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ime =
QO2TU/22.
Presented to Peniament purse to ssciion 77
Of the Postal Sarvicas Act 2000
I
ALON
A06 24/02/2023 #152
COMPANIES HOUSE
Registered] Numberg21 54540)
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Contents
Strategic Report
Chairman's Foreword
Chief Executive Statement
Financial and Business Review 9
Governance
Corporate Governance 18
Board of Directors 18
Remuneration Committee Chair's Statement 31
Management of Risk 53
Streamlined Energy & Carbon Reporting 58
Directors’ Report 63
Financial Statements
Independent Auditors’ Report to the members of Post Office Limited 69
Consolidated Income Statement 74
Consolidated Statement of Comprehensive Income 75
Consolidated Statement of Cash Flows 76
Consolidated Balance Sheet 77
Consolidated Statement of Changes in Equity 78
Notes to the Financial Statements 79
Company Financial Statements 130
Corporate information 146
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Strategic Repor
The Strategic Report for the Post Office comprises the Chairman's Foreword, Chief Executive Statement and
Financial and Business Review.
Chairman’s Foreword
As I approach the end of my tenure as the Chair of the Post Office Board,
lam thoughtful of the many changes I have witnessed across the business
since 2015 — and as we pass the decade anniversary since our separation
from Royal Mail. During this time, I have met countless brilliant people and
been fortunate to visit post offices across the UK. Above all, I have time
and again been inspired by Postmasters whose knowledge, expertise and
service are needed as much today as at any time in Post Office's history.
As Chairman, I have a shared responsibility with the Chief Executive and
Board colleagues to safeguard the future of Post Office for the next
generation. With this firmly in mind, I have two reflections on the past
financial year.
The first is in relation to the business’ financial position. The business
made a trading loss of £119 million in 2012. By 2020, and before the
onset of the pandemic, Post Office made a trading profit of £82 million.
This represents the significant progress we have made over the last decade towards commercial sustainability
and reduced reliance on Government. This, by any measure, is a remarkable turnaround for a public-owned
business whose only incentive to make profit is to better serve and support communities across all four
countries of the UK.
In 2021/22, a decade on since independence, Post Office was able to make further progress in this regard,
exceeding its target with an underlying trading profit of £42 million, up £7 million on the previous year. This is
of course a drop from our pre-pandemic performance, but nevertheless it reflects a robust trading performance
as well as our continued success in managing our costs — despite the pandemic, despite a depressed travel
market and despite an increasingly turbulent global economic outlook. This performance — and indeed the
successes of the last few years — is entirely due to the hard work of our Postmasters and their teams, our
Directly Managed Branches ("DMBs"), supply chain staff and our support function colleagues, for which they
have my deepest gratitude.
To be candid, there are challenges ahead for the business — even in my long career, I have witnessed few
uniquely challenging years as those which Post Office is set to face. Many of our customers’ lives are now digital
in nature; the outlook for the global economy is gloomy, exacerbated by Russia's invasion of Ukraine; in the UK,
many, not least our Postmasters, are starting to feel the bite of the cost of living crisis. Post Office also faces its
own, particular challenges in the months ahead. We must continue to play our part in righting historic wrongs,
but also separately need to reckon with reduced funding from Government to invest in our business due to the
myriad pressures on the public finances. Like other businesses and households across the UK, Post Office must
therefore reprioritise its plans consistent with the funds we have available, which may mean our journey to
become less reliant on Government is extended in turn.
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My second reflection is on the unfolding Horizon IT scandal. This past financial year was one of the most difficult
in the history of the business. The year began with the Court's findings that dozens of former Postmasters had
been wrongly convicted of fraud, theft and false accounting. Since December 2020, some 81 Postmasters have
had their convictions quashed and we are doing all we can to encourage and support many more who may also.
have suffered the same fate to come forward. Alongside this, Sir Wyn's public Inquiry into the Horizon IT
scandal was, quite rightly, placed onto a statutory footing and began its oral hearings in February 2022. These
shone a new light on the profound human costs of this colossal injustice. As distressing and uncomfortable as.
they are, it is an essential precursor to restoring the requisite trust with Postmasters and other stakeholders on
which our future success depends.
We have made real progress over the last year in righting those wrongs. Working with Government, we secured
funding in December 2021 for those with overturned historical convictions and, to date, of the 81 Postmasters
whose convictions have been quashed (80 Post Office prosecutions and 1 Crown Prosecution Service
prosecution), we have made interim payments of up to £100,000 to 70. Meanwhile, we continue to pay civil
compensation through the Historical Shortfall Scheme ("HSS") to Postmasters who have been affected by
financial discrepancies related to previous versions of Horizon. We are conscious of delays, however, and are
working hard to expedite payments. This is beginning to bear fruit, and we expect to have made 95% of HSS
offers by the end of the calendar year. Separately, we have been working with Government to address the
injustice for those whose claims were settled in the Group Litigation, and welcome the announcement in March
2022 that the Government will be providing them with appropriate redress. Achieving fair compensation for all
is a complex and, at times, frustratingly long process but, working with Government, we will not rest until that
goal is achieved.
Beyond reassurance that history will not repeat itself, a key determinant in our success, now and in the future,
will be the extent of confidence our Postmasters feel in their ability to thrive commercially, properly supported
by Post Office as they look to grow their businesses.
We have taken determined steps to ensure that we have a genuine understanding of the support Postmasters
need, not least in appointing two to our Board as Non-Executive Directors, as well as a serving Postmaster as
an executive Director, to ensure our future is grounded in the reality of their experiences. We have established
both regional and local Postmaster forums, as well as Postmaster working groups on key topics to promote
genuine collaboration. We are transforming our IT to ensure Postmasters have the latest data and information
at their fingertips so that they can make informed decisions about how best to run their branch. Each of our
senior leaders now spends time getting to know Postmasters in a designated area to see first-hand how they
can best help them in their work — with feedback collated and circulated across the business. We are also
involving Postmasters through a suite of working groups of key topics, for instance in co-designing our new IT
system to replace Horizon. Indeed, we passed a significant milestone this year as we completed our first
transactions independently of Horizon as part of trials for our new, lighter-touch ‘Drop and Collect’ format.
Importantly, we now know these efforts are beginning to bear fruit. We held our second Postmaster Research
consultation earlier this year, providing essential insight to better understand our Postmasters’ needs and shape
the business's priorities accordingly. Our research shows that, compared to a year ago, more Postmasters are
positive about their relationship with Post Office; more feel supported by the business; more feel that Post
Office recognises their critical importance, and more sense that Post Office understands their day-to-day
challenges. Forging a strong partnership with Postmasters will take time. This isn't about quick fixes or easy
wins, but a fundamental rebalancing in every part of the business.
In my time, I have seen my fair share of businesses navigate their way through change and challenges. I have
been with them through the good and the bad — both financially and reputationally. And so, if I may, it is with a
certain level of confidence borne of experience that I can say that the fundamentals of the Post Office are still
strong. Of course, the world is becoming ever more digital. Yet the online world will always have its limits and
confines; and there will always be things better done in person — whether taking out cash or posting a parcel.
And with a network of over 11,500 branches - each manned by a Postmaster you can talk to face-to-face - we
are the only retailer in each country and every community across the UK.
Post offices are more than just another retailer on the high street - more than a bank, more than a place to buy
essentials, more than a stop-off to collect a parcel or a spot to top-up the energy meter. It is all this, but also
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more than the sum of these parts. I leave the business in the capable hands of the Chief Executive Officer and
his team, and the Post Office Board. We have overcome many obstacles together, and I am sure there will be
more to come, but our purpose and intent to 2025 will steer us on the path of building a more successful,
sustainable and sought-after business that we can continue to be proud of.
Tim Parker
Chairman
17 August 2022
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Chief Executive Statement
Itis tempting to dwell on the continuing impact of the COVID-1Y pandemic
‘on the world and, of course, on the Post Office. However, there are many
other, more positive, stories to tell about our business over the past
financial year - stories made all the more remarkable given they took place
in the midst, and in spite, of the pandemic.
While there is certainly much to celebrate about our commercial
performance over the past year, one of those storles exernplifies yur sucial
purpose. We are privileged as a Government-owned business to be able
to use other metrics, over and above the traditional financial ones, to
measure our success. With a presence in every community in the UK, the
last year has seen us step up time and again to help those most in need in
a uniqucly challenging year. Indeed, the trials of the pandemic were almost
immediately substituted by another unwelcome surprise when Russia
invaded Ukraine. In March we supported the Disaster Emergency Committee's Ukraine humanitarian appeal to
support those fleeing the appalling crisis there, raising £1 million in just the last few weeks of our financial year
and building on important work earlier in the year to support its Coronavirus appeal.
More recently, as the economic context has worsened, we have partnered with others to use the strength, trust
and reach of our brand to help the UK through these difficult times. Take our partnership with the Trussell Trust
to help fight UK hunger for example where, by pledging 1p for every cash withdrawal made over our counters,
we were able to donate nearly £300,000 in total - surpassing our target by an impressive 18%. 2021/22 saw
continued strong demand for our ‘Payout’ service with £85 million paid out to customers through over 850,000
vouchers for schemes like the Warm Homes Discount. We have since seen further demand for the product
across public sector clients and charities; from the start of the 2022/23 financial year to 31 July 2022 we paid
out £168 million in vouchers, a year on year increase of nearly 100% in the first four months of 2022/23 alone,
when compared to the whole of 2021/22. As the cost of living crisis deepens, market-leading products like
Payout demonstrate the enormous value of having a physical presence in each nation, and every community
across the UK. Of course, this is to say nothing of the countless stories of Postmasters going above and beyond
the call of duty to support their communities — through local fundraising, food and donation collections and
offering advice and tips to those struggling.
All the while, we have been making huge strides across the business to ensure that Post Office is a commercially
sustainable business that can continue to contribute to the public good for years to come. Indeed, I began the
past financial year by communicating to Postmasters and colleagues my Intent for the Post Office to 2025 to
become a successful, sustainable and sought-after retailer that is less reliant on Government subsidy. Despite
the obvious headwinds, we were able to meet our trading profit target thanks to the resilience and dedication
of our Postmasters, our colleagues in directly managed branches, the supply chain colleagues who distribute
cash and stock across the nation, and the wider support teams who help keep the show on the road.
In retail terms, the biggest contributors to our strong performance are our Mails and Banking businesses — both
of which have hit a number of major milestones. In Mails, following our landmark Mails Distribution Agreement
Il (‘MDA2") with Royal Mail, we have been able to open up our extensive branch network to other providers for
the first time in our long history. Within months of the financial year starting, we secured major new
partnerships with both DPD and Amazon to provide “Pick Up, Drop Off” ("PUDO”) services across our networks
and, at the time of writing, we have rolled these services out to over 5000 branches across the UK. This new
deal continues to pay dividends, with DPD Ireland recently being confirmed as our third PUDO partner and
trials for a "Drop Off” offering starting later this year.
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Meanwhile, our Banking business has a remarkable story to tell. With banks across the UK continuing to close
branches — over 700 in 2021 alone — Post Office has shown that it can step in to meet the needs of retail and
business customers across the UK. We now regularly transact more than £3 billion each month in cash
withdrawals and deposits across our counters. This has helped small business on high streets to get back on
their feet as they emerged from the pandemic. And, looking ahead, we are best placed to support countless
consumers looking to better manage their household finances by using cash more frequently as the economic
situation deteriorates. That is why it was so important to secure agreement with 30 banks and building societies
to a third Banking Framework as we did this year, which will extend this critical service for consumers and
businesses across the UK for a further three years through to December 2025.
And we have gone further still. Over the past financial year, we have been exploring innovative new solutions
like our Banking Hubs to protect free, convenient and reliable access to cash for UK communities. These pilots
first began in Rochford and Cambuslang in April 2021 as part of the Community Access to Cash Pilots. Thanks
to their overwhelming success, the Cash Action Group announced a landmark, multi-million-pound programme
to share services and help protect cash across the UK, including by rolling out additional banking hubs across
the UK. Our role in the cash and banking market will only grow in the years to come and we welcome the
Government's recent announcement about plans to introduce access to cash legislation later this year. Cash
will remain vital to millions of people and businesses across the country for quite some time yet, and I am proud
that we have championed the need to protect its continued use from the get-go.
Of course, there are a number of other success stories for our products over the past year. Particular mention
must go to our new partnership with Yoti, a global leader in digital identity services, to expand our identity
offering. With Yoti, we have launched Easy!D, a free app that allows customers to create, manage and share
their own reusable digital identity on a phone. With over 250,000 users at the time of writing, this is an exciting
opportunity to integrate digital and physical identity verification at scale so that Post Office can play a key role
in driving the UK's digital transformation. We were therefore delighted that Post Office was approved by
Government as the UK's first certified digital identity service providers for services from proving people's ‘Right
to Work’ to offering ‘Right to Rent’ checks.
These threads of success weave together to tell a very positive story about Post Office over the past financial
year — none of which would have been possible without the determination, grit and support of our Postmasters.
Our colleagues, too, have worked hard in driving improvements and innovations for Postmasters. Reflecting on
the year just gone, this was perhaps the first in a number of years that we have been able to start looking further
ahead. As Tim’s foreword demonstrated, the implications of Post Office's historic failings continue to press
upon us in the here and now - I am under no illusions about that fact. However, with the progress we have
made with Sir Wyn's public Inquiry, securing compensation for those wronged, and delivering a suite of
operational and cultural changes across the business, we have started to turn to the next chapter in Post Office's
long history.
