasonable and prudent;
State that applicable accounting standards have been
followed, subject to any material departures disclosed
and explained in the financial statements;
Prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Company will continue in business.
The Directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Group's and Company's transactions and disclose, with
reasonable accuracy at any time, the financial position of the
Group and of the Company to enable them to ensure that
the Group consolidated financial statements comply with
the Companies Act 2006 and Article 4 of the IAS
Regulation and the Parent Company financial statements
comply with the Companies Act 2006. They are also
responsible for safeguarding the assets of the Group and
Parent Company and hence for taking reasonable steps for
the prevention and detection of fraud and other
irregularities.
The Directors are also responsible for preparing the
Directors’ report, the Corporate Governance report and the
Directors’ remuneration report in accordance with the
Companies Act 2006 and applicable regulations.
The Directors are responsible for the maintenance and
integrity of the corporate and financial information included
on the Company's website. Legislation in the United
Kingdom governing the preparation and dissemination of
financial statements may differ from legislation in other
jurisdictions.
The Directors confirm that to the best of their knowledge:
© The Group consolidated financial statements, prepared
in accordance with IFRS as adopted by the EU and in
accordance with the provisions of the Companies Act
2006 give a true and fair view of the assets, liabilities,
financial position and profit of the Group;
The Parent Company financial statements prepared in
accordance with United Kingdom Generally Accepted
Accounting Practice, give a true and fair view of the
assets, liabilities, financial position and profit of the
Company; and
* The management report contained in this report includes
a fair view of the development and performance of the
business and the position of the Group as a whole and of
the Company, together with a description of the
principal risks and uncertainties they face.
corporate.postoffice.co.uk/annualreport
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Independent auditor’s report
corporate postoffice.co.uk/annualreport!
We have audited the consolidated financial
statements of Post Office Limited for the 52-
week period ended 29 March 2015 which
comprise the Consolidated income statement,
the Consolidated statement of comprehensive
income and Parent Company statement of
comprehensive income, the Consolidated
statement of cash flows, the Consolidated
balance sheet and Parent Company balance
sheet, the Consolidated statement of changes in
equity and Parent Company statement of
changes in equity, and the related notes 1 to 24.
The financial reporting framework that has been
applied in the preparation of the consolidated
financial statements is applicable law and
International Financial Reporting Standards (IFRS)
as adopted by the European Union. The financial
reporting framework that has been applied in the
preparation of the Parent Company financial
statements is applicable law and United Kingdom
Accounting Standards (United Kingdom
Generally Accepted Accounting Practice)
including Financial Reporting Standard 101
“Reduced Disclosure Framework’.
This report is made solely to the Company's
members, as a body, in accordance with Chapter
3 of Part 16 of the Companies Act 2006. Our
audit work has been undertaken so that we might
state to the Company's members those matters
we are required to state to them in an auditor's
report and for no other purpose. To the fullest
extent permitted by law, we do not accept or
assume responsibility to anyone other than the
Company and the Company's members as a
body, for our audit work, for this report, or for
the opinions we have formed.
Respective responsibilities of Directors and
auditors
As explained more fully in the Directors’
Responsibilities Statement set out on page 59, the
directors are responsible for the preparation of
the financial statements and for being satisfied
that they give a true and fair view. Our
responsibility is to audit and express an opinion
on the financial statements in accordance with
applicable law and International Standards on
Auditing (UK and Ireland). Those standards
require us to comply with the Auditing Practices
Board's Ethical Standards for Auditors.
Scope of the audit of the financial statements.
An audit involves obtaining evidence about the
amounts and disclosures in the financial
statements sufficient to give reasonable
assurance that the financial statements are free
from material misstatement, whether caused by
fraud or error. This includes an assessment of:
whether the accounting policies are appropriate
to the Group's circumstances and have been
consistently applied and adequately disclosed;
the reasonableness of significant accounting
estimates made by the Directors; and the overall
presentation of the financial statements. In
addition, we read all the financial and non-
financial information in the annual report and
financial statements to identify material
inconsistencies with the audited financial
statements and to identify any information that is
apparently materially incorrect based on, or
materially inconsistent with, the knowledge
acquired by us in the course of performing the
audit. If we become aware of any apparent
material misstatements or inconsistencies we
consider the implications for our report.
Opinion on financial statements
In our opinion:
the financial statements give a true and fair
view of the state of the Group's and of the
Company's affairs as at 29 March 2015 and of
the Group’s profit for the 52-week period
then ended
* the Group's financial statements have been
properly prepared in accordance with IFRS as
adopted by the European Union
«the Parent Company financial statements
have been properly prepared in accordance
with UK Generally Accepted Accounting
Practice
« the Group and Parent Company financial
statements have been prepared in accordance
with the requirements of the Companies Act
2006.
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Fi I statements
Opinion on other matter prescribed by the Companies Act
2006
In our opinion the information given in the Strategic Report
and the Directors’ Report for the financial year for which
the financial statements are prepared is consistent with the
financial statements.
Matters on which we are required to report by exception
We have nothing to report in respect of the following
matters where the Companies Act 2006 requires us to
report to you if, in our opinion:
adequate accounting records have not been kept by the
Company, or returns adequate for our audit have not
been received from branches not visited by us; or
¢ the Parent Company financial statements are not in
agreement with the accounting records and returns; or
* certain disclosures of Directors’ remuneration specified
by law are not made; or
we have not received all the information and
explanations we require for our audit.
Other matters
¢ The maintenance and integrity of the Post Office Limited
website is the responsibility of the Directors; the work
carried out by the auditors does not involve
consideration of these matters and, accordingly, the
auditors accept no responsibility for any changes that
may have occurred to the financial statements since they
were initially presented on the website
¢ Legislation in the United Kingdom governing the
preparation and dissemination of financial statements
may differ from legislation in other jurisdictions.
Angus Grant
(Senior statutory auditor)
for and on behalf of Ernst SYoung LLP,
Statutory Auditor
London
1 July 2015
corporate.postoffice.co.uk/annualreport
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Consolidated income statement
for the 52 weeks ended 29 March 2015 and 30 March 2014
Notes 2015 2014
im £m
Turnover 976 979
Revenue 1,136 1179
People costs excluding restructi costs 3 (238)
(255)
Other operating costs (850)
Operating profit before exceptional items 4 100 107
Operating escaptional items 5 (185), 5
- Government grant
ension Plan amendment
- Restructuring costs
- Other
Operating (loss)/profit
Profit on disposal of property, plant and equipment
(Loss)/profit before financing and taxation
Finance costs
Finance income 7 1
Net financing income relating ib pensions. 18 7 I 5 ;
{Loss)/profit before taxation (80) 158
Taxation credit 8 26 12
(Loss)/profit for the financial year from continuing operations (54) 170
corporate postoffice.co.uk/annualreport!
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statements
Consolidated statement of comprehensive income
for the 52 weeks ended 29 March 2015 and 30 March 2014
N 2015 2014
lotes ene ‘Brit
(Loss)/profit for the financial year from continuing operations (64) 170
Other comprehensive income not to be reclas:
to profit or loss in future periods
Remeasurements on defined benefit surpluses 18 54 (52)
Income tax effect 8 (9) 2)
Total comprehensive income for the year (9) nNé
There are no other comprehensive income items that will be reclassified to the profit and loss in future periods.
corporate postoffice.co.uk/annualreportl415. PAGE 63
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Consolidated statement of cash flows
for the 52 weeks ended 29 March 2015 and 30 March 2014
2015 2014
Notes £m __ (Restated) £m
Cash flows from operating activities
Operating profit before exceptional items 100 107 I
Pension operating costs
Working capital movements
{Increase)/decrease in trade and other receivables
Increase/(decrease) in trade and other payables
Decrease in inventories
Increase in non-exceptional provisions
Pension operating costs paid
Cash (payments)/receipts in respect of operating exceptional items:
Government grant
Restructuring costs
Other
Net cash (outflow)/inflow from operating activities
Income tax recovered N 1
Cash flows from investing activities
ividends received from joint ventures . : 1 i eer ae
Net cash outflow from investing activities (116) (66)
Net cash (outflow)/inflow before financing activities (120) 27
Cash flows from financing activities
Finance costs paid
Payments to finance lease creditors
Proceeds/{repayment) of borrowings from BIS 310 (291)
Net cash inflow/ (outflow) from financing activities 304 (297)
Net increase/(decrease) in cash and cash equivalents 184 (270)
Cash and cash equivalents at the beginning of the year , : 13 a eee
Cash and cash equivalents at the end of the year 13 821 637
For the purposes of the consolidated statement of cash flows, cash and cash equivalents consists of £821 million (2014 (restated):
£687 million) included in note 13, net of a bank overdraft of £nil (2014: £50 million) which is disclosed in note 14.
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I statements
Consolidated balance sheet
at 29 March 2015 and 30 March 2014
2015 2014
Wana fm (Restated) £m
Non-current assets
Intangible assets 9 - -
Retirement benefit surplus
Total non-current assets
Current assets
Inventories 6 6
"Trade and other receivables 12 397 353
Cash and cash equivalents 3 821 687
Total current assets 1.224 1,046
Total assets 1516 1.280
Current liabilities
"Trade and other payables 14 (78) (767)
Financial liabilities ~ interest bearing loans and borrowings 15 (10) :
~ obligations under finance leases 21 3 (3)
Provisions ~~ ay; VO
(1,085) (840)
Total current liabi
Non-current liabilities
rovisions 6) (8)
Total non-current liabilities (36) (36)
Net assets 395 404
Equity
Share capital
Share premium
Retained earnings (72) (63),
Other Reserves 2 2
Total equity 395 404
The financial statements on pages 62 to 98 were approved by the Board of Directors on 1 July 2015 and signed on its behalf by:
P A Vennells A Cameron
Chief Executive Chief Financial Officer
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Consolidated statement of changes in equity
for the 52 weeks ended 29 March 2015 and 30 March 2014
Share Retained Other Total
premium earnings reserves equity
Notes £m £m £m £m
At 31 March 2014 465 (63) 2 404
Profit for the year : (54) 2 (54)
Remeasurements on defined benefit surplus. 18. 5 54 S 54
Income tax effect 8 2 0) 2 (9)
‘At 29 March 2015 465 (72) 2 395
Other reserves of £2 million relate to First Rate Exchange Services Holdings Limited, the joint venture entity.
Share Retained Other Total
premium earnings reserves equity
Notes £m £m £m £m
At] April 2013 465 (179) 2 288
Profit for the year # 170 * 170
Remeasurements of defined benefit surpluses 18 : (52) : (62)
Income tax effect 8 : (2) f (2)
At 30 March 2014 465 (63) 2 404
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cial statements
Notes to the financial statements
1, Accounting Policies
Financial year
The financial year ends on the last Sunday in March and for this
reason these financial statements are made up to the 52 weeks
ended 29 March 2015 (2014 - 52 weeks ended 30 March 2014)
Basis of preparation
The financial statements on pages 62 to 98 have been
prepared in accordance with International Financial Reporting
Standards (IFRSs) as adopted by the European Union and
with those parts of the Companies Act 2006 applicable to
companies reporting under IFRS. Unless otherwise stated in the
accounting policies below, the financial statements have been
prepared under the historic cost accounting convention:
The Company is incorporated and domiciled in the United
Kingdom. The Group consolidated financial statements
are presented in sterling and all values are rounded to the
nearest £million except where otherwise indicated.
Basis of consolidation
The consolidated financial statements comprise the financial
statements of the Company and its subsidiary undertaking.
Subsidiaries are consolidated from the date of acquisition,
being the date on which the Group obtains control, and
continue to be consolidated until the date when such control
ceases. A dormant set of financial statements for Post Office
Management Services Limited was prepared to 30 November
2014, the subsidiary began trading in January 2015 and the
first set of financial statements will be prepared to 27 March
2016 which will be in line with the parent Company. They use
consistent accounting policies and a proportion of their results
have been consolidated into the group financial statements. All
intra-Group balances, transactions, unrealised gains and losses
resulting from intra-Group transactions are eliminated in full.
New standards, amendments and interpretations issued not yet
effective for the current year
The following standards and interpretations, which have
been issued by the IASB and are relevant for the Group,
subject to EU ratification, become effective after the current
year-end and have not been early adopted by the Group:
IFRS 9 Financial Instruments
IFRS 9 Financial Instruments was first issued in November 2009 and
had since been amended several times. A complete version of the
standard was issued in July 2014 and is a replacement of IAS 39
Financial Instruments: Recognition and Measurement. IFRS 9 covers
the classification, measurement and derecognition of financial assets
and financial liabilities, together with a new hedge accounting model
and anew expected credit loss model for calculating impairment.
The new standard becomes effective for annual periods beginning
‘on or after 1 January 2018, subject to EU adoption. It is anticipated
that the application of this amendment will have no significant
impact on the Group's income statement or balance sheet.
IFRS 15 Revenue from Contracts with Customers
The IASB issued IFRS 15 Revenue from contracts with customers in
May 2014. The new standard provides a single, five-step revenue
recognition model, applicable to all sales contracts, which is based
upon the principle that revenue is recognised when control of
goods or services is transferred to the customer. It replaces all
existing revenue recognition guidance under current IFRS and
becomes effective for annual periods beginning on or after I January
2017, subject to EU adoption. The Group is currently considering the
impact of IFRS 15 on its consolidated results and financial position.