That next chapter will also, inevitably, bring its own challenges. I am, for instance, deeply conscious of the fact
that, despite a robust performance in tricky circumstances, Postmaster remuneration fell in the year. This was
partly a reflection of customer demand for our products. We know from the responses to our survey, as well as
in our direct engagement at our Postmasters’ conference, that remuneration remains the number one concern
on the front line. Accordingly, we have put branch profitability at the top of our agenda. Our new Banking
Framework agreement provides us with an early opportunity to look again at transaction fees
Further upstream, and following lengthy discussions with our Shareholder, we now know our funding
settlement from Government for the next three years. The core settlement includes a network subsidy of £50
million a year to partially offset the costs of the unprofitable parts of the network. There is also £185 million
over the next three years for investment which will directed at transforming our technology, as we moved away
from Horizon.
Naturally, I would have liked a more generous settlement. However, I acknowledge that there are significant,
competing, pressures on the public finances at present. Moreover, support can also take different forms and,
with this in mind, I welcomed Government's willingness to consider a review of its Post Office policy to ensure
that the network is fit for purpose in the years to come. Together, we need to think creatively and ambitiously
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about the future direction of Post Office and secure it for another generation. That is a prize worth fighting for
and I am hopeful that Government will take the idea forward.
I would like to conclude by thanking Tim Parker who stands down as Chairman of the Post Office Board in
September after seven years of service. Under his guiding hand since 2015, our business has started an
ambitious journey towards sustainability, fundamentally reset its relationship with Postmasters and continued
to evolve to meet the needs of communities across the UK. My colleagues on the Board and I wish him the very
best for the future.
Nick Read
Chief Executive Officer
17 August 2022
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Financial and Business Review
Presentation of results for 2021/22
As disclosed in the consolidated income statement of the financial statements on
page 74, we have split the results of the group of companies headed by Post
Office Limited (“the Group”, “Post Office") between continuing and discontinued
operations due to disposal of the Telecoms business in the prior year. All results
in the current year relate to continuing operations.
Overview
Post Office's trading profit increased by £7 million to £42 million (2021: £35
million) principally due to the easing of COVID-19 restrictions during the final
quarter of the year. The prior year trading profit of £35 million included £5 million
operating profit with respect to the Telecoms business, which was a discontinued
operation in the prior year, as such the comparison of year on year trading profit
for continuing operations represents a £12 million increase. The primary drivers
for this increase were travel products such as travel money and insurance and increased banking volumes
thanks to easing of lockdown restrictions and increased customer use of post offices for banking services.
However, this was offset by mails trading which decreased compared to the prior year as restrictions around
social distancing eased and our customers became less reliant on letter and parcel services to keep in touch.
Despite the continuing impact of the COVID-19 pandemic, the Group achieved a sixth consecutive year of
profitable trading. We have also maintained a positive cash and security headroom position throughout the
year.
Trading profit, shown below, includes revenue and costs from the Telecoms business in the 2021 column, which
was sold to Shell Energy Retail Limited on 15 March 2021. Refer to the discontinued operations note to the
financial statements (note 21) on page 123 for further details.
2022 2021 = Variance Variance
£m £m £m %
Revenue 834 957 (123) (13)
Costs* (796) (918) 122 13
Other income 1 3 (2) (67)
Share of profit/(loss) from joint venture 3 (7) 10 143
Trading profit™ 42 35 7 20
* Excludes exceptional items, investments, depreciation and amortisation.
** Non-statutory measure which is explained further in note 24 to the financial statements.
We recognised an overall statutory loss of £130 million (2021: £661 million restated), see table on the next
page. This includes Historical Matters related costs of £84 million (2021: £610 million). The costs include legal
and running costs of £13 million related to Overturned Historical Convictions ("OHC"), £36 million related to
the Historical Shortfall Scheme ("HSS") and £12 million (2021: nil) for the statutory inquiry, in addition to
changes in the provision values for HSS, OHC and Postmaster Remediation ("PR") (see pages 13 to 15 for more
explanation regarding Historical Matters). The loss is after charging £104 million (2021: £124 million from both
continuing and discontinued operations) of depreciation and amortisation.
The prior year overall statutory loss, and other 2020/21 comparatives, have been restated after reassessment
of the treatment pertaining funding by Government of the liabilities for Historical Matters. The reassessment
concluded that a more appropriate treatment would be to recognise an asset only when the quantum for each
specific claim settlement becomes virtually certain, given the current significant estimation uncertainty
associated with settlement cashflows. As such, in 2021/22 application of this reassessment has resulted in the
previously recognised asset of £64 million being derecognised and the prior year comparatives being restated.
The impact of the restatements on the primary statements are outlined in note 26 to the financial statements.
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2022 2021
m £m
Revenue 834 957
Adjusted EBITDA: operating profit before depreciation,
amortisation, exceptional items and investments (note 92 7
24)* 85
Trading profit: operating profit before depreciation,
amortisation, exceptional items, investments and 42 35 7
Network Subsidy Payment (note 24)*
Loss for the financial year** (130) (661) 531
* Non-statutory measures which are explained further in note 24 to the financial statements.
** The loss for the 2021/22 financial year has been restated, see note 26 to the financial statements for more detail.
In 2019/20 the Group entered a net liability position for the first time since 2012, driven by the recognition of a
£153 million provision for HSS. The net liabilities position worsened in 2020/21 with the recognition of two
additional provisions: OHC of £502 million and PR of £59 million. The Group remains in a net liability position
of £724 million (2021: £720 million restated).
Post year-end and prior to the signing of these financial statements, Government has agreed to provide
additional funding in respect-of investments and Network Subsidy Payments for the periods 2022/23 through
to 2024/25, extended the term of funding for the HSS and provided written assurances of continued
Government support in respect of any potential future liabilities for which funding has not yet been confirmed,
which is in addition to the commitment to fund the OHC which was received in the year. Given the estimation
uncertainty around several significant provisions and crystallisation of any possible future liabilities, we have
set out in some detail the material uncertainties we face within the going concern assessment in note 1 to the
financial statements. While Government funding is formalised for specific time periods and requests, we believe
that Government support remains strong and we are therefore confident that we can continue to provide our
national services for the foreseeable future. Post Office therefore remains a going concern.
Revenue
The Post Office business is organised into three strategic commercial pillars. Revenue from our subsidiary Post
Office Management Services Limited ("POMS") is included within the Insurance line below. Revenue from our
subsidiary Payzone Bill Payments Limited ("Payzone’) is included within the Payment Services line below. The
divisions and their performance are detailed on the following pages.
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2022 2021 Variance Variance
n m £m %
Revenue from Continuing Operation:
Mails 356 397 (41) (10)
Retail, Lottery & Gift Cards 34 34 - -
Government Services 21 14 7 50
Mails, Retail & Government Services 411 445 (34) (8)
Banking Services & ATMs 230 205 25 12
Transactional Financial Services 60 58 2 a)
Payment Services 28 29 (1) (3)
Post Office Card account ("POCa”) 11 14 (3) (21)
Banking, Payments & Transactional Services 329 306 23 8
Mortgages, Savings & Loans 27 13 14 108
Credit Cards 4 5 (1) (20)
Insurance : 39 24 15 63
Identity Services 12 10 2 20
Financial Services, Identity Services and
Insurance 82 52 30 58
Other* 12 12 : 7
Total Revenue from Continuing Operations: 834 815 19 2
Revenue from Discontinued Operation:
Telecoms** - 142 (142) (100)
Total Revenue 834 957 (123) (13)
* Principally relates to Supply Chain income of £9 million (2021: £9 million) predominantly for warehousing of Royal Mail stock, transport
of high value mails and release of Bank of Ireland deferred income of £2 million (2021: £2 million). The remaining £1 million (2021: £1
million) is made up of immaterial revenue balances.
** See note 21 to the financial statements for more detail.
Mails
Mails includes the sale of parcel labels, special delivery and home shopping returns along with other mails
products provided by Royal Mail, Parcelforce, DPD and Amazon. Underlying mails trading decreased by £41
million to £356 million (2021: £397 million) with labels and “signed for” decreasing 6%. This volume drop was
largely a result of fewer retail and travel restrictions operating in this financial year.
Retail, Lottery & Gift Cards
Revenue has remained flat to prior year, with Lottery decreasing £2 million to £26 million, offset by a £2 million
increase in Gift Cards revenue.
Government Services
Government services relates to Home Office passport applications, DVLA services and UK Visas and Immigration
residency permits, Revenue has increased by £7 million to £21 million (2021: £14 million) due to easing of
international travel restrictions improving passport volumes from prior year, along with a greater requirement for
UK visas post Brexit.
Banking Services & ATMs
Revenue has increased by £25 million to £230 million (2021: £205 million). Due to reduced volumes in the prior
year, our fixed fee decreased by £5 million to £85 million (2021: £90 million). This was more than offset by
growth in banking services deposits revenue which increased by £25 million to £90 million (2021: £65 million).
Transactional Financial Services
Our Transactional Financial Services products include travel money, MoneyGram and Postal Orders. Revenue
increased by £2 million to £60 million (2021: £58 million), predominantly due to improved Travel Money sales as
COVID-19 related travel restrictions eased throughout the year.
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Payment Services
Payment Services includes bill payment transactions. During the year energy and resellers volumes have been
affected by the energy crisis, warmer weather and changes to customers habits due to price cap changes, with
revenue experiencing a slight reduction to £28 million (2021: £29 million) as a result.
POCa
Account numbers are declining as planned migration away from Post Office Card Account continues. As such
revenue has decreased by £3 million to £11 million (2021: £14 million).
Mortgages, Savings & Loans
Revenue has increased by £14 million to £27 million (2021: £13 million) as a result of a higher incentive
performance with Bank of Ireland, The incentive performance was a combination of factors including the contract
addendum aligning interests with BOI on margin, low interest rate environment discouraging churn in savings
and customer behaviour changes due to the pandemic.
Credit Cards
Revenue has decreased by £1 million to £4 million (2021: £5 million) with a tightening of credit policy having a
slight impact on volumes.
Insurance
Post Office Management Services, subsidiary of Post Office Limited, provides Travel, Life and General Insurance
policy cover. Insurance revenue has increased by £15 million to £39 million (2021: £24 million). The increase
was driven mainly by Travel Insurance, which saw a £13 million improvement on prior year as the travel market
began to recover with COVID-19 restrictions easing.
Identity Services
Identity predominantly relates to Verify services. Revenue is volume driven, boosted by HMRC's extension of the
self-assessment tax return deadline. There is also a full year of YOT! revenue in the current year. Revenue in this
area has increased by £2 million to £12 million (2021: £10 million). However, increased volumes incur higher
associated Verify fees, hence there is little profit benefit.
Telecoms
Telecoms included Post Office HomePhone & Broadband and Fibre services. The business was sold to Shell
Energy Retail Limited on 15 March 2021. There has been no trading in this financial year for Telecoms.
Joint venture
Post Office Limited has a joint venture with the Bank of Ireland with each party holding 50% of First Rate
Exchange Services Holdings Limited ("FRESH"), whose principal activity is the supply of foreign currency
exchange in the UK to the Post Office and others. FRESH's result has dramatically improved this year as travel
restrictions imposed as result of the COVID-19 pandemic have been eased. As such, Post Office’s share of
operating profit from the joint venture was £3 million (2021: £7 million loss).
Costs
Trading costs decreased by £122 million to £796 million (2021: £918 million) predominantly from the sale of
Telecoms. Postmaster remuneration decreased by £20 million to £392 million (2021: £412 million) as revenue
shifts from higher remuneration generating products such as Mails to platform products which generate lower
remuneration.
People costs increased by £1 million to £164 million (2021: £163 million) reflecting capability builds particularly
in the IT space.
Average headcount reduced from 3,556 in 2020/21 to 3,415 in 2021/22 reflecting efficiency savings from
operational effectiveness programmes. Closing headcount for the year was 3,380 (2021: 3,449).
Other trading costs, excluding Postmaster and people costs, have decreased by £106 million to £239 million,
primarily driven by the disposal of the Telecoms business in 2020/21.
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Exceptional items
Exceptional costs are significant, one off items which require disclosure on their own in the income statement
due to their material size and nature. Exceptional costs of £90 million (2021: £626 million) were recognised in
the year. This includes Historical Matters related costs of £84 million (2021: £610 million) and £6 million (2021:
£7 million) in relation to other legal costs, in contrast to the prior year balance of £610 million which included
initial recognition of the OHC provision (£502 million) in addition to legal and running costs for both schemes,
offset by a small reduction in the HSS provision. The Historical Matters related costs are detailed in note 4 to
the financial statements. No exceptional costs related to COVID-19 were incurred during the year (2021: £9
million), see COVID-19 section below for further details.
Historical Shortfall Scheme
As part of the settlement reached with the claimants in the Post Office Group Litigation in 2019, Post Office
agreed to establish a remediation scheme open to Postmasters who had not participated in the Group Litigation
but who had experienced similar issues relating to shortfalls indicated by previous versions of the Horizon
system, known as the HSS. The agreement to establish this scheme in December 2019 was deemed to be a
triggering event on which to recognise a provision.
The HSS launched on 1 May 2020 and officially closed for applications on 14 August 2020. As at 31 July 2022,
the HSS had received 2,370 eligible applications from current and former Postmasters. Of these 87% are partly
or wholly quantified.