Amendment to IAS 19 Defined Benefit Plans: Employee
Contributions
The amendment applies to contributions from employees or third
parties to defined benefit plans and clarifies the treatment of such
contributions. The amendment distinguishes between contributions
that are linked to service only in the period in which they arise
and those linked to service in more than one period. The objective
of the amendment is to simplify the accounting for contributions
that are independent of the number of years of employee service,
for example employee contributions that are calculated according
to a fixed percentage of salary. Entities with plans that require
contributions that vary with service will be required to recognise
the benefit of those contributions over employee's working lives.
The amendment is effective for annual periods beginning on or
after 1 July 2014 and has been endorsed by the EU. It is anticipated
that the application of this amendment will have no significant
impact on the Group's income statement or balance sheet.
There are no other standards and interpretations in issue but not
yet adopted that the Directors anticipate will have a material
effect on the reported income or net assets of the Group.
The Group has not early adopted any standard, interpretation
‘or amendment that has been issued but is not yet effective.
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Notes to the financial statements
Fundamental accounting concept - going concern
After careful consideration of the plans for the coming
years, the Directors continue to believe that Post Office
Limited will be able to meet its liabilities as they fall due
for the next 12 months. Accordingly, on that basis, the
Directors consider that it is appropriate that these financial
statements have been prepared on a going concern basis.
The Group has net assets at 29 March 2015 and has operated at
a profit before exceptional items during 2014-15 for the seventh
year running. A funding agreement with the Government
was announced on 27 October 2010 which provided for:
* Funding of £410 million for 2012/13 (received on 2 April 2012)
+ Funding of £415 million for 2013/14 (received on 2 April 2013)
+ Funding of £330 million for 2014/15 (received on 1 April 2014)
* Extension of the existing working capital facility with the
Department for Business, Innovation & Skills (BIS) of
£1.15 billion up to 31 March 2016
State Aid approval for the funding for 2012/13 to 2014/15 was
received on 28 March 2012 and it was also recognised that the
working capital facility was no longer deemed State Aid.
An additional funding agreement with the Government was
announced on 27 November 2013 which provided for:
* Funding of £280 million for 2015/16.
* Funding of £220 million for 2016/17
* Funding of £140 million for 2017/18
* Extension of the existing working capital facility with the
Department for Business, Innovation & Skills (BIS) amended
with a limit of £950 million from 30 March 2015 up to
31 March 2018
State Aid approval for the funding for 2015/16 to 2017/18 was
received on 19 March 2015.
As previously reported
This investment takes the form of a Government Grant and enables
the Group to modernise the branch network, and the continuation
of the Network Subsidy Payment recognises the major social
value that Post Office branches provide to communities. New
main and local branches are currently being rolled out across the
United Kingdom. Customers are beginning to benefit from a much
better retail experience including extended opening hours. This
programme is designed to make the Post Office network more self-
sustaining and, over time, less dependent on direct subsidy. This is
a modernisation programme and not a branch closure programme.
The Directors are satisfied with the continued progress made
towards modernisation during 2014/15 and that the plans in place
and the substantial investment secured will enable the Group to
continue to modernise and to secure its future. However, they note
that the scale of change required remains significant and is not
without risk.
Prior year restatements
In preparing the financial statements for the current year, the
comparative figures for the year ended 30 March 2014 have been
restated for cash and cash equivalents and trade and other
receivables. Credit and debit card receivables were previously
included in cash and cash equivalents and have been reclassified to
trade and other receivables. These receivables relate to payments
made in branch by Post Office Limited customers using debit or
credit cards. These payments are reimbursed to Post Office Limited
by the card companies within 2 or 3 days post year end, as the cash
had not been received as at year end, and the amount has been
reclassified to debtors.
The impact on the 30 March 2014 financial statement is an increase
to trade and other receivables of £51m and a decrease to cash and
cash equivalents of £51m. This restatement had no impact on the
profit, equity or net assets for the period ended 30 March 2014.
The earliest period presented is 31 March 2013, the impact on this
period is an increase in trade and other receivables by £64m and
decrease in cash and cash equivalents £64m which has also been
restated. Again, there is no impact on profit, equity or net assets.
Restatement 30 March 2014 Restated
Total Trade and other receivables
317 51 368
Total cash and cash equivalents
738 (51) 687
As previously reported
Restatement 31 March 2013 Restated
Total Trade and other receivables
362 64
Total cash and cash equivalents
on (64)
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nancial statements
Critical accounting estimates and judgements in applying
accounting policies
The Group makes certain estimates and assumptions regarding
the future. Estimates and assumptions are continually evaluated
based on historical experience and other factors. In the
future, actual experience may differ from these estimates and
assumptions. In addition the Group has to make judgements
in applying its accounting policies which affect the amounts
recognised in the accounts. The most significant areas where
judgements and estimates are made are discussed below:
Pension assumptions
The costs, assets and liabilities of the pensions operated by
the Group are determined using methods relying on actuarial
estimates and assumptions. These pension figures are particularly
sensitive to changes in assumptions for discount rates, mortality
and inflation rates. The Group exercises its judgement in
determining the assumptions to be adopted, after discussion with
its Actuary. Details of the key assumptions are set out in note 18.
Pension liabilities are measured on an actuarial basis using the
projected unit credit method and discounted at a rate equivalent
to the current rate of return on a high quality corporate bond
of equivalent currency and term. Judgement has been applied
in determining that for these purposes a high quality corporate
bond constitutes AA rated or equivalent status bonds.
Provisions
The Group has recognised provisions where a present legal or
constructive obligation exists as a result of a past event, where it
is probable that an outflow of resources will be required to settle
the obligation and a reliable estimate of the amount can be made.
Severance provisions are recognised for business reorganisation
where the plans are sufficiently detailed and well advanced and
where appropriate communication to those affected has been
undertaken at the balance sheet date. Postmasters’ compensation
provisions are recognised when either Postmasters agree to
terminate their existing contracts or sign the new format contracts
under Network Transformation. Provisions are detailed in note 16.
Due to the nature of provisions the future amount settled
may be different from the amount that has been provided.
Impairment of non-current assets
The Group assesses whether there are any indicators of
impairment for all non-current assets at each reporting date.
Due to ongoing operational losses (excluding the Network
Subsidy Payment) the carrying value of intangible assets
and all property plant and equipment other than freehold
and long leasehold property has been impaired to zero.
Revenue
Turnover from Government Services, Financial Services, Mails
and Retail and Telecoms comprises the value of services provided
from the Groups principle activities in providing a wide range of
services through its network of Post Office branches across the
UK and other channels. Turnover from Financial Services and
some retail services comprises the commission received. Turnover
relating to line rental for Telecoms services is recognised evenly
cover the period to which the charges relate and revenue from calls
is recognised at the time the call is made. Turnover from all other
transactions is recognised when the transaction is completed. All
turnover is derived wholly from within the United Kingdom.
The Network Subsidy Payment is Government grant revenue
recognised to match the related costs of making available the
network of public Post Offices that the Secretary of State
for Business, Innovation and Skills considers appropriate.
Net revenue
Net revenue is calculated using revenue less the directly
attributable costs of delivering the service or product.
Operating exceptional items
Operating exceptional items (disclosed in note 5) are items
of income and expenditure arising from the operations of
the business which, due to the nature of the events giving
rise to them, require separate presentation on the face of the
income statement to allow a better understanding of financial
performance in the year, in comparison to prior years.
Intangible assets
Intangible assets acquired separately or generated internally
are initially recognised at cost and are reviewed for
impairment. An impairment loss is recognised in the income
statement for the amount by which the carrying value of the
asset exceeds its recoverable amount, which is the higher
of an asset's net realisable value and its value in use.
Amortisation of intangible assets with finite lives is charged
annually to the income statement on a straight-line basis as follows.
Software Tto 6 years
Where intangible assets are impaired to their recoverable amount
‘on acquisition the above range of asset lives is not applied.
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Notes to the financial statements
Property, plant and equipment
Property, plant and equipment is recognised at cost, including
attributable costs in bringing the asset into working condition for its
intended use.
Depreciation of property, plant and equipment is provided on a
straight-line basis by reference to cost and to the remaining useful
economic lives of assets and their estimated residual values. The
lives assigned to major categories of property, plant and equipment
are:
Range of asset lives
Land and buildings:
Freehold land
Freehold buildings
Not depreciated
Up to 50 years
The shorter of the
period of the lease, 50
years or the estimated
remaining useful life
Leasehold buildings
Motor vehicles and trailers 2:12 years
Fixtures and equipment 2:15 years
Where property, plant and equipment is impaired to its recoverable
amount on acquisition the above ranges of asset lives are not
applied. This is currently the case for plant and machinery,
motor vehicles and trailers and fixtures and equipment.
The remaining useful lives of freehold buildings are reviewed
periodically and adjusted where applicable on a prospective basis.
Impairment reviews
Unless otherwise disclosed in these accounting policies, assets are
reviewed for impairment if events or changes in circumstances
indicate that the carrying value may be impaired. The Group
assesses at each reporting date whether such indications exist.
Where appropriate, an impairment loss is recognised in the income
statement for the amount by which the carrying value of the asset
(or cash generating unit) exceeds its recoverable amount, which
is the higher of an asset's net realisable value and its value in use.
Leases
Finance leases, where substantially all the risks and rewards
incidental to ownership of the leased item have passed to
the Group are capitalised at the inception of the lease with a
corresponding liability recognised for the fair value of the leased
item or, if lower, at the present value of the minimum lease
payments. Lease payments are apportioned between the finance
charges and reduction of the lease liability so as to achieve a
constant rate of interest on the remaining balance of the liability.
Capitalised leased assets are depreciated over the shorter of
the estimated useful life of the asset and the lease term.
Leases where substantially all the risks and rewards of ownership
of the asset are retained by the lessor, are classified as operating
leases and rentals are charged to the income statement over the
lease term. The aggregate benefit of incentives are recognised
as a reduction of rental expenses over the lease term ona
straight-line basis.
Investments in joint ventures
Investments in joint ventures within the Group’s financial
statements are accounted for under the equity method of
accounting. Under this method the investment is carried in the
balance sheet at cost plus post-acquisition changes in the Group's
share of the net assets of the joint venture less any impairment in
value. The income statement reflects the Group's share of post-tax
profits from the joint venture. The financial statements of the joint
venture are prepared for the same reporting period as the Group.
Inventories
Inventories include printing and stationery, retail and lottery
products, are carried at the lower of cost and net realisable
value after adjusting for obsolete or slow-moving stock.
Taxation
The charge for current income tax is based on the results for the
year as adjusted for items which are not taxed or are disallowed.
Itis calculated using tax rates in legislation that has been
enacted or substantively enacted by the balance sheet date.
Deferred income tax assets and liabilities are recognised
for all taxable and deductible temporary differences
and unused tax assets and losses except:
initial recognition of goodwill
* the initial recognition of an asset or liability in a transaction
that is not a business combination and, at the time of the
transaction, affects neither the accounting profit nor taxable
profit and loss
* taxable temporary differences associated with investments in
subsidiaries and interest in joint ventures, where the timing of
the reversal of the temporary difference can be controlled and
it is probable that the temporary difference will not reverse in
the foreseeable future, and
* deferred tax assets are recognised only to the extent that it
is probable that taxable profit will be available against which
they can be utilised.
Deferred tax assets and liabilities are measured at the tax
rates that are expected to apply to the period when the
tax asset is realised or the liability is settled, based on tax
rates that have been substantively enacted at the balance
sheet date. Deferred tax balances are not discounted.
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Current and deferred tax is recognised in the income statement,
‘except to the extent that it relates to items recognised in other
comprehensive income or directly to equity. In this case,
the tax is also recognised in other comprehensive income or
directly in equity, respectively. Further details on deferred
tax can be found in note 8 to the financial statements.
Pensions and other post-retirement benefits
Membership of occupational pension schemes is open to most
permanent UK employees of the Company. All members of defined
benefit schemes are contracted out of the earnings-related part of
the State pension scheme.
The pension assets of the defined benefit schemes are measured
at fair value. Liabilities are measured on an actuarial basis using the
projected unit credit method and discounted at a rate equivalent
to the current rate of return on a high quality corporate bond of
equivalent currency and term. The resulting defined benefit asset or
liability is presented separately on the face of the balance sheet. Full
actuarial funding valuations are carried out at intervals not normally
exceeding three years as determined by the Trustees and, actuarial
valuations are carried out at each balance sheet date and form the
basis of the surplus or deficit disclosed. When the calculation at the
balance sheet date results in net assets to the Group, the recognised
asset is limited to the present value of any future refunds of the plan
or reductions in future contributions to the plan (the asset ceiling).
For defined benefit schemes, the amounts charged to operating
profit, as part of staff costs, are the current service costs and any
gains and losses arising from settlements, curtailments and past
service costs. The net difference between the interest costs and
the expected return on plan assets is recognised as net pensions
interest in the income statement. Actuarial gains and losses are
recognised immediately in the statement of comprehensive income.
Any deferred tax movement associated with the actuarial gains and
losses is also recognised in the statement of comprehensive income.
For defined contribution schemes, the Group's contributions are
charged to operating profit, as part of staff costs, in the period to
which the contributions relate.
For
The functional and presentational currency of the Group
is sterling (£).
n currencies
Transactions in foreign currencies are recorded at the spot exchange
rate ruling at the date of the transaction. Monetary assets and
liabilities denominated in foreign currencies are retranslated at the
functional rate of exchange ruling at the balance sheet date.
Currently hedge accounting is not applied to any monetary assets
and liabilities. Therefore all differences are taken to the income
statement.
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nancial statements
Trade receivables
Trade receivables are recognised and carried at original invoice
amount less an allowance for any non-collectable amounts.
An estimate for doubtful debts is made when collection of the
full amount is no longer probable. Bad debts are written off
when identified.
Borrowing costs
Borrowing costs in relation to the working capital loan facility are
recognised as an expense when incurred unless they are directly
attributable to the construction or development of a qualifying
asset, in which case they are capitalised using the weighted average
cost of borrowing for the period of construction/development.
Government grants
Government grants are shown separately in the income statement to
match the expenditure to which they relate.
Provisions
Provisions are recognised when the Group has a present obligation
(legal or constructive) as a result of a past event, it is probable that
an outflow of resources will be required to settle the obligation, and
a reliable estimate can be made of the amount of the obligation. If
the effect of the time value of money is material, provisions are
determined by discounting the expected future cash flows at an
appropriate pre-tax rate.
Financial instruments
The classification of financial instruments included on the balance
sheet is set out below:
Financial assets
Financial assets are classified into the following categories: at fair
value through the income statement, loans and receivables, and
available for sale as appropriate based on the purpose for which
they were required. Financial liabilities are classified as either fair
value through the income statement or as financial liabilities
measured at amortised cost.
Financial liabilities - interest-bearing loans and borrowings
Allloans and borrowings are classified as financial liabilities
measured at amortised cost.
Financial liabilities - obligations under finance leases
All obligations under finance lease and hire purchase contracts are
classified as financial liabilities measured at amortised cost.
Derivative financial instruments
The Group uses derivative financial instruments to manage its
exposure to fluctuations in foreign exchange rates. Such derivative
financial instruments are stated at fair value. Hedge accounting has
not been adopted for foreign exchange derivative instruments.
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Notes to the financial statements
Fair value measurement of financial instruments
The fair value of quoted investments is determined by reference
to bid prices at the close of business on the balance sheet date.
Where there is no active market, fair value is determined using
valuation techniques. These include using recent arm’s length
market transactions; reference to the current market value of
another instrument which is substantially the same; and discounted
cash flow analysis and pricing models. Specifically, in the absence
of quoted market prices, derivatives are valued by using quoted
forward prices for the underlying currency and discounted using
quoted interest rates. Hence derivative assets and liabilities are
within Level 2 of the fair value hierarchy as defined within IFRS 7.
For the purposes of disclosing the fair value of investments held
at amortised cost in the balance sheet, in the absence of quoted
market prices, fair values are calculated by discounting the future
cash flows of the financial instrument using quoted equivalent
interest rates as at close of business on the balance sheet date.
Derecognition of financial instruments
A financial asset or liability is derecognised when the contract
that gives rise to it is settled, sold, cancelled or expires.
All assets and liabilities for which fair value is measured or disclosed
in the financial statements are categorised within the fair value
hierarchy, described as follows, based on the lowest level input
that is significant to the fair value measurement as a whol
* Level] — Quoted (unadjusted) market prices in active markets
for identical assets or liabilities
* Level 2 — Valuation techniques for which the lowest level input
that is significant to the fair value measurement is directly or
indirectly observable
* Level 3 — Valuation techniques for which the lowest level input
that is significant to the fair value measurement is unobservable
For assets and liabilities that are recognised in the financial
statements on a recurring basis, the Group determines whether
transfers have occurred between levels in the hierarchy by
reassessing categorisation (based on the lowest level input that is.
significant to the fair value measurement as a whole) at the end of
each reporting period.
Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at
bank and in hand and short-term deposits (cash equivalents) with
an original maturity date of three months or less. In addition, the
Group uses Money Market funds as a readily available source of
cash, and these funds are also categorised as cash equivalents.
For the purpose of the statement of cash flows, cash and
cash equivalents consist of cash and cash equivalents as
defined above, net of bank overdrafts. Cash equivalents are
classified as loans, and receivable financial instruments.
2. Segmental reporting
In accordance with IFRS 8 ‘Operating segments,’ an operating
segment is defined as a business activity whose operating
results are reviewed by the chief operating decision maker
(CODM) and for which discreet information is available.
The Group's CODM is the Group Executive as defined
in the Corporate Governance section on page 43.
The CODM has determined the operating segments based in
the information reviewed by them for the purposes of allocating
resources and assessing performance. Operating segments have
not been aggregated in order to present reportable segments. All
segmental activities are located wholly within the United Kingdom.
The CODM assesses the performance of the operating segments
based on net revenue. This is calculated using segmental revenue
less the directly attributable costs of delivering the service
or product. The net revenue measure excludes the effect of
indirect costs and the effects of non-recurring expenditure
such as redundancy costs and asset impairment. Interest
income and expenditure is not allocated to segments as this
type of activity is driven by the central treasury function.
Assets and liabilities as recognised on the Group balance sheet
are not considered to be segmental assets or liabilities but rather
are managed by the Group's central functions. The information
reviewed by the CODM does not include assets or liabilities split by
segment. A description of the activities of the business segments
is included from page 12 of the Business and Strategy review.
Revenue from a major customer represents approximately
30% of the Group's total revenue in 2015. This revenue
was reported within the Mails and Retail segment.
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I statements
2015
Directly
R Attributable Net
evenue
£m Costs Revenue
£m £m
Mails and Retail 388 (4) 384
Government Services 141 (28) 113
"Telecoms 120 (73) 47
Other 37 ; 37
Subtotal 976 (106) 870
"Network Subsidy Payment 160 : 160
Total 1136 (106) 1,030
2014
Directly
Revenue Attributable Net
£m Costs Revenue
fm £m
Mails and Retail 390 (4) 386
"Financial Services 279 () 278
” Goverment Services 146 (30) 116
"Telecoms 124 (78) 46
Other 40 : 40
Subtotal
Network Subsidy Payment
Total 1179 (iia) 1,066
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Notes to the financial statements
A reconeiliation between underlying segment net revenue and (loss)/profit before taxation is provided below:
Profit on disposal of property, plant and equipment > 3
Profit before financing and taxation
Finance costs
Finance income 1 1
Net pensions interest 7 5
(Loss)/profit before taxation (80) 158
3. Staff costs and numbers
Employment and related costs were as follows
People costs excluding restructuring costs: 2015 2014
£m £m
Wages and salaries 191 208
Social security costs 9 20
Pension costs (note 18) 28 27
Total 238 255
Period end employees Average employees
2015 2014 2015 2014
Total employees 6,876 7.787 7,281 7.950
Total employee numbers can be categorised as follows:
2015 2014
Administration 1,324 1,691
Crown Offices 3,406 3,946
Supply Chain 1,524 1,553
Network and Crown transformation programmes 622 597
Total 6,876 7,787
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I statements
4. Operating profit from continuing operations before exceptional items
Operating profit from continuing operations before exceptional items, is stated after charging:
2015 2014
£000 £000
pany and Group audit
~ audit related assurance services
103
- other non-audit services
5. Operating exceptional items
2015 2014
£m £m
Government Grant 170 317
Total Government Grant 170 317
Royal Mail Pension Plan amendment : 102
Total Royal Mail Pension Plan amendment ° 102
Restructuring:
Business transformation programme I 7 (12) :
Business transform : : . : — “_ (5)
Network transformation including postmasters' compensation (140) (191)
Crown transformation
Restructuring - severance : : ; (25) (23)
“other : : : : I : (26) (3)
Total restructuring (214) (259)
inpatimnent of intangible assets nate 8} 67) (a2).
Impairment of property, plant and equipment (note 10) (64) (73).
Total other (ai) (15)
Total operating exceptional items (185) 45
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Notes to the financial statements
For further information in relation to the Royal Mail Pension Plan
amendment in prior year refer to note 18. Restructuring costs are
those incurred in order to implement the major transformation
programmes primarily the Crown and Network programmes
on page 14, Due to ongoing operational losses (excluding
Network Subsidy Payment) the carrying valve of intangible
assets and all property plant and equipment other than freehold
and long leasehold property has been impaired to zero.
which are discussed further in the Business and Strategy Review
6. Directors’ emoluments
The Directors received the following emoluments:
2015 2014
£000 £000
Emoluments, excluding pension contributions and LTIP* 1,234
1,000
Contributions to pension schemes - -
Amounts receivable under Long-Term Incentive Plans 187 187
*Figures include any cash supplements received in lieu of pension, also included is payment in lieu of notice, please refer to the Directors
Remuneration Report on page 56 for further details.
Directors accruing pension entitlements during the period under: 2015 2014
Number Number
Defined benefit schemes - -
Defined contribution schemes - .
The highest paid Director received the following emoluments:
2015 2014
£000 £000
Emoluments and LTIP, excluding pension contributions but
altars Peon ° 522 544
including cash supplements received in lieu of pensions
Company contributions to pension schemes 2
7. Net finance costs
2015 2014
£m £m
Interest receivable 1 1
Interest payable on loans @)
Total (2)
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I statements
8. Taxation
(a) Taxation gains recognised in the year
2015 2014
ém £m
Corporation tax credit for year (10) 0)
Tax under-provided in previous years (U) ()
(7) (10)
Current tax
to the origin and reversal of temporary differences
Deferred tax credit rel.
Effect of change in tax rate
Income tax credit reported in the consolidated income statement
(26) (12)
Deferred income tax of £9 million (2014: £2 million) has been charged to equity relating to actuarial movements in the retirement benefit
surplus. This offsets the deferred tax credit of £9 million (2014: £2 million) that has been reported in the consolidated income statement.
(b) Factors affecting current tax credit on profit on ordinary activities
The tax assessed for the year differs from the standard rate of corporation tax in the UK of 21% (2014: 23%). The differences are explained
below:
2015 2014
£m £m
(80) 158
(Loss)/profit on ordinary activities before tax
(Loss)/profit on ordinary activities multiplied by the standard 1) 6
...ate.of corporation tax in the UK of 21% (2014: 23%) an ssteen stsees
Net decrease in tax charge resulting from recognition of deferred tax assets (16) (41)
Expenditure disallowable for tax
6) 8
26) (12)
Joint venture profit after tax included in Group pre-tax profit
Total current tax (see above)
(c) Deferred tax
Deferred tax assets relate to the following:
Balance sheet Income statement
2015 2014 2015 2014
£m £m £m £m
Pensions temporary differences (30) (21) 9
Losses available for offset against 30 a1 . 2
future taxable income
e 9 2
Total deferred tax asset
Income statement
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Notes to the financial statements
(d) Factors that may affect future tax charges tax liability would be expected to crystallise should the assets
The Group has unrecognised deferred tax assets of £127 million _into which the gains have been rolled be sold at their residual
(2014: £144 million), comprising £74 million (2014: £94 million) value, as it is anticipated that a capital loss would arise.
relating mainly to fixed asset timing differences, £1 million
(2014: £5 million) relating to timing differences on provisions
and £52 million (2014: £45 million) relating to tax losses that
are available to offset against future taxable profits. The Group
has rolled over capital gains of £3 million (2014: £3 million); no
Finance Act 2013 reduced the main rate of corporation tax to 20%
with effect from 1 April 2015. Following these changes, deferred tax
balances were reduced from 21% to 20%. The impact of this change
on deferred tax balances is included in these financial statements.
9. Intangible assets
2015 2014
coe im £m
At 31 March 2014, 1 April 2013
208
Reclassifications @) a
Disposals 2 7)
At 29 March 2015, 30 March 2014 297 243
Amortisation and impairment
At 31 March 2014, 1 April 2013 243 208 :
Reclassifications 8)
Impairment (see note 5) 87 42
Disposals
At 29 March 2015, 30 March 2014 297 243 :
Net book value
At 29 March 2015, 30 March 2014 : =
The above intangible assets relate to software.
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I statements
10. Property, plant and equipment
Land and Buildings
Plant Fixtures
Long Short Motor
Freehold ieaschold leasehold Vehicles ane Piel Teal
machinery equipment
fm fm fm fm £m fm fm
100 7 13 44 1 739
Disposals (2) - (4) (6) : (13) (24)
At 29 March 2015 83 55 115 40 1 783 1,077
Dieposale (2) - (a) 6) - (13) (24)
At29 March 2015 a 54 115 40 1 783 1,067
Net book value
“At29March20I5.SSSSsSC«SDS 1 sec. ~ Ta
‘At 30 March 2014 9 1 - : : : 10
Depreciation rates are disclosed within accounting policies (note 1). No depreciation is provided on freehold land, which represents £3
million (2014: £3 million) of the total cost of properties.
* Reclassification between freehold, long leasehold and short leasehold asset categories is due to the fact that all land and building assets.
are classified as freehold whilst they are an asset under construction, then once works are complete and lease contracts are confirmed, the
asset is moved into the correct respective category.