A provision of £172 million (2021: £150 million) has been retained in respect of the HSS, with the increase
being due to revisions to the estimated volume and value of claims to be settled, offset by payments made in
year. This represents management's latest and best estimate of the potential future payments associated with
the claims received. The provision requires a number of significant estimates and assumptions by management,
with the level of estimation risk heightened as a result of the volume and range of claims received and the stage
of the settlement process. As at 31 July 2022 1,729 settlement offers have been issued and of these 1,353
have been settled. The settled claims equate to c. 13% of the provision value due to the least complex claims
having been settled first.
The HSS payments will be partially funded by Government, with Government having agreed in March 2021 to
provide sufficient financial support to Post Office to ensure that the scheme can proceed. In 2020/21 an asset
of £64 million was recognised in respect of the portion of the HSS provision to be funded by Government, based
on estimates at that time. The difference between the provision and asset value would be funded by Post Office
through its trading cashflows and cashflows from the sale of the Telecoms business. During 2021/22, the
Directors reassessed the treatment pertaining to the funding by Government of the liabilities for Historical
Matters which concluded that a more appropriate treatment would be to recognise an asset only when the
quantum for each specific claim settlement becomes virtually certain, given the current significant estimation
uncertainty associated with settlement cashflows. As such, in 2021/22 application of this reassessment
resulted in the previously recognised asset being derecognised and the prior year comparatives being restated.
See note 26 to the financial statements for further details.
Further details regarding the HSS and the estimates made by management in deriving the provision value are
included in the critical accounting estimates section in note 1 to the financial statements.
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Overturned Historical Convictions
In March 2020, following two High Court judgments which were handed down in March 2019 and December
2019, the Criminal Cases Review Commission (“CCRC”) announced its decision to refer a number of historical
convictions of Postmasters, branch managers and/or branch assistants (collectively “Postmasters”) to the
relevant appeal courts to decide if these convictions should be overturned on the grounds of abuse of process.
Since the CCRC’s announcement in March 2020, the Court of Appeal Criminal Division ("CACD") and the
Southwark Crown Court have overturned 80 convictions prosecuted by the Post Office (together, “the
Appeals"). As at 31 July 2022 the CCRC is understood to be reviewing a further 29 applications to refer
convictions for appeal.
In accordance with its duties as a former prosecutor, Post Office has made or is seeking to offer post-conviction
disclosure to 706 Postmasters who have historical convictions, prosecuted by Post Office, to enable them to
decide whether they wish to appeal their convictions and is taking all reasonable steps to support other
prosecuting bodies with regard to disclosure. Disclosure has to date been made for 287 Postmasters. It is not
known how many additional Postmasters will seek to appeal their convictions in due course. Post Office is also
liaising with other prosecution agencies to offer assistance in cases that were not prosecuted by Post Office
but where evidence from Horizon may have been relied upon.
Since 11 December 2020, when the Southwark Crown Court overturned the convictions of the first 6
Postmasters, Post Office has received correspondence on behalf of individuals stating their intention to seek
civil compensation. Post Office is committed to compensating Postmasters fairly and expeditiously and its legal
representatives have been in continued dialogue with the professional advisors representing the interests of
those who have been acquitted. To date no civil proceedings have been issued in the courts by former
Postmasters and served on Post Office.
Management's view is that liabilities arising from any future civil claims or requests for compensation arising
out of the overturned convictions to date represent a probable obligation arising from past events. Post Office
making its decision in 2020/21 not to oppose a number of appeals was deemed to be the triggering event for
liability recognition. The triggering event is deemed to apply to the full population of claimants or potential
claimants, and not only those who have or are currently appealing convictions.
As such, a provision of £487 million (2021: £502 million) has been retained in respect of the Overturned
Historical Convictions (“OHC"). This represents management's latest and best estimate of the potential future
payments associated with civil claims which may be received, assessed across the whole population of potential
claimants. The provision requires a number of significant estimates and assumptions by management,
principally relating to the potential number of claimants and the potential settlement amounts. The level of
estimation risk is increased as a result of the early stage of the proceedings. The reduction year on year is
primarily driven by the interim payments made to those who have had convictions overturned and the impact
of discounting the forecasted future cashflows, the impact of which is material at the balance sheet date due
to the increase in the discount rate in year.
In December 2021 Government formally confirmed it will provide funding in respect of future payments arising
as part of the OHC up to a maximum of £780 million. The funding will be recognised at the point of receipt. See
the going concern section of note 1 to the financial statements for further details.
Postmaster Remediation
Historically, before March 2019, Postmasters did not receive remuneration during the period of any contract
suspension. Post Office has subsequently changed this policy, resulting in Postmasters being remunerated
during a period of suspension. In the year, a decision was taken by the Directors to provide redress to those
Postmasters historically impacted. The means by which redress will be provided is still being determined.
Liabilities arising from any future redress represent a probable obligation arising from past events.
A provision of £62 million (2021: £59 million) has been recognised, representing management's best estimate
of potential future payments to be made to Postmasters for retrospective suspension remuneration. The
provision requires a number of significant estimates and assumptions by management, with the level of
estimation uncertainty increased as a result of the period of time for which the previous policy was in operation
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and because the means of any remediation is yet to be determined. The increase from the prior year relates to
updated management estimates. Further details regarding the provision estimate can be found in note 1 to the
financial statements.
As part of ongoing internal reviews into historical operational processes it is possible that other historical
policies and processes may be identified that may previously have led to some Postmasters being financially
impacted. Until such historical policies and processes are identified and any associated financial impact is
confirmed, we are unable to determine whether any liability that could arise in the future will have a material
adverse impact on the consolidated position of the Group. While no provision or contingent liability has been
recognised, as there is no triggering event for recognition, the Directors are including this statement for
transparency to stakeholders and continue to keep this under close review.
Inquiry
Sir’ Wyn's public Inquiry into the Horizon IT scandal was placed onto a statutory footing and began its oral
hearings in February 2022. Costs of £12 million (2020/21: £nil) have been incurred in relation to the inquiry.
COVID-19
As a result of the COVID-19 pandemic, additional one-off costs were incurred during the prior year amounting
to £9 million, with the majority of costs related to ensuring our branch network complied with health and safety
standards, as our Postmasters, where possible, kept branches open to serve their communities. Whilst no
related exceptional costs were incurred during the year, the impact of COVID-19 on the Group remained
material.
Other
The remaining exceptional costs relate to costs associated with defending an Employment Tribunal claim of £6
million (2021: £7 million), for which a contingent liability was disclosed in 2019/20. On 14 March 2022 Post
Office successfully defended the Employment Tribunal on all counts, resulting in the likelihood of a possible
obligation arising from past events in relation to this matter being considered remote. As such, no contingent
liability was disclosed in the 2020/21 financial statements and this remains the case in 2021/22.
Investments and capital spend
Investment funding and costs included in the consolidated income statement are shown below:
202
£m
Investment fun: ts :
Restructuring:
Business transformation (6) (6)
Network programmes (9) 5
IT transformation (11) (12)
Severance (2) (16)
Total restructuring costs (28) (29)
Impairment - (8)
Discontinued operation* . - (6)
Total investment charge (28) (43)
* Relates to costs in respect of the discontinued operation, see note 21 to the financial statements for more detail
No investment funding was received from the Department for Business, Energy and Industrial Strategy ("BEIS")
for transformation activities in 2021/22 (2021: £nil). Alternative funding, totalling £177 million was provided
by BEIS in 2021/22 in the form of a £52 million loan and share purchases totalling £125 million, see notes 15
and 19 to the financial statements for details.
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Total restructuring costs excluding discontinued operations decreased slightly from £29 million to £28 million,
with the majority of spend being in relation to ongoing programmes to transform IT infrastructure and the
branch network, driving Post Office toward commercial sustainability.
In addition, we have incurred £73 million (2021: £53 million) of capital spend, which includes right-of-use
assets, primarily on IT transformation projects, as disclosed in notes 9 and 10 to the financial statements.
Total Loss
The overall result for the year was a loss after tax of £130 million (2021: £661 million restated, from continuing
operations and discontinued operations results combined). The year on year movement is primarily due to the
initial recognition of the OHC provision in 2020/21.
Full results are set out on page 74 and further commentary on key aspects are outlined below.
Net liabilities
The Group ended the year with net liabilities of £724 million (2021: £720 million restated). The movement was
driven by the loss incurred for the year. The impact of being in a net liabilities position has been assessed and
considered as part of the going concern review in note 1 to the financial statements.
Cash flow
Cash and cash equivalents amounted to £367 million (2021: £365 million) at the year-end. There was a net
cash inflow during the year of £2 million (2021: £97 million outflow).
Operating activities resulted in a net cash outflow of £10 million (2021: inflow of £66 million) which was driven
primarily by working capital movements offset by restructuring and other exceptional costs incurred during the
year.
Post Office Limited seeks to minimise the amount drawn down on the loan from BEIS in order to reduce its
interest cost. The facility is limited to a maximum of £950 million, the unused facility at the end of the year was
£621 million (2021: £524 million). The maximum drawn down under the facility during the year was £491
million in February 2022.
A covenant, known as security headroom, exists within the facility. This covenant is in place to ensure there is
sufficient collateral in the form of cash and other assets to cover the borrowings under the facility. At year-end
headroom sat at £253 million (2021: £157 million), the increase driven by BEIS funding received during the
year. No breaches in headroom occurred in the year.
The facility was renewed in 2021, with a 3-year term to 31 March 2024 being agreed. In July 2022 this
agreement was extended to 31 March 2025. This renewed facility is available at one day's notice.
Post Office Limited's borrowing facility from Government limits the purposes for which the facility can be used
and, together with borrowing limits contained in the Articles of Association, imposes constraints on the
availability of external borrowing.
The Bank of England Note Circulation Scheme
The continued participation in the Note Circulation Scheme ("NCS") assures that Post Office Limited has an
adequate supply of banknotes to meet customer demand across its network and provides a mechanism which
enables Post Office Limited to hold Bank of England owned notes. At the end of the year £322 million (2021:
£240 million) of Bank of England owned notes were held. See note 23 to the financial statements for further
details on the NCS.
Pensions
Post Office Limited is the principal employer of the Post Office Section of the Royal Mail Pension Plan ("RMPP”),
which is independent of the Royal Mail section of the RMPP. 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. Both defined benefit plans are
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closed to new members and closed to future accrual. The history of these schemes can be found in note 18 to
the financial statements. Post Office operates a defined contribution scheme — the Post Office Pension Plan.
The deficit payments into RMSEPP were historically agreed with the pension trustees and payments were made
in accordance with the agreements. The income statement charge for the year in relation to the defined benefit
schemes was £1 million (2021: £2 million).
The income statement charge for the year in relation to the defined contribution scheme was £13 million (2021:
£11 million). Net cash payments made in 2021/22 relating to regular pension contributions amounted to £12
million (2021: £18 million), Further detail on Post Office's pension schemes can be found in note 18 to the
financial statements.
Section 172(1) Statement
The disclosure of the $172 statement is included within the Governance section on pages 29 and 30.
Alisdair Cameron
Group Chief Finance Officer
17 August 2022
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Governance
Corporate Governance
Legal Ownership and Structure
Post Office Limited ("the Company”), is wholly owned by BEIS, who hold a special share in the Company, the
rights of which are enshrined within the Company's Articles of Association (http://corporate.postoffice.co.uk/).
BEIS does not have day-to-day involvement in the running of the Company but monitors performance and
oversees key decisions, particularly the Company's compliance with the minimum network access criteria and
the provision of specified services, through UK Government Investments ("UKGI").
The Shareholder Relationship Framework Document effective from 1 April 2020 describes certain parameters
within which the Company is expected to operate, certain obligations with which the Company is expected to
comply, and certain aspects of the relationship between BEIS, the Shareholder's Representative (UKGI) and the
Company, and how it is expected that these parties will interact with each other.
Corporate Governance Overview 2021/22
The Company maintains standards of corporate governance appropriate for its ownership structure,
commitment to social purpose, and strategy to achieve commercial sustainability. Corporate governance
arrangements are reviewed to ensure they remain appropriate for developing business needs and as against
relevant legal and regulatory advances. The Company is not listed, however it takes into consideration the
requirements of the 2018 UK Corporate Governance Code (“UKCGC") and the Corporate Governance Code for
Central Government Departments, where these are relevant to the Company as a private limited company with
a Government owner. Departures from these Codes are either where provisions do not apply to the Company
because it is not listed nor is it a central Government department or an arms’ length body, or where the Codes
do not sensibly apply to it, for example the annual re-election of Directors, whose appointments are approved
by the Shareholder. In addition, the Non-Executive Director (Tom Cooper) who is the Shareholder
Representative, serves as a member of the Audit, Risk and Compliance Committee and the Remuneration
Committee, but is not an independent Non-Executive Director. As the Company has a single shareholder, the
involvement of the Shareholder Representative on the Board and its Committees is seen as important to the
provision of assurance to the Shareholder and therefore the Company has elected not to comply with provisions
24 and 32 of the UKCGC which stipulate that only independent Non-Executive Directors should be members
of the Audit, Risk and Compliance and Remuneration Committees respectively.
Board of Directors
The Board is responsible for setting the business’ strategic aims, putting in place leadership to deliver the
Company's strategy, maintaining appropriate oversight of the management of the business, reporting to the
Shareholder and determining the Company's vision, values and organisational culture.