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Notes to the financial statements
Tl. Investments in joint ventures First Rate Exchange Services Holdings Limited, whose principal
activity is the provision of Bureau de Change. First Rate
Exchange Services Holdings Limited is a company registered
in the United Kingdom. The registered address of First Rate
Joint ventures Exchange Services Holdings Limited is Great West House,
During 2014/15 and 2013/14, the Group's only joint venture Great West Road, Brentford, Middlesex, TW8 9DF.
investment was a 50% interest (1,000 £1 ordinary A shares) in
The following entity has been included in the consolidated
financial statements using the equity method:
Joint venture
£m
Share of net assets
Total net investment at 31 March 2014 él
Share of post tax pre-dividend profit 36
Dividend (30)
Total net investment at 29 March 2015 67
Joint venture
£m
Share of net assets
Total net investment at I April 2013 60
Share of post tax pre-dividend profit 33
Dividend (32)
Total net investment at 30 March 2014 él
2015 2014
Joint Joint
venture venture
Share of assets and liabilities:
Non-current assets 6 5
Current liabilities (130) (119)
Share of net assets 67 él
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I statements
12. Trade and other receivables
2014
2015 (Restated)
Em £m
Prepayments and accrued 106 82
Client receivables
Other receivables 8
Total 397 353
Non-current
Prepayments 10 15
The Group receives and disburses cash on behalf of As at 29 March 2015 trade receivables of £14 million (2014: £17
Government agencies and other clients to customers through million) were impaired and fully provided for. During the year
its branch network. Amounts owed from/to Government £6 million (2014: £2 million) of the provision has been utilised
agencies and other clients are disclosed separately as client and an additional £3 million (2014: £3 million) has been provided
receivables (as above) and client payables (see note 14). for. Trade receivables of £21 million (2014: £18 million) were past
due but not impaired. The aging analysis of the trade receivables
are as follows:
2014
2015 (Restated)
im £m
Not yet overdue 80 87
Past due not more than one month 8 10
Past due more than one month and not more than two months 3 2
Past due more than two months 10 6
Total 101 105
The fair value of trade and other receivables is not materially different from the carrying value.
13. Cash and cash equivalents
2014
2015 (Restated)
£m £m
Cash in the Post Office Limited network. 708 657
Short-term bank deposits 93 30
Money market fund investments 20
Total cash and cash equivalents 821 687
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Notes to the financial statements
Cash and cash equivalents comprise amounts held physically in
cash, cash deposits available on demand or for three months or less.
For the purposes of the consolidated statement of cash flows, cash
and cash equivalents consists of £821 million defined on the
previous page (2014 (Restated): £687 million), net of a bank
overdraft of Enil (2014: £50 million) which is disclosed in note 14.
14. Trade and other payables
Where interest is earned itis at a floating or short-term fixed rate.
The fair value of cash and cash equivalents is not materially different
from the carrying value.
2015
£m
2014
£m
Curret
Bank overdraft
Trade payables
Accruals
Deferred income
Social security
Client payables
Capital payables
Business transformation payments : 10
Other payables i
Total 718 767
Non-current:
Other payables 30. : 28
The fair value of trade and other payables is not materially different from the carrying value.
15. Financial liabilities - interest bearing loan and borrowings
2015 2014
im £m
Department of Business, Innovation & Skills 310
loan drawn down
The loan under the facility is short dated on a programme of
liquidity management and matures on average I day after the year
end (2014:1 day). The fair value of borrowings approximate their
carrying value due to the short-term maturities of the loan. On
maturity it is expected that further loans will be drawn down under
this facility, which expires in 2018. The undrawn committed facility,
in respect of which all conditions precedent had been met at the
balance sheet date, is £840 million (2014: £1,150 million). From the
30 March 2015 the total facility reduces from £1,150m to £950m.
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The average interest rate on the drawn down loans is 1.0%
(2014: 1.0%).
The facility is currently restricted to funding the cash and near cash
items held within the Post Office Limited network.
The facility (including drawn down loans) is secured by a floating
charge over all assets of Post Office Limited and a negative pledge
‘over cash and near cash items. The negative pledge is an agreement
not to grant security over the assets or to set up a vehicle that has
the same effect.
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I statements
16. Provisions
Crown
Conversions Network
Project Transformation Other Total
£m im im im
At 31 March 2014 2 51 25 78
Charged in operating exceptional items > 67 29 %
Charged in operating costs
Utilisation (122)
Unused amounts in the year -
operating exceptionals ) - ) @)
Unused amounts in the year - operating costs > = (3) 3)
At 29 March 2015, : 40 23 63
Disclosed as:
Current = 39 18 57
Non-current . 1 5 6
. 40 23 63
The Crown Conversions project related to past franchising of Crown offices and onerous property lease provisions.
The Network Transformation provision relates to the major transformation programme which is discussed further in
the Business and Strategy Review on page 14.
Other provisions of £23 million (2014: £25 million) include onerous lease obligations, severance and personal injury claims.
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Notes to the financial statements
17. Financial assets and liabilities
a. Financial assets and liabilities by category
The breakdown of the Group's financial instruments at 29 March 2015 and 30 March 2014 is shown below:
2015 2014
Non Non
Current current Total Current Current Total
im £m £m fim £m £m
Financial assets
Trade and other receivables
337
337
Cash and cash equivalents
687 687
Financial liabilities
Trade and other payables
(730).
(730)
Bank overdraft - :
BIS I
Finance leases obligations : -
Zenon OO).
(50)
cs 8) - 3)
Total financial assets/
(liabilities) 200 (2) 198 241 241
Except prepayments and deferred income, which have Interest rate risk
been excluded from the table above all of the Group's
financial assets and liabilities by nature and classification for
measurement purposes are considered loans and receivables.
The fair value of the Group's financial assets and liabilities
approximate their carrying value due to the short term maturities
of these instruments. The fair value of financial assets and liabilities
is defined as the amount at which the Group would expect to
receive upon selling an asset or pay to transfer a liability ina
transaction between market participants at the measurement date.
The nature of the inputs used in determining the values of
the financial assets and liabilities is quoted prices (unadjusted)
in active markets for identical assets and liabilities. All of
the Group's financial assets and liabilities are therefore
considered as Level 1 in the fair value hierarchy.
The Group has no Level 2 and Level 3 financial
instruments and there have been no transfers between
the levels of fair value hierarchy during the period.
b. Financial risk management objectives and policies
The Group is exposed to a variety of financial risks: market risk
(including foreign currency risk, interest rate risk), credit risk
and liquidity risk. The Group's overall risk management
programme focuses on the unpredictability of financial markets
and aims to minimise potential adverse effects
on the Group's financial performance.
The Group is exposed to changes in interest rate on floating
rate debt, cash deposits and money market fund investments.
Interest rate risk on borrowings is managed through determining
the right balance of fixed and floating debt within the financing
structure. Market conditions are considered when determining
the desired balance of fixed and floating rate debt. Had there
been a 50 basis point increase in interest rates, there would have
been a £5m favourable impact on the Group's equity and income
statement. A 50 basis point decrease would have resulted in a £5m
adverse impact on the Group's equity and income statement.
Foreign currency risk
The Group is exposed to foreign currency risk resulting from
balances held to operate Bureau de Change services.
The currencies which these transactions are primarily
denominated are the US dollar and euro. The Group's foreign
currency risk management objective is to minimise the impact
‘on the Income Statement of fluctuations in the exchange
rates, The Group hedges its foreign currency risk principally
through external forward foreign currency contracts to
cover near-term future revenues with a number of providers
including First Rate Exchange Services Holdings Limited
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cial statements
The following table demonstrates the sensitivity of financial instruments to a reasonably possible change in the US dollar and euro
exchange rates, with all other variables held constant, on profit/(loss) before tax and equity.
Strengthening/
(weakening) Effect on Strengthening/ Effect on
ba profit Effect (weakening) profit Effect
inUS dollar rate beforetax on equity ineurorate before tax on equity
percent £m £m percent £m £m
Increase/ Increase/ _Increase/ Increase/ Increase/ Increase/
(decrease) (decrease) _ (decrease) (decrease) (decrease) _ (decrease)
2015 10 1
1 10 3 3
2014 10 1
(10) 10]
(i) (10) 8) 8)
Credit risk
Credit risk refers to the risk that a counter party will default on
its contractual obligations resulting in financial loss to the Group.
Financial credit risk arises from cash balances (including bank
deposits and cash and cash equivalents) held by the Group and
business credit risk arises from exposures to customers. Business
risk includes commission receivable and client related settlements
for amounts paid out of the Post Office Network on their behalf.
The Group aims to minimise its financial credit risk through
the application of risk management policies approved by
the Board. Counter parties are limited to major banks and
financial institutions. The policy restricts the exposure to any
‘one counter party by setting appropriate credit limits. The
maximum exposure to credit risk is limited to the carrying
value of each class of asset summarised in note 12.
Business credit risk is monitored centrally. The individual
relationships and the contracts attached to them are managed
by dedicated teams and procedures are in place to monitor
any concentrations of credit risk. The level of bad debt
provision is less than 2% (2014: less than 2%) of turnover.
Capital management
The Group's objectives when managing capital (defined as the net
of borrowings and amounts due under finance leases and cash and
cash equivalents excluding cash in the Post Office Network) are to
safeguard its ability to continue as a going concern and to maintain
an optimal capital structure in order to support the
business and maximise stakeholder value. In managing the
Group's capital levels the Board and the Group Executive
regularly monitor the level of debt in the Group, the working
capital requirements and the forecast cash flows. The Board and
Group Executive plan accordingly following this review process
in order to meet the Group's capital management objectives.
Liquidity risk
The Group's primary objective is to ensure that the Group
has sufficient funds available to meet its financial obligations
as they fall due. This is achieved by aligning short-term
investments and borrowing facilities with forecast cash flows.
Typical short-term investments include short-term bank
deposits with approved counterparties. Borrowing facilities
are regularly reviewed to ensure continuity of funding.
The Group has adequate cash reserve to meet operating
requirements in the next 12 months.
At 29 March 2015 the Group has unused facility of £840 million
(2014: £1,150 million). From the 30th March 2015 the total facility
reduces from £1,150 million to £950 million. The facility expires
in 2018.
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Notes to the financial statements
The tables below analyse the Group's financial assets and liabilities I amounts disclosed in the table are the contractual undiscounted
into relevant maturity groupings based on the remaining period _cash flows and include interest, where applicable.
at the balance sheet date to the contractual maturity date. The
12 1-2 2-5 > Total
Months Years Years 5 Years
At 29 March 2015 £m
Financial assets
Trade and other receivables 378 = = = 378
Cash and cash equivalents 821 0 ‘ ° 821
Financial liabilities
Trade and other payables
Bank overdraft
Interest bearing loan
Finance leases obligations : 0 - = i
Total financial assets/(liabilities) 200 2) E E 198
12 12 25 > Total
Months Years Years 5 Years
At 30 March 2014 £m
Financial liabilities
Trade and other payables (730) , < : (730)
Bank overdraft (50) > 2 E (50)
Interest bearing loan = - 2 e .
Finance leases obligations (3) 5 ‘ 7 (3)
Total financial assets/{liabilities) 241 3 3 : 241
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18. Pensions
The disclosures in this note relating to the year ended 29
March 2015 and the comparatives for the year ended 30
March 2014 reflect the Post Office Limited sectionalised RMPP
scheme which is independently operated by the Group and
the 7% share of the RMSEPP scheme. Royal Mail Group Limited
Name
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ancial statements
is the principal employer in Royal Mail Senior Executive
Pension Plan (RMSEPP) and Post Office Limited became a
participating employer with effect from I April 2012.
The disclosures in this note show how the value of the assets
and liabilities has been calculated at the balance sheet date.
The Group participates in pension schemes as detailed below.
Eligibility Type
Royal Mail Pension Plan (RMPP)
Royal Mail Senior Executive Pension Plan (RMSEPP)
UK employees
Defined benefit
UK senior executives Defined benefit
Royal Mail Defined Contribution Plan (RMDCP)
UK employees Defined contribution
Defined Contribution
The charge in the income statement for the defined contribution
schemes and the Group contributions to these schemes was £3
million (2014: £2 million) during the year. A new defined
contribution plan (RMDCP) was launched in April 2009. With effect
from 1 April 2015 RMDCP will be replaced by Post Office Pension
Plan. New recruits joining from 31 March 2008 are able to begin
paying contributions to the new plan after they have worked for the
Group for a year.
Defined Benefit
Both RMPP and RMSEPP are funded by the payment of
contributions to separate trustee administered funds. The latest full
actuarial funding valuation of RMPP was carried out as at 1 April
2012 using the projected unit method. For RMPP, this valuation was
concluded at £135 million surplus. The latest full actuarial funding
valuation of RMSEPP was carried out as at 31 March 2012 using the
projected unit method. For 100% of the RMSEPP plan, the valuation
was concluded at £83 million deficit. Valuations are carried out
triennially and the next one will be performed as at I April 2015.
RMPP includes sections A, B and C, each with different terms and
conditions:
* Section A is for members (or beneficiaries of members) who
joined before 1 December 1971;
* Section B is for members (or beneficiaries of members) who
joined after 1 December 1971 and before 1 April 1987 or to
members of Section A who chose to receive Section B benefits;
* Section C is for members (or beneficiaries of members) who
joined after 1 April 1987 and before I April 2008,
A series of changes to RMPP and RMSEPP began to take effect
on I April 2008.
The changes encompassed:
* The Plans closed to new members from 31 March 2008;
* Allpensions and benefits earned before I April 2008 are linked
to final pensionable salary, but defined benefits built up from
1 April 2008 are earned on a “career average pensionable
salary” basis;
+ From] April 2014, pensionable salary was amended to the
amount in force at that date, increasing each I April thereafter
in line with RPI (up to 5% each year), with allowance for certain
promotional increases. This change resulted in a one-off
exceptional gain of £102 million for the 2013/14 financial year;
* Employees can continue to take their pension on reaching 60
but the normal retirement age increased to 65 for benefits
earned from 1 April 2010;
* From 1 April 2010 it is possible to draw pension earned before
the change to normal retirement age at 55, and continue
working while still contributing to the Pension Plan until the
maximum level of benefits has been reached; and
RMSEPP was closed to future accruals on 31 December 2012.
Payment of £19 million (2014: £21 million) was made by the Group
during the year in respect of regular future service contributions,
nearly all relating to RMP. The regular future service contributions
for RMPP, expressed as a percentage of pensionable pay, has
remained at 17.1% (2014: 17.1%), effective from April 2010. This rate
is not expected to change materially during 2015/16.
The Group pays 7% of the total deficit payment required to fund
the deficit in RMSEPP and a payment of £1 million (2014: £1 million)
was made by the Group during the year. No RMPP deficit payments
were made during 2013/14 or 2014/15. For RMSEPP, deficit recovery
payments will be £1 million per annum, from 1 April 2010 to
31 January 2024.
A current liability of £1 million (2014: £nil) has been recognised for
payments to the pension schemes relating to redundancy. During
the year, payments of £2 million (2014: £1 million) relating to
redundancy were made.
The weighted average duration of the RMPP fund is 28 years, and
for the RMSEPP fund is 21 years. Over the next financial reporting
period to 27 March 2016 it is expected that employer contributions
to the plans will be £19 million and £1 million for RMPP and
RMSEPP respectively.
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Notes to the financial statements
The following disclosures relate to the gains/losses and surplus/deficit in the scheme recognised for RMPP and RMSEPP defined benefit
plans in the financial statements of the Group:
a) Major long-term assumptions
The size of the RMPP pension surplus, which is large in the context
of the Group and its finances, is materially sensitive to the
assumptions adopted. Small changes in these assumptions could
have a significant impact on the surplus and overall income
statement charge. The major long-term assumptions in relation to
both RMPP and RMSEPP were:
At 30 March 2014
% pa
At 29 March 2015
%pa
Rate of increase in salaries
2.8
3.2
Rate of pension increases ~ RMPP sections A/B
Rate of pension increases - RMPP section C
Rate of pension increases - RMSEPP members
_transferred from Section A or B of RMPP.
Rate of pension increases - RMSEPP all other members
"Rate of increase for deferred pensions - RMSEPP
__.members transferred from Section A or B of RMPP
23
19 24
28 33
19 24
Rate of increase for deferred pensions
23
Discount rate
wv Taflation assumption (RPI) - RMPP
w Taflation assumption (CPI) - RMPP
"Taflation assumption (RPI) - RMSEPP
45
3.3
Inflation assumption (CPI) - RMSEPP
24
The ultimate cost of the RMPP plan to the Group will depend
upon future events rather than the assumptions made. The
assumptions made may not be borne out in practice and as such
the cost of the plan may be higher (or lower) than disclosed.
In common with other defined benefit schemes, the main risk in
relation to the arrangements is the value of the assets does not keep
pace with the increase in the value of the liabilities. This can arise
for many reasons, but the most significant risks are as follows:
Investment risk: If the assets of the arrangements fall short of
expectations, this will lead to a decrease in the funded status.
Asset volatility: The arrangements hold return seeking
assets (including equities and property) which are expected
to outperform corporate bonds in the long-term but give
exposure to volatility and risk in the short term. RMPP does,
however, invest in liability driven investment (LDI) assets,
for example corporate bonds, which mitigates the impact of
interest rate and inflation volatility on the funded status.
Inflation risk: Higher inflation rates than expected will act to
increase the plan liabilities as benefits will increase to a higher level
than assumed. The arrangements have a maximum pension increase
(generally 5% per annum) written into the rules which limits the
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increase for many benefits, so limiting the impact of high inflation.
This includes pensionable pay in RMPP, which was amended with
effect from I April 2014. In addition, the arrangement holds assets
that increase in value as price inflation expectations rise, so
mitigating the impact of rising inflation expectations. These assets
include LDI assets in respect of RMPP.
Changes in bond yields: A decrease in corporate bond yields will
increase the plan liabilities, although this will be partially offset by
an increase in the value of the bond holdings and, to some extent,
the LDI assets,
Pensioner longevity: If members live longer than expected, the
liabilities would increase because pensions would be paid for a
longer time.
Liabilities accrued in the Royal Mail Pension Plan to 31 March 2012
were transferred to the Royal Mail Statutory Pension Scheme.
These liabilities are no longer an obligation of the Group and
consequently the transfer resulted in a significant removal of
pension risk from the Group.
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I statements
The following table shows the potential impact on the RMPP assets and pension surplus of changes in key assumptions:
2015 2014
im £m
Changes in RPI and CPI inflation of +0.1% pa (4) (3)
Changes in discount rate of +0.1%pa 4 3
‘Changes in real salary growth of +0.1% pa () ()
Changes in CPI assumptions of +0.1% pa () ()
An additional 1 year life expectancy (5) (3)
The sensitivity analysis has been prepared using projected benefit cash flows as at the latest full actuarial valuation of the plan. The same
method was applied as at the previous reporting date. The accuracy of this method is limited by the extent to which the profiles of the
plan cash flows have changed since those valuations although any change is not expected to be material in the context of the above
sensitivity analysis.
Mortality: The mortality assumptions for the RMPP sectionalised scheme are based on the latest self-administered pension scheme (SAPS)
mortality tables with appropriate scaling factors (106% for male pensioners and 101% for female pensioners). For future improvements the
assumptions allow for ‘medium cohort’ projections with a 1.25% floor. These are detailed below:
Average expected life expectancy from age 60: 2015 2014
For a current 60 year old male RMPP member 27 years 26 years
For a current 60 year old female RMPP member 30 years 29 years
For a current 40 year old male RMPP member 29 years 29 years
For a current 40 year old female RMPP member 32 years 32 years
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Notes to the financial statements
b) Plans’ assets
The assets in the plans for the Group were:
Sectionalised RMPP Market value 2015 Market value 2014
£m £m
UK equities 1 1
lt ae so ce —
: : I : I “Te”
Corporate bonds
Bond/fixed interest funds
ed funds
Inde:
Equity funds 34 1
Fi I f RMPP 379 260
Present value of RMPP liabilities (150) (90) :
Surplusin plan before asset ceiling adjustment 229 170
Less effect of asset ceiling 7) (23)
Surplus in plan after asset ceiling adjustment 202 147
Share of RMSEPP Market value 2015. Market value 2014
im fm
UK equities 1 1
Overseas equities il
Government bonds
Corporate bonds
Property 2 2
Other assets 1 1
Fair value of share in plan assets for RMSEPP 31 26
Present value of share in plan liabilities for RMSEPP. (26) (24)
Surplus in plan for the share of RMSEPP before asset ceiling adjustment 5 2
Less effect of asset ceiling 2) ()
Surplus in plan for share of RMSEPP after asset ceiling adjustment 3 1
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I statements
A retirement benefit surplus of £205 million is disclosed on
the balance sheet, representing the surplus in plans of £229
million and £5 million for RMPP and RMSEPP respectively, and
net of tax of £29 million at a rate of 35% on the element of the
surplus which is recoverable through a refund from the plans.
Securities with quoted price in an active market:
Sectionalised RMPP
There is no element of the above present value of liabilities that
arises from plans that are wholly unfunded. The categories of
plan assets as a percentage of total plan assets are as follows:
2015 % 2014 %
Overseas equi
Corporate bonds
Cash and cash equivalents
Bond/fixed interest funds
Index-linked funds
Other loan/debt funds
Alternative asset funds
2 15
13 7
3 3
Equity funds 9 4
Total quoted securities 100 100
Sectionalised RMSEPP 2015 % 2014 %
UK equities 3 4
Overseas equities
Government bonds
Corporate bonds = 50
Property “8
Other assets 4
Total quoted securities 100 100
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Notes to the financial statements
) Movement in plans’ assets and liabilities
Changes in the fair value of the plans’ assets are analysed as follows:
Sectionalised Sectionalised
Assets RMPP 2015, RMPP 2014
£m £m
Assets in sectionalised RMPP at beginning of period 260 243
22
Employee contributions paid 7 8
Contributions paid
Finance income 12 12
Actuarial gains/(losses) 81 (24)
Benefits paid to members Q) ()
‘Assets in sectionalised RMPP at end of period 319 260
Share of Share of
Assets RMSEPP 2015 RMSEPP 2014
im £m
Share of assets in RMSEPP at beginning of period 25
Contributions paid
Finance income
Actuarial gains
Benefits paid to members ) ())
Share of assets in RMSEPP at end of period 31 26
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I statements
Changes in the present value of the defined benefit pension obligations are analysed as follows:
Sectionalised Sectionalised
Liabilities RMPP 2015 RMPP 2014
£m £m
Liabilities in sectionalised RMPP at beginning of period (90) (144)
Royal Mail Pension Plan amendment - 102
Current service cost — (25) 5)
Curtailment costs*
Employee contributions
Actuarial loss
Experience adjustments on liabilities
Benefits paid
Liabilities in sectionalised RMPP at end of period (150) (90)
Share of Share of
Liabi RMSEPP 2015 RMSEPP 2014
£m £m
Share of lia RMSEPP plans at begin: (24) (24)
Finance cost LU} 10)
- Actuarial gain/(loss) (2)
Benefits paid 1 1
Share of liabilities in RMSEPP at end of period (26) (24)
*The curtailment costs in the income statement are recognised on a consistent basis with the associated compensation costs. Estimates
of both are included, for example, in any redundancy provisions raised. The curtailment costs above represent the costs associated with
those people paid compensation in respect of redundancy during the accounting period. Such payments may occur in an accounting
period subsequent to the recognition of costs in the income statement.
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Notes to the financial statements
d) Recognised charges
An analysis of the separate components of the amounts recognised in the performance statements of the Group is as follows:
Sectionalised Sectionalised
RMPP 2015 RMPP 2014
£m £m
Current service cost 25 25
Total charge to operating profit before exceptional items 25 25
Analysis of amounts charged to operating exceptional items:
Royal Mail Pension Plan amendment : (102)
Loss due to curtailments 1 1
Total charge/(credit) to operating profit 26 (76)
Analysis of amounts charged/(credited) to net pensions interest:
Interest on plan liabilities
Interest income on plan assets (12) (12)
Net pensions credit to financing (7) (5)
Net charge/(credit) to the income statement before deduction for tax 19 (81)
Analysis of amounts recognised in the statement of comprehensive income:
Actual return on plan assets
Less: expected interest income on plan assets (12) (12) :
Less: taxation on surplus recoverable through plan refunds (4) (20)
Actuarial gains/(losses) on assets (all experience adjustments) 7 (44)
Experience adjustments on liabilities () -
Effects of changes in actuarial assumptions on liabilities (23) (8)
Actuarial losses on liabilities (24) @)
Total actuarial gains/(losses) recognised in the
statement of comprehensive income
53 (82)
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I statements
Share of Share of
RMSEPP 2015 RMSEPP 2014
im £m
Interest income on plan assets ) ()
Net
nsions credit to financing -
“Net charge (credit) to the income statement before deduction for tax >
Analysis of amounts recognised in the statement of comprehensive incom
Actual return on plan assets 5 1
Less: expected interest income on plan assets () ()
Less: taxation on surplus recoverable through plan refunds ()
Actuarial gains on assets (all experience adjustments) 3
Experience adjustments on lial
Effects of changes in actuarial assumptions on liabilities Q)
Actuarial losses on liabilities 1
Total actuarial gains recognised in the statement of F
comprehensive income
19. Called up share capital
2015 2014
£ £
Authorised
Ordinary shares of £1 each — oo —SsI000.SS*S*«SLOO
Total 51,000 51,000
Alllotted and issued and fully paid
Ordinary shares of £1 each 50,003 50,003
Total 50,003 50,003
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Notes to the financial statements
20. Commitments
Capital commitments contracted for but not provided in the financial statements amount to £96 million (2014: £68 million).
The Group is committed to the following minimum lease payments under non-cancellable operating leases:
Land and buildings
2015 2014
£m £m
7 20
Beyond five years
Total 87 %
21. Finance lease liabilities
2015 2014
Present value Present value
of minimum of minimum
Minimum lease Minimum lease
payments payments payments payments
£m £m £m £m
Within one year ” - 3 3
Between one and five years = : : :
Total minimum lease payments
Less amounts representing finance charges : : & *
Present value of minimum lease payments - - 3 3
Of which:
Current - - 3 3
Non-current - - - -
The aggregate finance charges allocated for the period in respect of finance leases was £211,078 (2014: £470,680). The fair value of finance
lease liabilities is not materially different from the carrying value.
In prior year the Group had finance lease contracts for equipment. The leases had no terms for renewal, purchase options or escalation
clauses and there were no restrictions concerning dividends, borrowings or additional leases. The leases had an average term of six years.
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I statements
22. Related party disclosures
Joint venture
The following company is a joint venture of the Group:
Company Country of incorporation
% Holding Principal activities
First Rate Exchange
Services Holdings Limited United Kingdom
50 Bureau de Change
All shareholdings are equity shares.
Related party transactions
During the year the Group entered into transactions with the following related parties. The transactions were in the ordinary
course of business. The transactions entered into and the balances outstanding at the financial year end were as follows:
Sales/recharges to Purchases/recharges Amounts owed from Amounts owed to
related from related party including _ related party including
party related party outstanding loans outstanding loans
2015 2014 2015 2014 2015 2014 2015 2014
£m £m £m £m £m £m £m £m
- 356 40 a 29 a 50
"First Rate Exchange
Services Holdings 26 7 129 125 7 5 7 6
Limited
The sales to and purchases from related parties are made atnormal Separately:
market prices. Balances outstanding at the year end are unsecured,
interest free and settlement is made by cash. First Rate Exchange
Services Holdings Limited is a joint venture of the Group. Until the
Royal Mail plc Initial Public Offering (IPO) which took place on
15 October 2013 Royal Mail plc was a subsidiary of the
Group's parent company Postal Services Holding Company
Limited, after the IPO Postal Services Holding Company
held an investment in Royal Mail plc. From the date of the
IPO Royal Mail plc is not a related party of the Group.