During 2021/22 the Board comprised a Non-Executive Chairman, the Group Chief Executive Officer, the Group
Chief Finance Officer, the Shareholder appointed Non-Executive Director five independent Non-Executive
Directors (one of whom is designated the Senior Independent Director) and two Postmaster Non-Executive
Directors. Non-Executive Directors are not employees of the Company however provide services under the
terms of an individual letter of appointment, signed at the commencement of their directorship. Saf Ismail and
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Elliot Jacobs, two serving Postmasters, joined the Board on 3 June 2021. Ben Tidswell joined the Board on 27
July 2021 and Brian Gaunt joined the Board on 25 January 2022. Ken McCall stepped down from the Board on
25 January 2022 having served two terms as a Non-Executive Director and as the Senior Independent Director.
Board members during the year ended 27 March 2022 and up to the point of signing are shown below.
Tim Parker
Chairman, Chairman of the Nominations
Committee and member of the
Remuneration Committee
Joined the Board 1 October 2015
Ken McCall
Senior Independent Director, Chairman of
the Remuneration Committee and member
of the Audit, Risk and Compliance and
Nominations Committees
Joined the Board 21 January 2016
Stood down from the Board 25 January
2022
i
k
Tom Cooper
Non-Executive Director, and member of
the Audit, Risk and Compliance
Committee Remuneration Committee,
Nominations Committee, and Historical
Remediation Committee
Joined the Board 27 March 2018
Carla Stent
Non-Executive Director and Chair of the
Audit, Risk and Compliance Committee
Joined the Board 21 January 2016
Zarin Patel
Senior Independent Director (from 26
January 2022) and member of the Audit
Risk and Compliance Committee and the
Historical Remediation Committee.
Joined the Board 26 November 2019
Lisa Harrington
Non-Executive Director, Chair of the
Remuneration Committee (from 26
January 2022) and member of the
Nominations Committee.
Joined the Board 8 April 2020
Saf Ismail
Non-Executive Director and Postmaster
Joined the Board 3 June 2021
Elliot Jacobs
Non-Executive Director and Postmaster
Joined the Board 3 June 2021
Ben Tidswell
Non-Executive Director and Chair of the
Historical Remediation Committee and
member of the Remuneration Committee
(from 30 November 2021).
Joined the Board 27 July 2021
Brian Gaunt
Non-Executive Director
Joined the Board on 25 January 2022
Nick Read
Group Chief Executive Officer
Joined the Board 16 September 2019
Alisdair Cameron
Group Chief Finance Officer
Joined the Board 28 January 2015
Veronica Branton
Company Secretary
Appointed as Company Secretary 26
July 2019 and left Post Office on 9
March 2022
Rachel Scarrabelotti
Interim Company Secretary
Appointed as Company Secretary 12 April
2022
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Non-Executive Directors are usually appointed for an initial term of three years with the scope to renew for a
second term or any subsequent period, subject to the approval of BEIS. As the Shareholder Representative,
Tom Cooper's appointment period is determined by the Secretary of State for BEIS. Biographies of all current
members of the Board can be found on the Company's website.
Board
Role and responsibilities
The Board is accountable to BEIS, the sole shareholder, for the performance of the Company and is required to
seek consent for certain matters, as set out in the Articles of Association. The Shareholder is briefed regularly
on the performance of the business and the progress made towards delivering the strategy, including at
quarterly accountability meetings. The Shareholder Relationship Framework Document sets out the
responsibilities of each party.
The Board is also responsible for oversight of legal and regulatory compliance, delivery of the strategy,
providing constructive challenge to the Group Executive and communicating with all stakeholders. The Board
has a schedule of matters reserved for its decision and has approved Terms of Reference for its committees,
which are available on the Company's website.
The Board reviews the strategy and approves the annual budget and business plan required to deliver the
strategic objectives annually. The Board regularly reviews reports on performance against the business plan
and receives periodic business reports from Senior Management. Directors are briefed on matters to be
discussed at Board and Committee meetings by papers distributed in advance of meetings, as well as
management presentations.
In setting the risk appetite for the Company the Board has established a framework to manage and mitigate
risk. The Board takes guidance from its Audit, Risk and Compliance Committee, and has oversight of risk
management. The Audit, Risk and Compliance Committee receives reports from the Compliance Director, the
Head of Internal Audit and Risk, and the Legal Director as well as from operational management and the
External Auditors. Further detailed information on the Management of Risk within the Company, together with
identification of enterprise risks and their impacts can be found in the Management of Risk section on pages 53
to 57.
Key focus and developments in 2021/22
During the year to 27 March 2022, the Board continued to oversee the Company's strategic plan to remediate
the past, build a stronger relationship with Postmasters, and be a commercially focussed business with a strong
social purpose. The Board's vision for 2025 has been defined which involves strengthening our partnership
with Postmasters, evolving the network to make it commercially sustainable, continuing to grow our role in
Mails and Banking supported by additional services, and building an IT platform that is fit for the future.
Throughout the 2021/22 financial year, the impact of the COVID-19 pandemic remained and the Board
oversaw the Company's response through two workstreams: one focusing on protecting the work force and
Postmasters, serving elderly and vulnerable customers, keeping branches open and the supply chain moving
and the other on the longer-term aim of ensuring the Company's future resilience. Regular updates on the
response to the COVID-19 pandemic were provided to the Board during the year. The Board monitored the
trading position carefully throughout the year, received advice where appropriate, received updates on
discussions with major creditors and sought and received waivers in relation to branch network numbers from
the Shareholder during the year. The 2021/22 plan was approved by Board in May 2020. This included specific
Mails and Travel related stretch items which were subsequently removed in agreement with the Board. At year-
end trading profit of £42 million was achieved. A funding settlement with BEIS for the three financial years
within the period 2022/23 —- 2024/25 was agreed with the Shareholder and approved by the Board in April
2022.
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In April 2021 the Board approved a strategy to replace the Bank of Ireland ATM network with a network of
ATMs owned and operated by the Company under a new commercial and financial framework. This followed
the Bank of Ireland's decision not to continue providing the service after March 2022. The Company sees the
provision of cash to its customers and on behalf of its Banking Framework clients as a core Post Office service
which it delivers through counter services and ATMs.
Work continued during the year to move the Company's IT system from data centres to a new cloud-based
system, on an incremental basis, with Board approved funding for this.
The Board approved the 2020/21 Network Report in January 2022; this confirmed compliance with the
Entrustment Letter and Funding Agreement for provision of the agreed access criteria, such as the number of
Post Office branches, as at March 2021. The Board approved the Company's Group Risk Policy in March 2022.
Post Office Limited entered into a settlement agreement on 10 December 2019 with the 555 Postmasters who
had brought a High Court claim against the company, which was managed by the Court through a Group
Litigation Order ("GLO"). A public apology was made to the Postmasters with whom the settlement was
reached for the serious historical failings. In addition to the financial settlement it was agreed that Post Office
Limited would set up a scheme to seek to compensate any Postmaster who had suffered a historical shortfall.
The HSS was subsequently set up in May 2020. A Stamps Reconciliation Scheme was also set up in July 2020.
An independent advisory panel assesses and makes recommendations to Post Office on fair outcomes for HSS.
applications, while the Board has oversight of the overall management of the HSS. The Board approved the
submission of a funding proposal to BEIS for the HSS in November 2020 as the volume and potential quantum
of claims meant that Post Office Limited would not be able to fund the costs without Government support. The
Board approved interim payments being made under the HSS in distress cases in October and the
commencement of payments from January 2021, once the Company had secured associated Government
funding.
In March 2020 the Criminal Cases Review Commission (“CCRC”) referred the first cases prosecuted by Post
Office Limited to the Court of Appeal Criminal Division (“CACD”) for appeal. Where Post Office Limited was the
prosecutor, it has a duty to respond to each appeal setting out its stance on them. The Board reviewed all the
appeals and supported the overturning of those cases where it recognised and accepted that the individuals
could not have received a fair trial. On 23 April 2021 the CACD delivered a judgment allowing 39 appeals and
dismissing 3, concluding that Post Office Limited's failures to investigate and disclose problems with or
concerns about Horizon were so egregious as to make the prosecution of any “Horizon case” an affront to the
conscience of the court. Post Office Limited apologised to all those whose convictions are overturned, and
recognises that many individuals had been fighting for justice for a considerable length of time and not all had
lived to see their convictions quashed. Post Office Limited continues to respond to appeals by applying the
CACD's guidance. As at 31 July 2022, 81 convictions have been set aside, 42 convictions have been upheld or
had unsuccessful appeals, 1 further appeal is being considered and the CCRC is reviewing a further 29
applications to refer convictions for appeal. Further details can be found in the disclosures surrounding
Overturned Historical Convictions on page 14.
The Board has also overseen a Post-Conviction Disclosure Exercise ("PCDE”) which reviewed more than 3.8
million documents to identify the generic and case specific information to be disclosed to those who have
appealed or may wish to appeal a historic prosecution brought by Post Office Limited. Steps have been and
continue to be taken to contact all those who Post Office Limited prosecuted historically and that may have
relied on evidence from the Horizon system so that disclosure can also be made to them.
Extensive programmes of work were undertaken during the year and have continued into the 2022/23 financial
year to make sure that Post Office Limited not only complies with the findings of the Common Issues Judgment
("CU") and Horizon Issues Judgment (“HU”), but goes beyond these, to develop a successful modern franchise
that runs in partnership with Postmasters and other partners. This entails cultural change, not just changes to
systems and processes. The Board made a number of decisions to support this change with a particular focus
on Postmaster engagement and support, including:
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. Saf Ismail and Elliot Jacobs, two serving Postmasters, joined the Board in June 2021 following an
independent appointment process, with the Postmaster community voting for the shortlisted candidates;
. Reviewing and amending a suite of policies specific to Postmasters and introducing a number of new
Postmaster policies along with a Postmaster Guide to the policies;
. Workshops being run to help all employees understand what is involved in running a Post Office;
. Senior leaders are involved in the ‘Adopt an Area’ initiative where each leader visits branches with the
Area Manager each quarter, building knowledge, understanding and empathy which in turn inform
decision making. The visits allow senior leaders to receive direct feedback from Postmasters. This
information is then collated centrally to provide further insight along with an opportunity to observe key
themes, issues and concerns;
. A virtual Postmaster Conference was held in April 2021 along with a number of subsequent regional
events;
* APostmaster Director has been appointed to help embed engagement with Postmasters;
* _ InBranch Christmas period support by back-office staff resumed, helping back-office staff to appreciate
the demands of running a Post Office, and to provide additional resource during this peak trading period.
Conflicts of Interest and Independence
In accordance with the Companies Act 2006, the Articles of Association give the Directors power to authorise
conflicts of interest. During the period, none of the Directors had a material interest in any contract of
significance with the Company or any of its subsidiaries.
Atall times during the periods of their appointments in 2021/22, the independent Non-Executive Directors met
the criteria for independence set by the Board.
The Company has arranged appropriate insurance cover in respect of legal action against Directors of the
Company and its subsidiaries.
Tim Parker, Chairman of the Board of the Company was independent on appointment. Ken McCall, Carla Stent,
Zarin Patel, Lisa Harrington, Ben Tidswell and Brian Gaunt are considered independent Non-Executive
Directors. Tom Cooper is not an independent Non-Executive Director as he is a shareholder representative. Nick
Read and Alisdair Cameron held executive roles throughout the financial year, and as such were not
independent Directors. Saf Ismail and Elliot Jacobs as serving Postmasters are not independent Non-Executive
Directors.
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Board Meetings
During 2021/22 the Board met 33 times (including additional meetings held either in person or virtually). A
record of Directors’ attendance (attended/eligible to:attend) at the Board and its Committees is set out in the
table below:
Director Board Board Audit, Risk & Nominations Remuneration Historical
(Additional) Compliance Committee Committee Remediation
Committee Committee (Note 1)
Chairman
Tim Parker 9/9 22/24 = 2/2 6/6 bd
Executive Directors
Nick Read 9/9 19/24 - - - .
Alisdair Cameron 9/9 20/24 - - - 7
Non-Executive Directors
Ken McCall (Senior 718 18/22 5/6 2/2 4/4 .
Independent Director
resigned 25 January
2022)
Tom Cooper (Note 2) 9/9 23/24 8/8 2/2 6/6 221
Lisa Harrington 9/9 15/24 - 22 6/6 -
Zarin Patel (Senior 8/9 22/24 8/8 - - 20/21
Independent Director
From 26 January
2022)
Carla Stent 9/9 19/24 8/8 - - -
Saf Ismail (Note 3) 9/9 13/17 - - = =
Elliot Jacobs (Note 4) 9/9 12/17 : - - .
Ben Tidswell (Note 5) 8/8 10/10 - - 2/2 21/21
Brian Gaunt (Note 6) 2/2 2/2 - - - 7
Note 1: The Historical Remediation Committee first met on 26 August 2021,
Note 2: Tom Cooper was appointed as a member of the’Nominations Committee on 30 March 2021
Note 3: Saf Ismail joined the Board on 3 June 2021.
Note 4: Elliott Jacobs joined the Board on 3 June 2021.
Note 5: Ben Tidswell joined the Board on 27 July 2021.
Note 6: Brian Gaunt joined the Board on 25 January 2022
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Committees
To assist in the execution of its corporate governance responsibilities, the Board has established four
committees which deal with specific topics requiring independent oversight. The Audit, Risk and Compliance;
Nominations; Remuneration; and Historical Remediation Committees are each chaired by an independent Non-
Executive Director.
The Board retains overall oversight but delegates responsibilities and authorities to its committees to operate
within the Terms of Reference approved by the Board. The Terms of Reference for all committees are reviewed
annually to assess that each Committee has discharged its duties effectively in accordance with the Terms of
Reference. The reviews conducted in February 2022 raised no material issues.