The Group trades with numerous Government bodies on an arm's
length basis. Transactions with these entities are not disclosed
owing to the significant volume of transactions that are conducted.
* The Group has certain loan facilities with Government
{note 15);
* The Group has received a Government Grant of £170 million, all
of which was recognised through the income statement; and
* The Group has received the Network Subsidy Payment from
Government (note 1).
Key management comprises Executive and Non-Executive Directors
of the Post Office Limited Board and the members of the Group
Executive at 29 March 2015. The aggregate remuneration of the key
management personnel of the Post Office Group is set out below:
2015 2014
£000 £000
Short-term employee benefits* 3,380 3,582
Post-employment benefits
68 59
Other long-term benefits
307 439
Total
3,755 4,080
*Payment in lieu of notice has been included in short-term employee benefits. Please refer to the Director's Remuneration Report on page
55 for further details.
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Notes to the financial statements
23. Post balance sheet events 24. Immediate and ultimate parent company
In accordance with the funding agreement with Government At 29 March 2015, the Directors regarded Postal Services
announced on 27 November 2013, for which State Aid approval Holding Company Limited as the immediate and ultimate
was received on 19 March 2015, Post Office Limited received parent company. The largest group to consolidate the results
£280 million of funding on 1 April 2015. of the company is Postal Services Holding Company Limited,
a company registered in the United Kingdom. Postal Services
Holding Company Limited financial statements can be obtained
from Finsbury Dials, 20 Finsbury Street, EC2Y 9AQ.
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Financial statements
Parent Company
financial statements
2014/15
"We work hard as
a team and that's
the important thing.
We all believe in
our products and
that's the best
way of selling to
our customers”
JAVED IQBAL
Huddersfield
New Street
jal
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Company statement of comprehensive income
At 29 March 2015
2015 2014
Notes £m £m
(Loss)/profit for the financial year from continuing operations
Other comprehensive incom
ot to be reclassified to profit or loss in future periods
Remeasurements on defined benefit surplus 1
(9) 2)
(15) 115
There are no other comprehensive income items that will be reclassified to the profit and loss in subsequent periods.
Income tax effect
Total comprehensive income for the year
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I statements
Company balance sheet
At 29 March 2015
2014
2015 (Restated)
Notes £m £m
Non-current asset
Intangible assets
Investment in subsidiaries
2
: Property, plant and equipment 3 10 10 '
. acral bl _ 7 ea ROTI -.sssecssesen ay
5
Investments in joint ventures
Retirement benefit surplus nN 205 148
Trade and other receivables 6 10 15
Total non-current assets 226 174
Inventories 6 6
Trade and other receivables 6 399 353
Cash and cash equivalents 7 8i7 687
Total current assets 1,222 1,046
Current liabilities
ve" Trade and other payables 8 (716) (770)
Financlal liabiities-interest bearing loans and borrowings 9 (310) .
Provisions 10 67) (70)
Total current liabilities (1,083) (840)
Non-current liabi
Beha papalalee 8 (30) (28)
Pramas 10 6 (8)
Total non-current liabilities (36) (36)
Net assets 329 344
Equity
Share capital 2 i a
. Share premium 465 465 °
"Retained earnings : ee 3) (121)
Total equity 329 344
The financial statements on pages 100 to 121 were approved by the Board of Directors on I July 2015 and signed on its behalf by:
PA Vennells A Cameron
Chief Executive Chief Financial Officer
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Company statement of changes in equity
At 29 March 2015
Share Retained Total
premium earnings equity
Notes £m £m £m
At 31 March 2014 465 (121) 344
“mon toca — i 0) 0)
At 29 March 2015 465 (136) 329
Share Retained Total
premium earnings equity
Notes £m £m £m
Att April 2013 465 (236) 229
"femensaremerts on defined benef surpics SS - (62) (62)
"Thearha eaanaledt eee a “2 a)
At 30 March 2014 465 (121) 344
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cial statements
Notes to the financial statements
1. Accounting Policies
The accounting policies which follow set out those which
apply in preparing the financial statements for the year ended
29 March 2015.
Financial year
The financial year ends on the last Sunday in March and accordingly,
these financial statements are made up to the 52 weeks ended
29 March 2015 (2014: 52 weeks ended 30 March 2014).
Authorisation of financial statements
The parent company financial statements of Post Office Limited
(the ‘Company’) for the year ended 29 March 2015 were
authorised for issue by the Board of Directors on 1 July 2015
and the balance sheet was signed on the board's behalf by
PA Vennells and A Cameron. Post Office Limited is a limited
company incorporated and domiciled in England and Wales.
Basis of preparation
These financial statements were prepared in accordance
with Financial Reporting Standard 101 Reduced Disclosure
Framework (FRS 101). These financial statements are
prepared under the historical cost convention.
As permitted by Section 408 of the Companies Act 2006
Post Office Limited has not presented its own income statements.
The result dealt with in the accounts of the Company
amounted to £60 million loss (2014: £169 million profit).
The results of Post Office Limited are included in the
consolidated financial statements of Post Office Group
which are available from Companies House.
The Company has taken advantage of the following
disclosure exemptions under FRS 10I:
(a)
(6)
(<)
the requirements of IFRS 7 Financial Instruments: Disclosures
the requirements of paragraphs 91-99 of IFRS 13 Fair Value
Measurement
the requirement in paragraph 38 of IAS I ‘Presentation of
Financial Statements’ to present comparative information in
respect of:
i. paragraph 73(e) of IAS 16 Property,
Plant and Equipment
ji. paragraph 118(e) of IAS 38 Intangible Assets
the requirements of paragraphs 10(d), 10(f), 39(c) and 134-136 of
IAS 1 ‘Presentation of Financial Statements’
the requirements of IAS 7 Statement of Cash Flows
(f)_ the requirements of paragraphs 30 and 31 of IAS 8 ‘Accounting
Policies, Changes in Accounting Estimates and Errors’
the requirements of paragraph 17 of IAS 24 ‘Related Party
Disclosures’
the requirements of IAS 24 ‘Related Party Disclosures’ to
disclose related party transactions entered into between two
‘or more members of a group, provided that any subsidiary
which is a party to the transaction is wholly owned by such a
member.
Fundamental accounting concept - going concern
In making an assessment of the Company's ability to continue as a
going concern, the Directors have considered the going concern
assessments made in relation to the Group (see note 1 on page
68) and are of the view that it is appropriate that these financial
statements have been prepared on a going concern basis.
Prior year restatements
In preparing the financial statements for the current year, the
comparative figures for the year ended 30 March 2014 have
been restated for cash and cash equivalents and trade and other
receivables. Credit and debit card receivables were previously
included in cash and cash equivalents and have been reclassified
to trade and other receivables. These receivables relate to
payments made in branch by Post Office Limited customers
using debit or credit cards. These payments are reimbursed
to Post Office Limited by the card companies within 2 or 3
days post year end, as the cash had not been received as at
year end, and the amount has been reclassified to debtors
The impact on the 30 March 2014 financial statements an increase
to trade and other receivables of £5lm and a decrease to cash and
cash equivalents of £51m. This restatement had no impact on the
profit, equity or net assets for the period ended 30 March 2014.
As previously reported Restatement 30 March 2014
Restated
Total Trade and other receivables 317 51 368
Total cash and cash equivalents
738 687
(51)
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Notes to the financial statements
Critical accounting estimates and judgements in applying
accounting policies
The Company makes certain estimates and assumptions
regarding the future. Estimates and assumptions are continually
evaluated based on historical experience and other factors. In
the future, actual experience may differ from these estimates and
ins. In addition the Company has to make judgements
in applying its accounting policies which affect the amounts
recognised in the accounts. The most significant areas where
judgements and estimates are made are discussed here:
Pension assumptions
The costs, assets and liabilities of the pensions operated by the
Company are determined using methods relying on actuarial
estimates and assumptions. These pension figures are particularly
sensitive to changes in assumptions for discount rates, mortality
and inflation rates. The Company exercises its judgement in
determining the assumptions to be adopted, after discussion with
its Actuary. Details of the key assumptions are set out in note 11.
Pension liabilities are measured on an actuarial basis using the
projected unit credit method and discounted at a rate equivalent
to the current rate of return on a high quality corporate bond
of equivalent currency and term. Judgement has been applied
in determining that for these purposes a high quality corporate
bond constitutes AA rated or equivalent status bonds.
Provisions
The Company has recognised provisions where a present
legal or constructive obligation exists as a result of a past
event, where itis probable that an outflow of resources will
be required to settle the obligation and a reliable estimate of
the amount can be made. Provisions are detailed in note 10.
Due to the nature of provisions the future amount settled
may be different from the amount that has been provided.
Impairment of non-current assets
The Company assesses whether there are any indicators of
impairment for all non-currents assets at each reporting date. Due
to ongoing operational losses (excluding the Network Subsidy
Payment) the carrying value of intangible assets and all property
plant and equipment other than freehold and long leasehold
property has been impaired to the recoverable amount.
Intangible assets
Intangible assets acquired separately or generated internally are
initially recognised at cost and are reviewed for impairment. An
impairment loss is recognised in the income statement for the
amount by which the carrying value of the asset exceeds its
recoverable amount, which is the higher of an asset's net realisable
value and its value in use.
Amortisation of intangible assets with finite lives is charged
annually to the income statement on a straight-line basis as follows.
Software lto 6 years
Where intangible fixed assets are impaired to their recoverable
amount on acquisition, the above range of asset lives is not applied.
Property, plant and equipment
Property, plant and equipment is recognised at cost, including
attributable costs in bringing the asset into working condition for its
intended use.
Depreciation of property, plant and equipment is provided on a
straight-line basis by reference to net book value and to the
remaining useful economic lives of assets and their estimated
residual values. The lives assigned to major categories of property,
plant and equipment are:
Range of asset lives
Land and buildings:
Freehold buildings
Up to 50 years
The shorter of the period
of the lease, 50 years or the
estimated remaining useful life
Leasehold buildings
Plant and Machinery
3.15 years
Motor vehicles
and trailers
212 years
Fixtures and equipment 2-15 years
Where property, plant and equipment is impaired to their
recoverable amounts on acquisition the above ranges of asset
lives are not applied. This is currently the case for plant and
machinery, motor vehicles and trailers and fixtures and equipment.
The remaining useful lives of freehold buildings are reviewed
periodically and adjusted where applicable on a prospective basis.
PAGE104 corporate postoffice.co.uk/annualreportl 415
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Impairment reviews
Unless otherwise disclosed in these accounting policies, assets are
reviewed for impairment if events or changes in circumstances
indicate that the carrying value may be impaired. The Company
assesses at each reporting date whether such indications exist.
Where appropriate, an impairment loss is recognised in the income
statement for the amount by which the carrying value of the asset
(or cash generating unit) exceeds its recoverable amount, which is.
the higher of an asset’s net realisable value and its value in use.
Leases
Finance leases, where substantially all the risks and rewards
incidental to ownership of the leased item have passed to the
Company are capitalised at the inception of the lease with a
corresponding liability recognised for the fair value of the leased
item or, if lower, at the present value of the minimum lease
payments. Lease payments are apportioned between the finance
charges and reduction of the lease liability so as to achieve a
constant rate of interest on the remaining balance of the liability.
Capitalised leased assets are depreciated over the shorter of
the estimated useful life of the asset and the lease term.
Leases where substantially all the risks and rewards of ownership of
the asset are retained by the lessor are classified as operating leases.
and rentals are charged to the income statement account over
the lease term. The aggregate benefits of incentives are recognised
as a reduction of rental expenses over the lease term on a straight-
line basis.
Investments in joint ventures
Investments in joint ventures within the Company's financial
statements are stated at cost less any accumulated impairment losses.
Investments in sub: ies
Investments in subsidiaries within the Company's financial
statements are stated at cost less any accumulated impairment
losses. The carrying value relates solely to the Company's
investment in Post Office Management Services Limited, a 100%
subsidiary of the Company and is less than £lm.
Inventories
Stocks, which include printing and stationery, retail and lottery
products, are carried at the lower of cost and net realisable value
after adjusting for obsolete or slow-moving stock.
Taxation
The charge for current income tax is based on the results for the
year as adjusted for items which are not taxed or are disallowed. It is
calculated using tax rates in legislation that has been enacted or
substantively enacted by the balance sheet date.
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nancial statements
Deferred income tax assets and liabilities are recognised for all
taxable and deductible temporary differences and unused tax assets
and losses except:
* Initial recognition of goodwill
* The initial recognition of an asset or liability in a transaction that
is not a business combination and, at the time of the transaction,
affects neither the accounting profit nor taxable profit and loss;
* Taxable temporary differences associated with investments in
subsidiaries’ interest in joint ventures, where the timing of the
reversal of the temporary difference can be controlled and it is
probable that the temporary difference will not reverse in the
foreseeable future; and
* Deferred tax assets are recognised only to the extent that it is
probable that taxable profit will be available against which they
can be utilised,
Deferred tax assets and liabilities are measured at the tax rates that
are expected to apply to the period when the tax asset is realised or
the liability is settled, based on tax rates that have been
substantively enacted at the balance sheet date. Deferred tax
balances are not discounted.