Terms of Reference for the committees established in line with the requirements of the UKCGC are available
on the Company's website.
Nominations Committee
Role and Membership
The duties and responsibilities of the Nominations Committee are included in the Terms of Reference, which
are available on the Company's website.
The Committee is chaired by Tim Parker, Chairman. The other members during the year were Ken McCall,
Senior independent Director, Lisa Harrington, Non-Executive Director, and Tom Cooper, Non-Executive
Director, who was appointed to the Committee on 30 March 2021. Ken McCall stepped down as a member of
the Board and consequently the Committee on 25 January 2022.
The Group Chief Executive Officer ("CEO") and Group Chief People Officer also attend meetings at the invitation
of the Committee Chairman.
Work of the Committee in 2021/22
During the year the Committee considered the recommendations from the 2021/22 annual Board and
Committee review and reviewed progress in implementing these in November 2021 following which a number
of additional Board briefing sessions were scheduled.
Succession planning requirements for the Board were considered during the 2021/22 period and the
appointment process and role description for two new Non-Executive Directors were approved for submission
to the Shareholder. Additionally the Nominations Committee considered the appointment of the Senior
Independent Director and the composition of the Nominations Committee, Remuneration Committee and the
Audit, Risk, and Compliance Committee ahead of Ken McCall stepping down in January 2022.
Green Park were engaged as an external search consultancy to assist with the recruitment process for the two
new Non-Executive Directors. Green Park is not otherwise connected with the Company nor with any individual
directors. Gatenby Sanderson were engaged as an external search consultancy to assist the Shareholder with
the recruitment process for the new Chair of the Board. Gatenby Sanderson is not otherwise connected with
the Company nor with any individual directors.
Succession planning requirements for the Company's subsidiaries were considered during the 2021/ 22 period
also, with the Committee approving the process for the appointment of a Non-Executive Director on the Post
Office Management Services Board.
Succession planning at the Senior Management level was considered by the Committee during the 2021/22
period, with the focus on defining and recruiting for critical roles, building a diverse succession pipeline, and
having the correct workforce capabilities needed to address historic issues, achieve current business
imperatives, and to retain relevance for the future.
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The Committee approved a number of appointments to the Group Executive. The annual review of terms of
reference was carried out in February 2022.
Remuneration Committee
Role and Membership
The duties and responsibilities of the Remuneration Committee are included in the Terms of Reference which
are available on the Company's website.
The Committee was chaired by Ken McCall, Senior Independent Director, until Ken McCall stepped down on 25
January 2022. The other members of the Committee up until this time were Tom Cooper, Non-Executive
Director, Tim Parker, Chairman of the Board of Directors of Post Office Limited and Lisa Harrington, Non-
Executive Director. Lisa Harrington became Chair of the Committee on 26 January 2022. The other members
of the Committee after this time were Tom Cooper, Non-Executive Director and Tim Parker, Chairman of the
Board of Directors of the Company. Ben Tidswell, Non-Executive Director joined the Committee on 30
November 2021.
In accordance with the Terms of Reference, the CEO may attend meetings, at the invitation of the Committee
Chair, to discuss matters relating to the remuneration of the Group Chief Finance Officer (“CFO”) and other
members of the Group Executive. However, the Committee recognises the need to manage any potential
conflicts of interest and upholds the principle that no individual may be involved in discussions concerning their
own remuneration. The Shareholder approves the remuneration of the Executive Directors and determines fees
for Non-Executive Directors. The Group Chief People Officer also attends Remuneration Committee meetings
at the invitation of the Chair.
Work of the Committee in 2021/22
During the year the Committee approved the calculation methodology for the 2021/22 STIP and the 2021-24
LTIP.
The Committee previously decided that an STIP scheme would not be launched in 2020/21 or an LTIP scheme
for 2020-23 given the trading uncertainties and consequent difficulties in setting budget assumptions, however
a Transformation Scheme covering the period from April 2020 to January 2022 was approved by the
Committee in July 2021 and subsequently launched.
The Committee discussed and approved the Directors’ Remuneration Report for the 2020/21 Annual Report
and Accounts.
Willis Towers Watson were appointed as remuneration advisers to the Committee in September 2020 and
remain as the remuneration advisers to the Committee. Willis Towers Watson are not otherwise connected
with the Company nor with any individual directors.
The Committee approved remuneration packages for a number of members of the Group Executive. Non-
Executive Director fees for 2022/23 were noted, with no changes proposed.
The annual review of terms of reference was carried out in February 2022.
Audit, Risk and Compliance Committee
Role and Membership
The duties and responsibilities of the Audit, Risk and Compliance Committee are included in the Terms of
Reference which are available on the Company's website.
The Committee is chaired by Carla Stent, Non-Executive Director. Other members during the year were Ken
McCall, Senior Independent Director, until Ken McCall stepped down on 25 January 2022, Tom Cooper, Non-
Executive Director, and Zarin Patel, Non-Executive Director.
The Board considers that the Committee's members have broad commercial knowledge and extensive business
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leadership experience, in addition to which Carla Stent, Tom Cooper and Zarin Patel are qualified chartered
accountants, which it believes constitutes an appropriate mix of business and financial experience and
expertise.
The CEO, CFO, General Counsel, Compliance Director, and Head of Internal Audit and Risk, or nominated
deputy, attended all of the meetings of the Committee. The Committee Chair held regular meetings with each
of these individuals during the year, The external auditor was invited to, and attended, all meetings of the
Committee.
The Audit, Risk and Compliance Committee members held separate meetings with the Head of Internal Audit
and Risk, co-source internal auditors Deloitte, and with the external auditors without management present
during the year. The Committee assesses the independence and effectiveness of the external auditor,
currently PricewaterhouseCoopers LLP, routinely as part of the committee's governance reviews. The external
auditor has been in place since 2019 following a tender exercise.
Further detailed information on the management of risk within Post Office Limited can be found in the
Management of Risk section on pages 53 to 57.
Work of the Committee in 2021/22
The 2021/22 internal audit programme provided for significant focus on Postmaster processes and the
Postmaster agenda. The following Postmaster-focused audits were approved by the ARC in March 2021 and
were all delivered during the financial year:
© Three reviews focusing on Post-GLO improvement activities (set-up of the new Historical Matters Unit,
CU and Hu).
© Validation of Postmaster data used by the Historical Shortfall Scheme.
* An audit of Postmaster Reporting, which assessed the provision of management information to
Postmasters.
e Four reviews of the improvements to Postmaster processes overseen by the Improvement Delivery
Group ("IDG").
© A review of the BranchHub programme which will provide improved service and support to
Postmasters.
e Areview of the HU improvement programme.
© Two reviews of Postmaster compensation schemes.
© Postmaster Remuneration Process.
® Postmaster On-boarding Process.
In March 2022, the ARC approved the internal audit programme for 2022/23, which included the following
Postmaster focused reviews (delivery of the audit programme was on track at the time of writing this report):
© One review to assess progress with the Post-GLO improvement programme overseen by the IDG.
e Three reviews to assess the effectiveness of Postmaster processes
© Historical Matters Unit (Compensation for overturned historic convictions).
© Two reviews of the Strategic Platform Modernisation (“SPM”) programme.
In the lead up to signing the 2020/21 Annual Report and Accounts ("ARA"), the Committee maintained
oversight over critical accounting estimates and judgements, as well as considering the principal and strategic
risks, going concern assumptions and provisions for the HSS, OHC and PR. The ARA 2020/21 was
recommended to the Board for approval to sign following an additional meeting of the Committee on 21 April
2022.
The Committee approved the annual Audit Plan 2021/22 for the internal and external auditors and approved
the Internal Audit Charter.
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During the course of the year the Committee reviewed and approved the following policies: Co-operation with
Law Enforcement Agencies and Addressing Suspected Criminal Misconduct Policy (for recommendation to the
Board);Whistleblowing Policy; Financial Crime Policy; Anti-Money Laundering and Counter Terrorist Funding
Policy; Business Continuity Policy (for recommendation to the Board); Procurement Policy; HMRC Fit and
Proper Policy; Business Change Management Policy; Conflicts of Interest Policy; Protecting Personal Data
Policy; Cyber and Information Security Policy; Employee Vetting Requirements Policy; Postmaster Onboarding,
Postmaster Training, Postmaster Complaint Handling, Network Monitoring and Audit Support, Network Cash
and Stock Management, Network Transaction Corrections, Postmaster Account Support, Postmaster
Accounting Dispute Resolution, Postmaster Contract Performance, Postmaster Contract Suspension,
Postmaster Contract Termination, Postmaster Decision Review (replacement for Postmaster Termination
Decision Review) Health & Safety Policy, Treasury (for recommendation to the Board), and Group Risk Policy
(for recommendation to the Board).
The Modern Slavery Act Transparency Statement was approved (as required on an annual basis) for
recommendation to the Board.
The Committee received an update on tax matters and approved the annual review of tax strategy.
Reports were provided at each of its scheduled meetings on compliance, risk, IT, change and security
programmes, such as cyber security and disaster recovery testing. A separate annual report was received on
legal risks. The Committee receives an update from the Chair of the Post Office Management Services Limited
Audit and Risk Committee at each scheduled meeting.
A Deep Dive on Dangerous Goods was undertaken in March 2021, and an IT Controls Deep Dive was
conducted in November 2021 along with a Data Protection Deep Dive in March 2022. Cyber Security Updates
were provided to the Committee in July 2021 and January 2022.
The Committee approved the renewal of the Insurance Policies for the period 1 November 2021 to 31 October
2022.
The Committee approved the Group Risk Policy, including the proposed approach to Risk Appetite and Key
Risk Indicators for recommendation to the Board.
The recommendations from the Committee effectiveness review were discussed and approved in May 2021
and the annual review of the Committee's terms of reference was carried out in March 2021.
Historical Remediation Committee
Role and Membership
The Historical Remediation Committee ("HRC”) first met on 26 August 2021. The duties and responsibilities of
the Historical Remediation Committee are included in the Historical Remediation Committee's Terms of
Reference,
The Committee is chaired by Ben Tidswell, Legal Non-Executive Director. The other members during the year
were Zarin Patel, Senior Independent Director, and Tom Cooper, Non-Executive Director.
The Group General Counsel, the Group Chief Financial Officer, external counsel to the Company and
representatives of the Shareholder also attend meetings at the invitation of the Committee Chairman.
Work of the Committee in 2021/22
The Committee oversaw the administration of the Historical Shortfall Scheme ("HSS"), considering the
principles that underpin how HSS claims are assessed for the consideration of the HSS Independent Advisory
Panel ("IAP"), considering claim outcomes recommended by the IAP (including those recommending offers of
financial compensation), recommending to the Board decisions on precedent setting matters, and considering
any other matters escalated in relation to the operation of HSS for decision, ensuring at all times that offers
received by postmasters are fair and consistent and are issued as swiftly as possible. HRC also agreed in 2022
to delegate exceptional or precedent setting specific claim outcomes to a sub-committee of HRC (Sub-
Group: Review of Exceptional Criteria IAP) with HRC retaining controlling oversight and approval.
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The Committee also oversaw the administration of the Stamps Scheme, and decided, in accordance with
decision making tools approved by the Board, the Company's stance on appeals to the Court of Appeal (Criminal
Division), Scottish Court of Appeal and Crown Court of convictions where Post Office acted as prosecutor.
In addition, the Committee oversaw the management of claims for compensation made against the Company
by those who have had convictions overturned, and oversaw the implementation of measures to enable
conformance with the Post Office Group Litigation Common Issues and Horizon Issues judgments and resolved
any other outstanding Group Litigation issues. Additionally, the Committee provided oversight and agreement
of responses to the ongoing BEIS Select Committee and Post Office Horizon IT Inquiry information requests,
and considered changes to the scope and extent of the HSS in response to this external oversight and challenge.
The Committee made a decision to provide redress to Postmasters impacted by historical policies regarding
remuneration during any contract of suspension. The means by which redress will be provided continues to be
a key focus of the HRC on behalf of the Board, The Committee is overseeing the ongoing reviews into historical
operational processes to assess if any may have led to some Postmasters being financially impacted.
The Committee also oversaw the processes in place for the management and challenge of litigation costs across
all workstreams and that sufficient resources were in place to support the management team and enable
effective delivery.
In all matters considered by the Committee, the Committee took an approach which is transparent, promotes
fairness for appellants and claimants overall, while representing Value for Money for taxpayers’ money and
safeguarding the reputation of Post Office Limited
Board and Committee Effectiveness Review
Post Office Limited undertakes an annual review of its Board and Committees and the Senior Independent
Director facilitates a discussion on the Chairman's performance. An externally facilitated review typically takes
place every third year. The Board review for 2021/22 was facilitated internally, an external evaluation having
been conducted in 2020/21.
The internal review involved questionnaires issued to Board and Committee Members, as well as a small pool
of executives who interact regularly with the Board and Committees. The results of the questionnaires were
presented to the Board on 29 March 2022. The primary aim of the review was to provide suggestions for how
the Board and its committees could further develop their effectiveness in the future. The report highlighted a
number of current Board strengths including:
* respondents had a high degree of confidence in how the Board is chaired, the commitment of the
directors and the skills and composition of the Board;
time had been focused on Postmaster engagement, organisation culture and succession planning;
new board members had added expertise in mails, IT, legal and retail; and
« the Postmaster Non-Executive Directors had brought a welcome perspective to discussions and
decision-making.
The report noted the Board's focus during the year on historical matters. The main suggestions from the report
related to focus and balance, particularly the need to continue to work on Postmaster engagement, organisation
culture, succession planning, and to focus on customers and employees. As it moves forward, the Board needs
to:
* determine where it plans to spend its time given the competing demands of historical matters, business
as usual and strategy;
* consider and determine how it will address succession challenges to manage the succession of Board
members coming to the end of their terms, and also how best to integrate new members joining the
Board; and
* continue to hold private sessions of the Non-Executive Directors without the executives.
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In March 2022 the Board discussed the report's recommendations and adopted these. An implementation plan
in respect of the recommendations will be reviewed during the year. Presently the Board is provided with a
Forward Planner in each Board pack to sight proposed agenda items, and care is given to allocating sufficient
Board time to allow consideration of strategy and historical matters, whilst allowing adequate time for business
as usual periodic updates and approvals. In relation to succession planning, the Board receives regular updates
from the Chair of the Nominations Committee as to the work of the Nominations Committee in this area, and
are provided with an opportunity to contribute their thoughts. Bi-annual Board wide discussions on Board
succession are planned. The Non-Executive Directors routinely hold private Non-Executive Director sessions
without executives present
In addition to the annual board and committee reviews, the Board receives an annual governance report to
review the matters reserved to the Board, delegated authorities, the register of interests and the reviews of
performance against committees’ terms of reference.
$172(1) Statement
Directors’ statutory duties are set out in the Companies Act 2006. The primary duty of the Directors is to
promote the success of the Company for the benefit of its Government shareholder and the wider stakeholder
community.
The Board of Directors has sought to pay regard to its key stakeholders and to promote the long-term success
of the Company when taking decisions, as required under $172(1) of the Companies Act 2006. The Company
is owned by Government and strives to be commercially sustainable while delivering a social purpose. It seeks
to do this formally through meeting a number of measures agreed with the Shareholder, including delivering a
convenient and trusted local service, including working closely with Postmasters: ensuring services continue to
be easily accessible, particularly to vulnerable groups: and supporting the Government's access to cash and
financial inclusion agenda.
The Shareholder has appointed a Non-Executive Director as the Shareholder Representative on the Board. The
Chairman and CEO meet regularly with the Minister who has responsibility for the Post Office and with senior
officials at BEIS and UKGI. The Senior Independent Directors during the reporting period were also the
designated Non-Executive Directors for employee engagement.
The Business seeks to build and maintain strong working relationships with its suppliers, and adhered to the
Payment Practices requirements, paying 85% of its invoices within 30 days in the first half of the financial year,
and averaging paying 95% of its invoices within 30 days over the financial year.
No employees were furloughed during 2021/22 due to the COVID-19 pandemic and those who needed to
shield and could not work from home received full pay. Colleagues’ views were sought through surveys at
regular intervals and feedback factored into decisions taken on matters such as the provision of office space for
those for whom working from home was very difficult, and on the best approach to returning to some measure
of office working. Additional prominence was given to well-being with access to a number of means of support
and the continuation of an “empower hour” to promote taking a break from screen-based meetings during the
day.
The branch visits that normally take place during the year to meet Postmasters and our multiple partners
remained disrupted during 2021/22 but members of the Group Executive, including the CEO and CFO,
continued to make branch visits, where permitted, under the rules on avoiding unnecessary travel. A fuller
programme of engagement with partners and employees was undertaken by Board Directors in 2021/22 as
restrictions gradually eased.
Board debates are informed by structured papers which consider the stakeholder impact and potential risks
associated with proposals recommended to the Board.
The Board took a number of significant decisions during the year which were driven by the imperative of
addressing Post Office Limited’s historical issues and the positive ambition to create a modern franchise in
partnership with Postmasters and our multiple partners. There is recognition that there needs to be the right
culture as well as the right processes and support. This provided the context for the Board's commitment to
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strengthening engagement with Postmasters further and making sure that Post Office is Postmaster and
customer focused. As well as strengthening engagement with Postmasters generally through continued area
manager visits, the Board also appointed Saf Ismail and Elliot Jacobs, who are Postmasters, to the Board of
Directors in June 2021. Access to help and support, on-boarding, training and materials for Postmasters have
been revised to make them better, clearer and simpler and this work will continue with more information and
resources being added to BranchHub and improvements being made to the Support Centre. In addition, a
Postmaster Director was appointed to help embed engagement with,Postmasters.
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Remuneration Committee Chair’s Statement
I am pleased to present my first Remuneration Committee Chair's statement following my appointment as Chair
of the Remuneration Committee ("the Committee”) in January 2022.
The role of the Committee is to determine the remuneration and performance-related incentive schemes of the
Executive Management team at Post Office. We do so in line with the Directors’ Remuneration Framework
agreed with our Government shareholder. This is an exercise which must balance the requirements of fairness
and value for money with the need to attract, retain and motivate senior leaders in an increasingly competitive
market. .
In 2021/22, we had a number of priorities:
© to strengthen the quality of our governance and oversight arrangemen
to maintain rigorous control over reward spend so that our decisions are impactful for individuals while
representing value for money;
@ to reward behaviours alongside outcomes; and
© to reflect external developments in setting our strategic approach for 2022/23 which will see us link
reward to our Environmental, Societal and Governance (“ESG") responsibilities for the first time.
From this list, I place particular emphasis on our determination to use reward increasingly as a means to drive
behaviours in the organisation which are consistent with our purpose, strategy and our values. Similarly, I have
been keen to ensure that our reward principles, and the reward framework we have developed for the next
financial year, link to our ESG performance for the first time. On both counts, given the central and privileged
role we play in communities across the country, we should expect our leaders and our business more generally
to demonstrate the highest levels of propriety, respect and integrity in all that they do.
It is clear that our approach to reward at this level (comprising base pay, incentive schemes, pension
contributions, and other benefits) must reflect the interests of an unusually wide set of stakeholders.
This is entirely understandable in the context of any publicly-owned business, let alone one with the unique
characteristics of the Post Office. Our scale and reach, our role in delivering essential services in communities
across the United Kingdom, and our franchise-like operating model with Postmasters and their assistants on
the frontline, all combine to create a complex matrix of stakeholder interests and a commensurately pronounced
degree of scrutiny.
This was heightened yet further by the COVID-19 pandemic and its lockdowns which brought the value of our
network and particularly those who work within it into sharp relief. Regrettably, but quite rightly, the historic
failings of the business in the Horizon scandal have also placed our business under the spotlight as never before.
Against that backdrop, this was a challenging year for Post Office. The pandemic continued to disrupt consumer
behaviour which made for an unpredictable and unforgiving trading environment. Having a diversified product
portfolio enabled us to weather the storm better than many. The ongoing priority to remedy legacy issues in
full, and to transform our relationship with, and service to, Postmasters continued at pace. A public sector pay
freeze was introduced by Government which further conditioned our work.
The Committee concluded that, in these circumstances, it would be inappropriate to make any changes to the
fixed element of reward in the year. Accordingly, no changes were made to the base salary of the CEO and
CFO, nor to the fees for Non-Executive Directors. The Committee was, however, pleased to be able to resume
incentive payments after a fallow year with relevant targets being met despite tough trading conditions and
significant progress being made in building a new, supportive, relationship with Postmasters. These
performance-related incentive schemes are an important element in securing and retaining the organisational
capability we need to deliver commercially, to fund further investment and to engineer the ongoing cultural shift
we need to place Postmasters at the heart of everything we do.
We exercised our discretion over one element of the short term incentive scheme relating to Postmaster
Engagement. The targets were intentionally set to be extremely stretching to signal the urgency of the work to
be done in building a true partnership with Postmasters, as we seek to help them to run their businesses more
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efficiently and more profitably. While the target here may not have been met in full, the Committee concluded
that the outcomes achieved constitute very significant and, critically, sustainable progress in a very short period
and that this should be recognised.
Meeting our financial targets in 2021/22 was not easy. Trading profit recovered and the company maintained
liquidity in the face of strong headwinds. The work underway to improve both our culture and our support to
Postmasters is beginning to bear fruit. We look forward to continuing to work with Nick Read and his team in
the year ahead, with reward providing the right balance of incentive and recognition for colleagues working
hard to build a successful, sustainable and responsible business for the future.
In closing, I should like to welcome Ben Tidswell as a new member of the Committee. I have no doubt that his.
blend of legal and commercial experience will being fresh insight and further rigour to our work. I also wish to
thank my fellow Committee members for their challenge, commitment and engagement throughout the year,
as well as colleagues at UKGI and BEIS for their support. .
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Directors’ Remuneration Policy
Summary of Remuneration Policy
The Committee is responsible for setting the remuneration packages for the Executive Board members (CEO
and CFO), as well as the other members of the Group Executive.
The Post Office remuneration strategy is based on the following:
* attracting, motivating and retaining the right talent within an agreed policy to lead and deliver the
strategic plan,
* — using incentives appropriately to reward the achievement of strategic business goals and promote the
long-term viability of the organisation,
¢ — reinforcing a culture of sustainable performance, partnership and mutual ways of working; and
e providing a transparent approach to the disclosure of pay.
The 2018 Corporate Governance Code sets out a number of provisions for best practice remuneration policy.
We have aligned our policy with these provisions, as shown on the next page.
How Directors’ Remuneration Policy aligns with the Code provisions
Clarity We are committed to transparency in the disclosure of pay. This report provides a comprehensive
account of the Committee's objectives and decisions over the year. We also maintain an extensive and
continuous dialoque with the Shareholder on all matters related to the remuneration of our Fxecutive
Directors.
Simplicity ‘We aim for simplicity in the structure of remuneration and how it is communicated so that it is easy to
understand for both participants and external stakeholders.
Risk Executive Directors are subject to malus and clawback in the STIP and LTIP. This provides for the
reduction or return of all or part of bonus payments in the event of misstatement of the accounts, error,
gross misconduct, or instances where the Executive Director has contributed to serious reputational
damage of the company, a material corporate failure or some other exceptional event.
Additionally, the Committee has the absolute discretion to make adjustments, including a downward
adjustment, to any bonus payment due under any scheme if it considers such adjustment to be
appropriate having taken into account all relevant factors.
Predictability As Post Office is not able to pay in shares, there is no risk of excessive gains within our incentives. The
upside of incentives is capped to avoid any “windfall gains.” The range of possible values of rewards to
individual Executive Directors is set out in the scenario charts on page 35.
Proportionality ‘A meaningful portion of an Executive Director's overall total reward is linked to performance. The
potential upside is in line with conservative market practice and is capped.
INCRE CRGNGMEE Our remuneration framework includes a consideration of how individuals have demonstrated our Ways
uf Working. These Ways uf Working iv cilileal iy our cultural wansformacion and underpin how we
operate as a business: “working in partnership as one team”
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Executive Directors: Key elements of the remuneration policy
The following table sets out the key elements of the Remuneration Policy for Executive Directors (the CEO and
CFO). The remuneration framework including the specific measures and targets for the incentive plans for the
Executive Directors requires consent from BEIS each year.
Element and link to Operation Potential
Salaries are normally reviewed on an annual basis, in July. There is no formal cap set on salaries.
When determining base salary increases for Executives, the Any increase in Executive Directors’
To recruit and reward Committee takes into account: salaries will typically be no more than
individuals based on their that applied to the wider workforce
cidiisanditar the * individual capability and performance growth and will take'eecount.of the increases
© internal comparisons within POL _
i in the public sector and wider market
responsibilities; required, * market data on comparable roles p
trends.
Benefits In fine with Government guidance for senior employees, Historically, all Executive Directors
participation in benefits such as cars, life insurance and health _had the opportunity to participate in
cover schemes are no longer provided to new appointments. benefit schemes. However, now the
The policy is to CFO is the only remaining
Since September 2019, any new Executive appointee is not participating Executive as he was
consolidate taxable i
4 offered benefits as part of their remuneration package. appointed prior to September 2019.
benefits into base salary.
Pension Historically, Executive Directors received a 25% salary For 2021/22 the CEO has opted out
supplement in lieu of pension. of the Post Office Pension Scheme.
In line with Government guidance for senior employees, anynew The CFO receives a 25% salary
To provide market Executive Director appointment from September 2019 has not —_supplement in line with previous
competitive pensions been offered salary supplement in lieu of pension but remains policy.
packages. entitled to participate in the Post Office Pension Scheme at the
same levels of contribution as the wider workforce.
Maximum opportunity under the STIP
as % of salary for different levels of
performance are as follows:
Short-Term Incentive STIP awards are made annually.
Plan ("STIP") The metrics and target ranges are agreed annually with the
Board and BEIS as part of the annual business and budget
planning cycle. These are described in the Directors’ CEO:
A discretionary payment [@gNaeuenia crags Threshold: 24%
DENI 80% of the target STIP award is based on a business scorecard, T2raet 309%
improved in-year including financial and non-financial measures and 20% is based M@xI mum: 45%
BUT Teo ea ELS on individual performance objectives which are approved bythe CFO:
personal performance. fERaa™ Threshold: 32%
Target: 40%
Company measures are defined at Threshold, Target and
Maximum: 66%
Maximum payment levels.
Long-Term Incentive LTIP awards are made annually and are paid in cash at the end of Maximum opportunity under LTIP as
Plan ("LTIP") three years depending on performance against the target. % of salary for different levels of
performance are as follows:
LTIP performance measures include company- level financial and
non-financial metrics defined at Threshold, Target and Maximum
Te d and retain ki
MARMRRRAMEREAE els. There is no individual component of the LTIP.
executives and se
managers on the Performance measures for the LTIP support the Post Office
Pee ere Strategic Plan agreed with BEIS.