Current and deferred tax is recognised in the income statement,
except to the extent that it relates to items recognised in other
comprehensive income or directly to equity. In this case, the tax is
also recognised in other comprehensive income or directly in
equity, respectively.
Pensions and other post-retirement benefits
Membership of occupational pension schemes is open to most
permanent UK employees of the Company. All members of defined
benefit schemes are contracted out of the earnings-related part of
the State pension scheme.
The pension assets of the defined benefit schemes are measured at
fair value. Liabilities are measured on an actuarial basis using the
projected unit credit method and discounted at a rate equivalent to
the current rate of return on a high quality corporate bond of
equivalent currency and term. The resulting defined benefit asset or
liability is presented separately on the face of the balance sheet. Full
actuarial funding valuations are carried out at intervals not normally
exceeding three years as determined by the Trustees and, actuarial
valuations are carried out at each balance sheet date and form the
basis of the surplus or deficit disclosed. When the calculation at the
balance sheet date results in net assets to the Company, the
recognised asset is limited to the present value of any future refunds.
of the plan or reductions in future contributions to the plan (the
asset ceiling).
For defined benefit schemes, the amounts charged to operating
profit, as part of staff costs, are the current service costs and any
gains and losses arising from settlements, curtailments and past
service costs. The net difference between the interest costs and the
PAGE 105
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Notes to the financial statements
expected return on plan assets is recognised as net pensions interest
in the income statement. Actuarial gains and losses are recognised
immediately in the statement of comprehensive income. Any
deferred tax movement associated with the actuarial gains and
losses is also recognised in the statement of comprehensive income.
For defined contribution schemes, the Company's contributions are
charged to operating profit, as part of staff costs, in the period to
which the contributions relate.
Foreign currencies
The functional and presentational currency of the Company is
sterling (E).
Transactions in foreign currencies are recorded at the rate ruling at
the date of the transaction (or at the contracted rate if the
transaction is covered by a forward foreign currency contract).
Monetary assets and liabilities denominated in foreign currencies are
retranslated at the rate of exchange ruling at the balance sheet date
(or the appropriate forward contract rate). Alll differences are taken
to the income statement.
Trade receivables
Trade receivables are recognised and carried at original invoice
amount less an allowance for any non-collectable amounts. An
estimate for doubtful debts is made when collection of the full
amount is no longer probable. Bad debts are written off when
identified.
Borrowing costs
Borrowing costs are recognised as an expense when incurred
unless they are directly attributable to the construction or
development of a qualifying asset, in which case they are capitalised
using the weighted average cost of borrowing for the period of
construction/development.
Government grants
Government grants of a revenue nature are recognised to match
costs in relation to the performance of certain specified activities.
Provisions
Provisions are recognised when the Company has a present
obligation (legal or constructive) as a result of a past event, it is
probable that an outflow of resources will be required to settle the
obligation, and a reliable estimate can be made of the amount of the
obligation. If the effect of the time value of money is material,
provisions are determined by discounting the expected future cash
flows at an appropriate pre-tax rate.
Financial instruments
The classification of financial instruments included on the balance
sheet is set out below:
Financial assets
Financial assets are classified into the following categories: at fair
value through the income statement, loans and receivables, and
available for sale as appropriate based on the purpose for which
they were required. Financial liabilities are classified as either fair
value through the income statement or as financial liabilities
measured at amortised cost.
Financial liabilities ~ interest-bearing loans and borrowings
All loans and borrowings are classified as financial
liabilities measured at amortised cost.
Financial liabilities - obligations under finance leases
All obligations under finance lease and hire purchase contracts
are classified as financial liabilities measured at amortised cost.
Derivative financial instruments
The Company uses derivative financial instruments to manage its
exposure to fluctuations in foreign exchange rates. Such derivative
financial instruments are stated at fair value. Hedge accounting has
not been adopted for foreign exchange derivative instruments.
Fair valve measurement of financial instruments
The fair value of quoted investments is determined by reference
to bid prices at the close of business on the balance sheet date.
Where there is no active market, fair value is determined using
valuation techniques. These include using recent arm's length
market transactions; reference to the current market value of
another instrument which is substantially the same; and discounted
cash flow analysis and pricing models. Specifically, in the absence of
quoted market prices, derivatives are valued by using quoted
forward prices for the underlying currency and discounted using
quoted interest rates. Hence derivative assets and liabilities are
within Level 2 of the fair value hierarchy as defined within IFRS 7.
For the purposes of disclosing the fair value of investments held at
amortised cost in the balance sheet, in the absence of quoted
market prices, fair values are calculated by discounting the future
cash flows of the financial instrument using quoted equivalent
interest rates as at close of business on the balance sheet date.
Derecognition of financial instruments
A financial asset or liability is derecognised when the contract that
gives rise to itis settled, sold, cancelled or expires.
Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at
bank and in hand and short-term deposits (cash equivalents) with an
original maturity date of three months or less. In addition the
Company uses Money Market funds as a readily available source of
cash, and these funds are also categorised as cash equivalents
Auditor's remuneration
The remuneration paid to auditors is disclosed in the Group financial
statements (note 4).
Directors’ emoluments
The emoluments paid to Directors are disclosed in the Group
financial statements (note 6).
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2. Intangible assets
Coa 2015 2014
Em £m
At31 March 2014, 1 April 2013 243 208
Reclassifications @)
on xdditions 57 2
Disposals : un
At 29 March 2015, 30 March 2014 297 243
At 3 March 2014.1 April 2013 243 208
Reclassifications @)
Impairment (see note 5 in the Group financial statements) 57 22
sposals 6 a)
‘At29 March 2015, 30 March 2014 297 203
Net book value
At 29 March 2015, 30 March 2014 :
The above intangible assets relate to software.
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Notes to the financial statements
3. Property, plant and equipment
Land and Buildings
Plant Fixtures
Long Short Motor and and
Freehold leasehold leasehold Vehicles. += machinery — equipment Total
im im im im £m im im
Cost
At31 March 2014 100 V7 m3 44 1 739 1,014
Reclassification
Disposals “ 2) : (2) (5) : (13) (24)
‘At29 March 2015 83 55 115 40 1 783 1.077
Depreciation
At31 March 2014
Reclassification*
Impairment (see note 5
in the Group financial 16 12 = 1 = 55 84
statements)
Disposals Q) 2 (4) (5) 3 (13) (24)
At 29 March 2015 74 54 mS 40 1 783 1,067
Net book value
At 29 March 2015 © 1 2 ° 2 ® 10
At 30 March 2014 9 1 - : : - 10
Depreciation rates are disclosed within accounting policies (note 1). _* Reclassification between freehold, long leasehold and short
No depreciation is provided on freehold land, which represents _ leasehold asset categories is due to the fact that all land and building
£3 million (2014: £3 million) of the total cost of properties. assets are classified as freehold whilst they are an asset under
construction, then once works are complete and lease contracts are
confirmed, the asset is moved into the correct respective category.
4. Investment in subsidiaries
The carrying value of £100 relates solely to the Company's investment in Post Office Management Services Limited, a 100% subsidiary
of the Company. The registered address of Post Office Management Services Limited is Finsbury Dials, 20 Finsbury Street, EC2Y 9AQ
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5. Investments in joint ventures
2015 2014
Em £m
Investment in joint ventures 1 1
Joint ventures the provision of Bureau de Change. First Rate Exchange
During 2014/15 and 2013/14, the Company’s only joint venture Services Holdings Limited is a company registered in
investment was a 50% interest (1,000 £1 ordinary A shares) in First the United Kingdom. The registered address of First Rate
Rate Exchange Services Holdings Limited with a carrying value Exchange Services Holdings Limited is Great West House,
of £0.6 million (2014: £0.6 million), whose principal activity is Great West Road, Brentford, Middlesex, TW8 9DF.
6. Trade and other receivables
2014
2015 (Restated)
£m £m
Current
Trade receivables
101 105
Amounts owed by group undertakings
Prepayments and accrued income
106 82
Client receivables
162 158
Other receivables 28 8
Total 399 353
Non-current
Prepayments and accrued income 10 15
7. Cash and cash equivalents
2014
2015 (Restated)
£m £m
Cash in the Post Office Limited network 708 657
Short-term bank deposits
89 30
Money market fund investments 20 :
Total 8i7 687
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Notes to the financial statements
8. Trade and other payables
2015 2014
im £m
Current
Bank overdraft - 50
Trade payables 29 55
Accruals 159 133
Deferred income
Social sec
Obligations under finance lease - 3
Capital payables 31
Business transformation : 10
Other payables : : a & i
Total 76 770
Non-curret
Other payables 30 28
9. Financial liabilities - interest bearing loans and borrowings
2015 2014
im £m
Department of Business, Innovation & Skills 310
loan drawn down
The loan under the facility is short dated on a programme of liquidity management and matures on average 1 day after the year end (2014:1
day). The fair value of borrowings approximate their carrying value due to the short-term maturities of the loan. On maturity itis expected
that further loans will be drawn down under this facility, which expires in 2018, The undrawn committed facility, in respect of which all
conditions precedent had been met at the balance sheet date, is £840 million (2014: £1,150 million). From the 30 March 2015 the total
facility reduces from £1,150m to £950m.
The average interest rate on the drawn down loans is 1.0% (2014: 1.0%).
The facility is currently restricted to funding the cash and near cash items held within the Post Office Limited network.
The facility (including drawn down loans) is secured by a floating charge over all assets of Post Office Limited and a negative pledge over
cash and near cash items. The negative pledge is an agreement not to grant security over the assets or to set up a vehicle that has the same
effect.
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10. Provisions
Crown
Conversions Network
Project Transformation Other Total
im im im im
At 31 March 2014 2 51 25 78
Charged in operating exceptional items : 67 29 %
Charged in operating costs > = 16 16
Utilisation (i) (78) (43) (122)
Unused amounts in the year ~ operating exceptionals
nused amounts in the year ~ operating costs :
At 29 March 2015 Z 40
Disclosed as:
Current - 39 18 57
Non-current - 1 5 6
40 23 63
The Crown Conversions project related to past franchising of Crown offices and onerous property lease provisions.
The Network Transformation provision relates to the major transformation programme which is discussed further in the Business and
Strategy Review on page 14.
Other provisions of £23 million (2014: £25 million) include onerous lease obligations, severance and personal injury claims.
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Notes to the financial statements
Tl. Pensions
The disclosures in this note relating to the year ended 29 March 2015 and the comparatives for the year ended 30 March 2014 reflect the
Post Office Limited sectionalised RMPP scheme which is independently operated by the Company and the 7% share of the RMSEPP
scheme. Royal Mail Group Limited is the principal employer in Royal Mail Senior Executive Pension Plan (RMSEPP) and Post Office Limited
became a participating employer with effect from 1 April 2012.
The disclosures in this note show how the value of the assets and liabilities has been calculated at the balance sheet date. The Company
participates in pension schemes as detailed below.
Name
Eligibility Type
Royal Mail Pension Plan (RMPP)
UK employees
Defined benefit
Royal Mail Senior Executive Pension Plan (RMSEPP)
UK senior executives
Defined benefit
Royal Mail Defined Contribution Plan (RMDCP)
UK employees
Defined contribution
Defined Contribution
The charge in the income statement for the defined contribution
schemes and the Company contributions to these schemes
was £3 million (2014: £2 million) during the year. A new
defined contribution plan (RMDCP) was launched in Apri
2009. With effect from 1 April 2015 RMDCP will be replaced
by Post Office Pension Plan. New recruits joining from 31
March 2008 are able to begin paying contributions to the new
plan after they have worked for the Company for a year.
Defined Benefit
Both RMPP and RMSEPP are funded by the payment of
contributions to separate trustee administered funds. The latest
full actuarial funding valuation of RMPP was carried out as at
1 April 2012 using the projected unit method. For RMPP, this
valuation was concluded at £135 million surplus. The latest full
actuarial funding valuation of RMSEPP was carried out as at
31 March 2012 using the projected unit method. For 100% of
the RMSEPP plan, the valuation was concluded at £83 million
deficit. Valuations are carried out triennially and the next one
will be performed as at] April 2015. RMPP includes sections
A, Band C each with different terms and conditions:
* Section A is for members (or beneficiaries of members) who
joined before 1 December 1971;
* Section B is for members (or beneficiaries of members) who
joined after 1 December 1971 and before 1 April 1987 or to
members of Section A who chose to receive Section B
benefits;
* Section C is for members (or beneficiaries of members) who
joined after 1 April 1987 and before 1 April 2008.
PAGE TI2 corporate.postoftice.co.uk/annualreportl415,
Asseries of changes to RMPP and RMSEPP began to take
effect on 1 April 2008. The changes encompassed:
* — The Plans closed to new members from 31 March 2008;
* — All pensions and benefits earned before 1 April 2008 are
linked to final pensionable salary, but defined benefits built up
from
1 April 2008 are earned on a “career average pensionable
salary” basis;
* From] April 2014, pensionable salary was amended to the
amount in force at that date, increasing each I April thereafter
in line with RPI (up to 5% each year), with allowance for
certain promotional increases. This change resulted in a one-
off exceptional gain of £102 million for the 2013/14 financial
year;
* Employees can continue to take their pension on reaching
60 but the normal retirement age increased to 65 for benefits
earned from 1 April 2010;
* From 1 April 2010 itis possible to draw pension earned before
the change to normal retirement age at 55, and continue
working while still contributing to the Pension Plan until the
maximum level of benefits has been reached; and
+ RMSEPP was closed to future accruals on 31 December 2012.
Payment of £19 million (2014: £21 million) was made by the
Company during the year in respect of regular future service
contributions, nearly all relating to RMPP. The regular future service
contributions for RMPP, expressed as a percentage of pensionable
pay, has remained at 17.1% (2014 17.1%), effective from April 2010.
This rate is not expected to change materially during 2015/16.
The Company pays 7% of the total deficit payment required to
fund the deficit in RMSEPP and a payment of £1 million (2014: £1
million) was made by the Company during the year. No RMPP
deficit payments were made during 2013/14 or 2014/15. For
RMSEPP, deficit recovery payments will be £1 million per annum,
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from 1 April 2010 to 31 January 2024.
A current liability of £1 million (2014: £nil) has been recognised for payments to the pension schemes relating to redundancy. During the
year, payments of £2 million (2014: £1 million) relating to redundancy were made.
The weighted average duration of the RMPP fund is 28 years, and for the RMSEPP fund is 21 years. Over the next financial reporting period
to 27 March 2016 it is expected that employer contributions to the plans will be £19 million and £1 million for RMPP and RMSEPP
respectively.
The following disclosures relate to the gains/losses and surplus/deficit in the scheme recognised for RMPP and RMSEPP defined benefit
plans in the financial statements of the Company:
a) Major long-term assumptions
The size of the RMPP pension surplus, which is large in the context of the Company and its finances, is materially sensitive to the
assumptions adopted, Small changes in these assumptions could have a significant impact on the surplus and overall income statement
charge. The major long-term assumptions in relation to both RMPP and RMSEPP were:
At 29 March 2015 At 30 March 2014
Rate of increase in salaries
Rate of pension increases - RMPP sections A/B
Rate of pension increases - RMPP section C
Rate of pensions increases ~ RMSEPP members
___ transferred from Section A or B of RMPP_
Rate of pension increases ~ RMSEPP all other members
Rate of increase for deferred pe! ins - RMSEPP members
__.transferred from Section A or B of MPP.
Rate of increase for deferred pensions
Discount rate
Inflation assumption (CPI) - RMPP
2.3
Inflation assumption (RPI) - RMSEPP 3.0 3.4
Inflation assumption (CPI) - RMSEPP 19 2.4
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Notes to the financial statements
The ultimate cost of the RMPP plan to the Company will depend
upon future events rather than the assumptions made. The
assumptions made may not be borne out in practice and as such
the cost of the plan may be higher (or lower) than disclosed.
In common with other defined benefit schemes, the main risk in
relation to the arrangements is the value of the assets does not keep
pace with the increase in the value of the liabilities. This can arise
for many reasons, but the most significant risks are as follows:
Investment risk: If the assets of the arrangements fall short of
expectations, this will lead to a decrease in the funded status.
Asset volat he arrangements hold return seeking assets
{including equities and property) which are expected to outperform
corporate bonds in the long-term but give exposure to
volatility and risk in the short term. RMPP does, however,
invest in liability driven investment (LDI) assets, for example
corporate bonds, which mitigates the impact of interest
rate and inflation volatility on the funded status.
Inflation risk: Higher inflation rates than expected will act
to increase the plan liabilities as benefits will increase to
a higher level than assumed. The arrangements have a maximum
pension increase (generally 5% per annum) written into the
rules which limits the increase for many benefits, so limiting the
impact of high inflation. This includes pensionable pay in RMPP,
which was amended with effect from 1 April 2014. In addition, the
arrangement holds assets that increase in value as price inflation
expectations rise, so mitigating the impact of rising inflation
expectations. These assets include LDI assets in respect of RMPP.
Changes in bond yields: A decrease in corporate bond yields will
increase the plan liabilities, although this will be partially offset by
an increase in the value of the bond holdings and, to some extent,
the LDI assets.
Pensioner longevity: If members live longer than expected, the
liabilities would increase because pensions would be paid for a
longer time.
Liabilities accrued in the Royal Mail Pension Plan to 31 March 2012
were transferred to the Royal Mail Statutory Pension Scheme.
These liabilities are no longer an obligation of the Company and
consequently the transfer resulted in a significant removal of
pension risk from the Company.
The following table shows the potential impact on the RMPP assets and pension surplus of changes in key assumptions:
2014
im
2015
£m
Changes in real salary growth of +0.1% pa
(4)
() (1)
Changes in CPI assumptions of +0.1% pa
An additional 1 year life expectancy
)
The sensitivity analysis has been prepared using projected
benefit cashflows as at the latest full actuarial valuation of the
plan. The same method was applied as at the previous reporting
date. The accuracy of this method is limited by the extent to
which the profiles of the plan cashflows have changed since
those valuations although any change is not expected to be
material in the context of the above sensitivity analysis.
Average expected life expectancy from age 60:
Mortality
The mortality assumptions for the RMPP sectionalised scheme
are based on the latest self-administered pension scheme (SAPS)
mortality tables with appropriate scaling factors (106% for
male pensioners and 101% for female pensioners). For future
improvements the assumptions allow for ‘medium cohort’
projections with a 1.25% floor. These are detailed below:
2015 2014
For a current 60 year old male RMPP member
2Tyears 26 years
For a current 60 year old female RMPP member
30 years 29 years
For a current 40 year old male RMPP member
2Wyears 29 years
For a current 40 year old female RMPP member
32years 32 years
PAGE NIA
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b) Plans’ assets
The assets in the plans for the Company were:
Sectionalised RMPP Market value 2015 Market value 2014
£m £m
Property
Private Equity
Alternative asset fun:
Equity funds
379 260
Fair value of RMPP
Present value of RMPP liabilities (150) (90)
Surplus in plan before asset ceiling adjustment 229 170
Less effect of asset ceiling (27) (23)
Surplus in plan after asset ceiling adjustment 202 7
dinianene Market value 2015 Market value 2014
£m £m
1 1
UK equities
Overseas equi
Government bonds
Corporate bonds
Other assets
Fair value of share in plan assets for RMSEPP
Present value of share in plan liabilities for RMSEPP. (26) (24)
Surplus in plan for the share of RMSEPP before asset ceiling adjustment 5 2
Less effect of asset ceiling 2) ()
3 1
Surplus in plan for share of RMSEPP after asset ceiling adjustment
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Notes to the financial statements
A retirement benefit surplus of £205 million is disclosed on There is no element of the above present value of liabilities that
the balance sheet, representing the surplus in plans of £229 arises from plans that are wholly unfunded. The categories of
million and £5 million for RMPP and RMSEPP respectively, and plan assets as a percentage of total plan assets are as follows:
net of tax of £29 million at a rate of 35% on the element of the
surplus which is recoverable through a refund from the plans.
Securities with quoted price in an active market:
2015 2014
Li
Sectionalised RMPP % %
UK equities -
Overseas equities
Corporate bonds
Property
Private equity
Cash and cash equivalents
Bond/fixed interest funds
Indexclinked funds 3 3
Other loan/debt funds 5 2”
Alternative asset funds : ; I ss
Equity funds 4
Total quoted securities 100
Sectionalised RMSEPP or ao
Other assets 3 4
Total quoted securities 100 100
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¢) Movement in plans’ assets and liabilities
Changes in the fair value of the plans’ assets are analysed as follows:
Sectionalised Sectionalised
Assets RMPP 2015 RMPP 2014
£m £m
Assets in sectionali
.d RMPP at beginning of period
Contributions paid
Employee contributions paid
Actuarial gains/{losses)
Benefits paid to members 2) (1)
Assets in sectionalised RMPP at end of period 379 260
Share of Share of
Assets RMSEPP 2015 RMSEPP 2014
fim £m
Share of assets in RMSEPP at beginning of period
Contributions paid
Finance income
Actuarial gains
Benefits paid to members @ ()
Share of assets in RMSEPP at end of period 31 26
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Notes to the financial statements
Changes in the present value of the defined benefit pension obligations are analysed as follows:
Sectionalised Sectionalised
Liabilities RMPP 2015 RMPP 2014
im £m
Liabilities in sectionalised RMPP at beginning of period (90) (144)
Royal Mail Pension Plan amendment - 102
Current service cost (25) (25)
Curtailment costs*
Finance cost
Employee contributions
Aetuarial loss : a = (23) —e_
Experience adjustments on liabilities
Benefits paid 2 1
Liabilities in sectionalised RMPP at end of period (150) (90)
Share of Share of
Liabilities RMSEPP 2015 RMSEPP 2014
£m £m
Share of liabilities in RMSEPP plans at beginning of period (24) (24)
Finance cost () ()
Actuarial gain/(loss) @) :
Benefits paid 1 1
Share of liabilities in RMSEPP at end of period (26) (24)
*The curtailment costs in the income statement are recognised on a consistent basis with the associated compensation costs. Estimates of
both are included, for example, in any redundancy provisions raised. The curtailment costs above represent the costs associated with
those people paid compensation in respect of redundancy during the accounting period. Such payments may occur in an accounting
period subsequent to the recognition of costs in the income statement.
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d) Recognised charges
An analysis of the separate components of the amounts recognised in the performance statements of the Company is as follows:
Sectionalised Sectionalised
RMPP 2015 RMPP 2014
im £m
Loss due to curtailments 1 1
Total charge/(credit) to operating profit 26 (76)
Analysis of amounts char;
.d (credited) to net pensions interes!
Interest on plan liabilities
Interest income on plan assets (12) (12)
Net pensions credit to financing (7) (5)
Net charge/(credit) to the income statement before deduction for tax 9 (81)
Analysis of amounts recognised in the statement of comprehensive income:
Actual return on plan assets 93 )
expected interest income on plan assets )
Leen taantian emourpliis memvarable tarecgh plan raf ards (4) (20)
‘Actuarial gains/{losses) on assets (all experience adjustments) 7 (44)
Experience adjustments on liabilities
Effects of changes in actuarial assumptions on liabilities (23) 8)
Actuarial losses on liabilities (24) 8)
Total actuarial gains/(losses) recognised in the statement of = (52)
comprehensive income
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Notes to the financial statements
Share of RMSEPP_ Share of RMSEPP.
2015 2014
£m £m
Analysis of amounts recognised in the income statement
‘Analysis of amounts charged/\credited) to net pensions interest: _
Interest on plan liabilities
Interest income on plan assets () ()
Net pensions credit to financing - 7
Net charge/(credit) to the income statement before deduction for tax - -
Less: expected interest income on plan assets
Less: taxation on surplus recoverable through plan refunds
Actuarial gains on assets (all experience adjustments) 3
Experience adjustments on liabilities G
Effects of changes in actuarial assumptions on liabilities 2)
Actuarial losses on liabilities 1 -
Total actuarial gains recognised in the statement of 1 .
comprehensive income
12. Called up share capital
2015 2014
Author
Ordinary shares of £1 each 51,000 51,000 °
Total 51,000 51,000
Allotted and issued
Ordinary shares of £1 each $0,003 50,003 .
Total 50,003 50,003
15. Commitments 16. Finance lease liabilities
Capital commitments contracted for but not provided in the Details of the Company's finance lease liabilities are
financial statements amount to £96 million (2014: £68 million). disclosed in the Group financial statements (note 21).
Details of the Company commitments under non-
cancellable operating leases are disclosed in the
Group financial statements (note 20).
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17. Related party disclosures
Details of transactions with related parties are disclosed in the The transactions were in the ordinary course of business.
Group financial statements (note 22). The transactions entered into and the balances outstanding
at the financial year end were as follows:
Post Office Management Services Limited, a 100% subsidiary
of the Company is disclosed as a related party below but this is
not required in the Group financial statements.
Sales/recharges to Purchases/recharges AAmountsiqwed from Pumante wend be
lated ke f ated ba related party including __ related party including
Felated' party rom related’ party outstanding loans outstanding loans
2015 2014 2015 2014 2015 2014 2015 2014
£m £m £m £m im fim im £m
Post Office
Management 1 - - - 2 - - -
Services Limited
18. Operating exceptional items 21. Immediate and ultimate parent company
Details of operating exceptional items are disclosed At 29 March 2015, the Directors regarded Postal Services Holding
in the Group financial statements (note 5). Company Limited as the immediate and ultimate parent company.
Pe The largest group to consolidate the results of the Company is
19. Taxation Postal Services Holding Company Limited, a company registered
Details of the taxation gains recognised in the year are in the United Kingdom. Postal Services Holding Company Limited
disclosed in the Group financial statements (note 8a). financial statements can be obtained from Finsbury Dials,
20 Finsbury Street, EC2Y 9AQ.
20. Post balance sheet events y
In accordance with the funding agreement with Government
announced on 27 November 2013, for which State Aid approval
was received on 19 March 2015, Post Office Limited received
£280 million of funding on 1 April 2015.
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Corporate information
Registered Office
Post Office Limited
Finsbury Dials
20 Finsbury Street
London
EC2Y 9AQ
Auditor
Ernst & Young LLP
1 More London Place
London
SEI 2AF
Solicitor
Linklaters LLP
One Silk Street
London
EC2Y 8HQ
Actuary
Towers Watson Limited
Watson House
London Road
Reigate
Surrey
RH29PQ
Consumer Body
Consumer Focus
Ath Floor
Artillery House
Artillery Row
London
SWIP 1RT
PAGE122 corporate postoffice.co.uk/annualreportl 415
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ncial statements
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