CEO:
Threshold: 24%
Target: 30%
longer-term targets The performance targets are agreed with BEIS in advance of each Maximum: 43%
linked to the Jaward and are described annually in the Directors’ Remuneration
development and growth [uptie Threshold: 40%
of a sustainable business. Target: 50%
Maximum: 70%
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Illustrations of application of remuneration policy
The charts below show the quantum and composition of the current remuneration policy for the two Executive
Directors under three performance scenarios:
* fixed pay only (i.e. there is no STIP or LTIP pay-out)
* on-target performance (STIP and LTIP paying out at a target level)
@ = ~=maximum (maximum pay-out of both STIP and LTIP).
CEO CFO
800,000 800,000
600,000 600,000
400,000 400,000
200,000 200,000 I
0 Le 0
Fixed On-target Maximum Fixed On-target Maximum
Salary mPension OBenefits OSTIP mLTIP WSalary mPension GBenefits GSTIP mLTIP
Notes: Notes:
Base salary £415,000 Base salary £244,800 plus benefits of £73,468.
Target STIP £124,500 and Target LTIP £124,500 — both at 30%
total of £664,000
Maximum that can be achieved capped at 45% on STIP and 43%
on LTIP - total of £780,200
Target STIP £97,920 and Target LTIP £122,400 ~ 40% and 50%
respectively - total of £538,588
Maximum that can be achieved capped at 66% on STIP and 70%
on LTIP ~ total of £651,196
Policy on payment for loss of office
Item Policy
Fixed pay Payments in lieu of notice of salary only. Payments in lieu of notice are not pensionable.
STIP The default position is that any outstanding STIP 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 the individual was employed. The
definition of good leaver status is set out in the scheme rules,
LTIP The default position 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 the individual was employed. The
definition of good leaver status is set out in the scheme rules.
Change of There are no enhanced provisions on a change of control.
control
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Policy on remuneration at recruitment
The remuneration package for a newly appointed or promoted Executive Director is normally set in
accordance with the terms of the remuneration policy of the Post Office in force at the time of appointment.
Item Policy
Salary, Benefits and The fixed package offered to new Directors takes account of the previous incumbent.
Pension However, in line with Government remuneration guidance for senior employees, from
September 2019 the approach to remuneration has changed and pension and benefits
are not offered separately. These elements are consolidated into salary, resulting in more
competitive base salary levels and reduced benefits.
STIP For new appointees, STIP will not exceed 45% of salary for Executive Directors.
LTIP For new appointees, LTIP awards will not exceed 43% of salary for Executive Directors.
Buyout of Where the Committee determines that the individual circumstances of recruitment
incentives forfeited justify the provision of a buyout, the equivalent value of any incentives that will be
on cessation forfeited on cessation of an Executive Director's previous employment will be calculated
of employment. taking into account the nature, performance conditions and time horizon attaching to
award forgone and will be tailored to the individual.
Any such award requires approval from BEIS.
Internal Any variable pay element awarded in respect of the incumbent's previous role will be
appointments allowed to pay out according to the terms on which it was originally granted.
Adjustments may be made to the award, as relevant, to take account of the new role.
Non-Executive Directors: Key elements of the remuneration policy
The following table sets out the key elements of the Remuneration Policy for Non-Executive Directors. The
remuneration framework for the Non-Executive Directors requires consent from BEIS each year. Post Office's
Articles of Association provide that the aggregate total of Non-Executive Director remuneration may not exceed
£400,000 per annum.
Eiement and link to Operation Opportunity
strategy
Fees The Chairman is paid a single fee to
cover all duties (including chairing the
To attract and retain a tion Committee). Non-Executive Directors do not participate
high calibre Chairman in any variable remuneration or receive any
and Non-Executive The Non-Executive Directors are paid other benefits.
Directors. basic fee together with additional fees
for chairing Board Sub-Committees or
the role of Senior Independent Director.
The fees for the Chairman are reviewed
by the Committee and approved by BEIS.
The fees of the Non-Executive Directors
are reviewed and approved by BEIS.
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The fees for Non-Executive Director roles are set out in the table below:
2022 tees % change
Chair £19,300 0%
Senior Independent NED £5,000 0%
Non-Executive Directors base fee £35,000 0%
Chair of Audit, Risk and Compliance
Committee, Chair of Historical Remediation £10,000 £10,000 0%
Committee and Chair of Remuneration
Committee additional fee
The company’s policy when setting fees for the appointment of new Non-Executive Directors is to apply the
same policy which applies to current Non-Executive Directors.
Annual. Remuneration Report (unaudited)
Single total figure of remuneration
Nick Read CEO Alisdair Gameran CF
Financial year 2021/22 2020/21 2021/22 2020/21
£000 £000 £000 £000
Annualised salary 415 415 245 245
Actual salary 415 415 245 245
Benefits - S 10 10
me lieu of pension - - 61 61
_ Fixed remuneration total 415 415 316 316
TI scheme (Note 2) 177 “ 79 -
STIP (Note 3) 163 - 99 -
LTIP (Note 4) 115 - 132 -
veneee remuneration 455 - 310 .
Total remuneration 870 415 626 316
Note 1: The CEO does not take the pension benefit and does not have any benefit entitlements due to being appointed after the
September 2019 policy change
Note 2: The 2020/21 Executive Directors’ STIP was cancelled and replaced with the Transformation Incentive ("TI") scheme which was
paid out in March 2022 and therefore included in the 2021/22 figures rather than in the 2020/21 figures. See the next page for more
information regarding the TI scheme.
Note 3: As per note 2, there was no 2020/21 STIP. Payout of the 2021/22 STIP will be made following Board approval of the annual
report and accounts ("ARA").
Note 4: The 2018-21 LTIP did not pay out as performance did not reach the EBITDAS target threshold. Payment in 2022 relates to the
2019-2022 LTIP, and payment to CEO and CFO will be made following Board approval of the ARA. The award for Nick Read will be pro-
rated in line with his start date of 16 September 2019.
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2021-2022 Remuneration Outcomes
Base salaries
Salaries for individual Executive Directors are reviewed annually by the Committee and normally take effect
from July. The Committee decided, to be consistent with the decision across the whole Post Office workforce,
that no salary increase would be awarded to the Executive Directors in July 2021.
Transformation Incentive Scheme
To replace the cancelled STIP and LTIP plans in 2020/21, the Transformation Incentive ("TI") scheme was
implemented on a one-off basis for the Executive Director, Group Executive and Senior Leadership population
("SLP"). This is a deferred cash plan, with a payout opportunity that mirrors eligibility under the STIP.
Performance against the plan metrics was assessed in February 2022 and payment was made in March 2022.
There is no threshold or maximum performance level around each target. The Committee has discretion to
adjust payment in cases of near-target performance.
The scheme is based on a scorecard of four equally weighted metrics aligned to our business transformation
priorities:
¢ Postmaster Satisfaction
«Inquiry
° New Branch IT
¢ Organisation Design
The table below provides the detail of each metric, the accompanying targets set and the performance
assessment as evidenced against actual outcomes:
Postmaster Satisfaction (weighting 25%)
Delivery of a step change in Postmaster engagement through delivery of key milestones and metrics aligned as
part of the Culture change programme. Measure effectiveness through delivery of top priority areas identified from
the survey feedback and ensure this represents a significant change by January 2022 in comparison to the previous
feedback from the Postmaster Consultation with external provider.
Metric Target Outcome
Postmaster Survey: Improve from 17% to 30% 25%
Question B1: “How would
you describe your
relationship with Post
Office?"
Question B7: “How Improve from 25% to 30% 31%
supported or not do you feel
by Post Office?”
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Delivery of all the required information and support for the Horizon Inquiry satisfying the requirements of Sir Wyn
Williams, ensuring there is a clear measurable plan created to demonstrate action on improving the overall culture
to be Postmaster centric and to ensure processes for Postmasters are addressed in line with recommendations
from the inquiry. Any actions or
plans must have been endorsed by the Inquiry and the Board.
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Metric
Target
Outcome
Inquiry support
All required evidence and information supplied on time, with
confirmation from Sir Wyn Williams and team that Post
Office's performance supported and enabled the Inquiry to
finish in line with expectations.
Achieved
Culture change programme
Deliverables and actions from culture change programme
achieved with clear evidence to support this on
improvements and overall symbols of change e.g. rhythms
and routines, new ways of working, activities undertaken to
bring our people closer to Postmasters etc.
Achieved
Operational processes and
change plans transitioned to
BAU
Clearly documented plan on all major operational process,
with defined change plans in progress as per
recommendations from the Judgements and Inquiry.
Deliverables from these changes transitioned to BAU with
appropriate controls in place.
Achieved
Validation of Horizon Issues
Judgement ("HU") and
Common Issues Judgement
("CU") actions
External sign-off of IT Audit on HU.
External sign-off of execution of plans instigated by external
consultant work.
New Branch IT - Strategic Platform Modernisation ("SPM") programme (weighting 25%)
Create a Board approved SPM plan and business case to move off Horizon dependence (first ve
2021, final by 31 December 2021) and deliver a prototype to operate an ‘express’ proposition ful
by 31 January 2022 with ability
to subsequently scale across the Post Office network.
Achieved
rsion by 31 March
ly outside Horizon
Metric
Target
Outcome
Prototype express proposition
Protype express proposition in place by 31 January 2022.
Achieved
SPM roadmap
Clear understanding and Board approval for the roadmap,
major milestones, overall business case and overall
programme cost to incrementally stand-up a core IT platform
that eventually allows for the retirement of Horizon over the
next 3-5 years.
Achieved
SPM module
A functional SPM module, which includes a retailer-facing
device and new Postmaster interface, which allows
Postmasters to process transactions from the “basic” and
“express” propositions without the need of a Horizon
terminal.
Achieved
SPM rollout
A roadmap and timeline for the rollout of that SPM module to
400 new or existing Post Office locations in order to meet
the first business objectives of the Network Strategy.
Achieved
Investment assessment
The Remuneration Committee to assess whether the
investment has been spent wisely. .
Achieved
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Orga:
ign (weighting 25%)
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Delivery of an improved organisational design and lower cost operating model through the successful
implementation of organisational change plans. Measured by improving metrics on spans and layers (in accordance
with best practice making the organisation flatter and more aligned to the Postmaster.
Metric
Target
Outcome
FTE reduction
colleagues in DMB branches if reductions are to be made
with funding and shareholder consent.
Reduction of net 280 FTE between August 2020 (baseline) I FTE reduction of
and January 2022. NB: This excludes any capability build for I 334
IT and Data and any potential FTE reductions related to
Span of contro!
‘Average of fewer than 6 direct reports per manager Average of 5.8
direct reports
per manager
Line Managers
Fewer than 15% of the workforce as line managers 16.4%
workforce are
line managers
Grade compression
structure
Maximum 90 cases of grade compression across the Now 70 cases
of grade
compression
The Committee reviewed this information in order to determine a fair level of award for the performance
achieved. The table below shows the decision reached and the supporting rationale:
Pian Metric
Postmaster Satisfaction
Award level
50%
Decision rationale
Whilst the results from the survey of Postmasters only hit one of the
two targets, the Committee determined that it was appropriate to use
our discretion to recognise significant progress in building levels of
Postmaster satisfaction, and the challenging targets which exceeded
external recommendations for improvement over this period of time.
The Committee also recognised the substantial delivery against the
action plan against Postmaster priority areas.
The Committee awarded 50% of the target payout against this plan
metric.
Inquiry
100%
A wide range of evidence was examined to cover all the targets set
against this metric. including external audit reports validating that the
in-scope HJ and ClJ actions due within the timeframe had been
completed.
The Committee awarded 100% of the target payout against this
plan metric.
New Branch IT - SPM
100%
A range of evidence was examined to demonstrate achievement
against the targets, including reports to the Board and updates to the
SPM Steering Committee.
The Committee awarded 100% of the target payout against this
plan metric.
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Plan Metric Award level Decision rationale
Organisational Design The Committee reviewed the information as tracked and reported by
the Organisational Design team.
On the basis that three out of the four areas had met the target, the
Committee awarded 75% of the target payout against this plan
metric.
Overall, the base, award made to TI scheme participants was 81.25% of target, before any adjustments for
individual performance. The Committee considered the formulaic outcome of 81.25% to be a fair reflection of
Post Office performance over the TI period and did not therefore consider it appropriate to exercise additional
discretion.
Consideration of Individual Performance within the Tl scheme
Participants must perform satisfactorily to receive a payment. Additionally, there is provision for enhanced
awards to a small group of consistently high performing individuals, limited to 20% of the eligible population.
The enhanced award may not exceed the maximum STIP opportunity for the individual.
Recommendations for an award were made to seven individuals, of whom six were at SLP level. In addition,
the Chairman recommended an enhanced award for Nick Read to reward his strong leadership of Post Office
through exceptionally challenging times.
2021/22 STIP
The 2021/22 STIP comprises both financial and non-financial metrics in line with the strategic priorities of the
business. Company measures account for 80% of the plan, with individual performance accounting for 20%.
Each metric has three performance levels set which correspond to Threshold, Target and Maximum payout
levels. The plan metrics and performance levels for the company metrics are shown on the next page.
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Company measures (80% weighted)
Performance Outcome (% of
Mat " Taract 08
ene slehting aa achieved _ target achieved)
Network Availability 11,500 branches (subject to any Gateway passed
(Gateway metric) NIA waiver from the Shareholder) I Over 14,600 Note 2
Financial Metric: Threshold I Target I Maximum
EBITDAS ~ I 40% £39.5mN%3 I 103.95%
£30.4m I £38m I £45.6m
Postmaster Satisfaction, Threshold I Target I Maximum
measured by Postmaster
survey answers to two
questions:
B1: How would you B1: 25% ote 4
describe your B7: 31% I S485%
relationship with Post 30% 33% 36% — I Average: 28%
, 15%
Office?
B7: How supported, or
not, do you feel from
Post Office?
Transaction Corrections Threshold I Target I Maximum
d 15% 954 125.79%Ne85
{average aged open 1400 I 1200 I 1000
items)
Growth in Mails revenue Threshold I Target I Stretch
. . 2.2
75% I ¢331m [£368] £405m I £2995 22-20%
Growth in Banking Threshold I Target I Stretch
7.5% £215.81 100.84%
revenue £190m_I[£214mI_£236m m
Dangerous Goods Threshold I Target I Stretch
handling % at P12:
Inland 7.5% 60 70 80 59 B4.29%NS
International 7.5% 75 85 95 95 111.76%"**7
Note 1: Payment calculated on a straight-line basis between threshold and maximum / stretch.
Note 2: The network stood at around 11,600 branches at year end. During the year, there were occasions where the network number fell
below 11,500 for reasons outside of Post Office control. However, on the basis that the year-end number was in excess of the gateway
and POL's intention was clearly to sustain this size of network, the Committee considered the gateway metric as achieved.
Note 3: This is an adjusted figure downwards from that disclosed elsewhere in this ARA. This is due to the removal of an amount for the
release of bonus accruals to avoid over-payment of STIP.
Note 4: Threshold target for responses to survey questions were not met. However, as for the TI Scheme, the Committee applied its
discretion to make @ minimum Threshold award, considering the improvement against previous results, the progress in Postmaster Trust
metrics and against the key action areas. The Committee wished to recognise the significant contribution and achievements of the Post
Office leadership group in this respect.
Note 5: As the actual performance exceeded the maximum performance level (i.e. fewer aged open items) the maximum award was
made under this metric.
Note 6: Actual performance was below Threshold hence no award was made in this respect.
Note 7: As the actual performance exceeded the maximum performance level, the maximum award was made under this metric.
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Individual performance (20% weighted)
Individual performance accounts for 20% of the plan opportunity, based on an assessment of performance
against objectives.
In addition to the use of the individual performance score in determining how much of the 20% is achieved
the score is also taken in consideration to adjust the overall STIP.
The Chairman recommended an enhanced award for Nick Read to reward his strong leadership of Post Office
through exceptionally challenging times. This produced a multiplier of 1.3 overall.
2021/22 STIP award
Considering both Company performance against the targets outlined above, and individual performance, the
Committee approved a bonus equal to £162,982 for the CEO and £98,605 for the CFO. These amounts are
shown in the remuneration table on page 37.
LTIP awards vesting
The 2019-2022 LTIP vested on 31 March 2022. The performance conditions for the plan are set out in the table
below:
Network Availability Gateway Metric 11,500 branches (subject to any waiver from the
Shareholder)
Threshold Target Maximum
EBITDAS £30.4m £38m £45.6m
As noted under STIP above, the gateway target was met and the final year-end EBITDAS outturn was a trading
profit of £39.5 million (adjusted to remove the amount of bonus accrual release), which is 103.95% of Target.
The Committee approved an award of 32.56% based on this performance in line with the scheme design. Nick
Read's award is pro-rated in line with his start date of 16 September 2019.
Outstanding interests in LTIP
Under the remuneration policy, LTIP awards are granted annually. The CEO and CFO have the following
outstanding award:
Target award Stretch award Performance period
CEO 35% 43% 2021 = 24
CFO 50% 70% 2021 - 24
There was no LTIP award made in 2020/21.
LTIP 2021-24
The Committee approved an LTIP for 2021-24. The plan aims to reward, motivate and retain senior executives
for long-term sustained performance against critical measures of success.
The LTIP comprises both financial and non-financial measures which are strategic transformational measures.
There are also two gateway measures that must be met before any LTIP award can be made: Network
Availability and positive EBITDAS.
The other measures in the plan are:
* Financial (40% weighting)
* Postmaster Promise (15% weighting)
* Systems implementation: delivery of mails services without Horizon (15% weighting)
* Systems implementation: Postmaster adoption: utilisation of processes and services available through
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the new IT system (15% weighting)
* Customer Promise (7.5% weighting)
* Colleague Promise (7.5% weighting)
There is no individual performance measure for the LTIP.
Each performance measure will be defined at three performance levels: Threshold, Target and Maximum.
These will be disclosed at the point of making an award under the Plan.
Consideration of progress against recommendations of the Inquiry
In determining the outcome of the LTIP, the Committee will take into account the recommendations of the
Inquiry when available and review the progress of the Executive against those recommendations. If not
available during the LTIP measurement period this measure will be deferred and included in the 2022-25 LTIP
and not this 2021-24 LTIP.
Total pension entitlements
Any new Executive Director appointment from September 2019 is not offered salary supplement in lieu of
pension but remains entitled to participate in the Post Office Pension Scheme at the same levels of contribution
as the wider workforce. This applies to the CEO who has chosen not to participate in the scheme in 2021/22.
Historically, Executive Directors received a 25% salary supplement in lieu of pension. This still applies to the
CFO.
Remuneration of the CEO over time
The table below shows the total remuneration of the CEO over nine financial years (since the Post Office
became independent from Royal Mail) with a breakdown of the elements of remuneration in each year, showing
the level of incentive paid under each relevant scheme relative to maximum opportunity (note this is not a
percentage of salary).
2014 I 2015 2016 2017 I 2018 2019 2020 2021 2022
£000 I £000 00 £000 I £000 £000 £000 £000 £000
Total
Remuneration} 544 I 522 I 619 I 671 I 718 I 717 I 475 I 415 870
Salary 250 I 250 I 250 I 250 I 255 I 255 I 415 I 415 415
TI (% of
Ny
a NWA I WA I NA I NA I N/A I NA WA I NA 95%
P
STIP (% of 38% I 48% I 77% I 99% I 96% I 71% I 32% I wa 101%
target)
taney o 59% I 45% I 59% I 62% I 80% I 100% I WA I NA 104%
From 2012-2019 the CEO remuneration data relates to Paula Vennells.
The 2020 figure is an annualised figure relating to Nick Read for comparison purposes. Nick worked 54% of the year due to starting on
16 September 2019.
The 2021 figure excludes any STIP payment as the 2021/22 scheme was replaced with a deferred bonus scheme (TI) which paid out
in March 2022. The 2022 LTIP payment for the 2019-22 plan is prorated in line with Nick Read's start date.
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Percentage change in CEO remuneration compared with employees
The CEO's total pay in 2021/22 increased by 110% in comparison to 2020/21. This can be explained as follows:
* No STIP payment was made in 2020/21 whereas a STIP award was made in 2021/22
e The TI scheme did not pay out until March 2022 although the performance period included 2021
* The CEO was not eligible for the 2018 — 2021 LTIP (which in any case did not pay out). He was eligible
for a pro-rated award under the 2019-22 LTIP which will be paid out in 2022/23 following publication
of this ARA.
Note that the CEO did not receive a pay increase in either 2020/21 or 2021/22.
Over the same period, remuneration for other employees was affected as follows:
* Inline with guidance from BEIS no pay award was made to any staff groups in 2021/22
e@ Employees in bonus-eligible grades (management grades) received a bonus in line with their eligibility.
The average bonus was just circa 98% of target, with some adjustments based on individual
performance
© Employees in the Group Executive and Senior Leadership population received a payment under the TI
scheme
© Eligible employees in the Group Executive and Senior Leadership population received an award under
the 2019 - 2022 LTIP
Note that employees in non-management grades had bonus consolidated into base pay effective April 2020
and therefore were not eligible to receive a bonus in 2021/22.
CEO pay ratio
In line with our commitment to transparency, we provide information below on our CEO pay ratio. This has been
calculated using Option A under the relevant regulatory requirements. Option A was selected as this is the
preferred approach used by listed companies, as it provides the most statistically accurate comparison.
In line with the requirements the information is set out in a table reporting the CEO's total pay and benefits as
a ratio of:
* the 25th percentile ("P25") employees’ total pay and benefits.
* the 50th percentile ("P50" or median) employees’ total pay and benefits.
«the 75th percentile ("P75") employee's total pay and benefits.
Total remuneration
2021/22 P25 (lower quartile) P50 (median) P75 (upper quartile)
CEO single figure remuneration £870,000 £870,000 £870,000
Pay ratio 311 26:1 18:1
Employee total pay and benefits £28,000 £33,000 £48,000
The CEO remuneration is the total single figure remuneration for the year ended 27 March 2022.
The total pay and benefits for Post Office employees at P25, P50 and P75 has been determined using the
calculated full-time equivalent ("FTE") basic pay, including fixed allowances, taxable benefits, accrued
incentives and the default defined contribution employer pension contribution for the year ended 27 March
2022.
By way of comparison, WTW, Post Office’s Remuneration Committee advisors, quote the median UK CEO pay
ratio in the FTSE 250 at 44.75:1.
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The table below shows the P50 ratio information each year since this figure was first reported in 2020/21.
Eventually the table will include ratios for the previous 10 years.
020/21 P50 (media 0 P50 (media
CEO single figure remuneration £415,000 £870,000
Pay ratio 12.8:1 26:1
Payments to past Directors
There were no payments to past Directors.
Payments for loss of office
No payments were made for loss of office in 2021/22 to Executive Directors, and at the balance sheet date
there were no provisions made for compensation payable for early termination of contracts or loss of office to
Executive Directors.
Single Figure for Non-Executive Directors
The table below shows the remuneration of Non-Executive Directors for the year ended 27 March 2022 and
the comparative figures for the year ended 28 March 2021.
Annualised fees Actual fees (note 1) Actual fees
2022 2022 2021
[Tim Parker (note 2) 19,230 19,230 19,230
ITom Cooper {note 3) - - -
Lisa Harrington (note 4) 45,000 36,855 35,000
Ken McCall (note 5) 45,000 41,667 50,000
(Carla Stent 45,000 45,000 45,000
arin Patel (note 6) 40,000 35,914 35,000
Saf Ismail (note 7) 35,000 32,083 -
Elliot Jacobs (note 8) 35,000 32,083 -
Ben Tidswell (note 9) 45,000 30,605 -
Brian Gaunt (note 10) 35,000 8,750 -
Note 1: The actual fees are shown as at 27 March 2022 or at the date of leaving.
Note 2: Donates the after-tax value of his Board fees to charity.
Note 3: Tom Cooper is an employee of UK Government Investments Limited ("UKGI").
Note 4: Appointed as Non-Executive Director on 8 April 2020 and as Remuneration Committee Chair on 26 January 2022.
Note 5: Stood down as Senior Independent Director and Remuneration Committee Chair on 25 January 2022.
Note 6: Appointed as a Senior Independent Director on 26 January 2022.
Note 7: Appointed as Non-Executive Director on 3 June 2021.
Note 8: Appointed as Non-Executive Director on 3 June 2021.
Note 9: Appointed as Non-Executive Director on 27 July 2021.
Note 10: Appointed as Non-Executive Director on 25 January 2022 and has been Chair of the Historical Remediation Committee since
it first met on 26 August 2021. Joined the Remuneration Committee on 30 November 2021.
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Service Contracts
Each of the Executive Directors has a signed contract within 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.
Date of service contract Notice period
CEO 16 September 2019 6 months
CFO 28 January 2015 12 months
The Chairman and Non-Executive Directors have letters of appointment. Dates of the Directors’ letters of
appointment are set out below:
Name Date of joining the board Notice period
Ken McCall 21 January 2016 6 months
Tim Parker 1 October 2015 6 months
Tom Cooper 27 March 2018 N/A
Carla Stent 21 January 2016 6 months
Zarin Patel 26 November 2019 6 months
Lisa Harrington 8 April 2020 6 months
Elliot Jacobs 03 June 2021 6 months
Saf Ismail 03 June 2021 6 months
Ben Tidswell 27 July 2021 6 months
Brian Gaunt 25 January 2022 6 months
Copies of the service contracts of the Executive Directors and the letters of appointment of the Non-Executive
Directors are available for inspection at the Company's registered office.
External appointments
Tim Parker is the Chairman of Samsonite International S.A and HM Courts & Tribunals Service. He is the
Chairman of The Grange Festival as well as Director and Owner of the British Pathé Film Archive. He is also a
Member of the Governing Body of the Royal Academy of Music. His term as Chairman of the National Trust
ended in October 2021.
Carla Stent is a Director of Bestinvest (Consultants) Limited, HW Financial Services Limited, Index Fund
Advisers Limited, MCS Advisory Limited and JP Morgan Elect PLC. She is also a Director of Evelyn Partners
formerly Tilney Smith & Williamson Group, where she chairs the Risk and Audit Committee and is a member of
both the Remuneration and Nominations Committees. She is Chair of Marex Group and also chairs several
early-stage businesses. She is a Chair and shareholder of Littlefish FX Limited. She is a shareholder of Lightpoint
Medical Limited, Antaco UK Limited and Binomia Limited (trading as New Path). She was appointed as a
Director at HFS Milbourne Financial Services Limited on 02 March 2021. Carla is a shareholder of LiveSmart,
55 Redefined, Malherbe Limited, Savernake Management Limited, Savernake Capital Limited and Savernake
Technology Limited. She ceased her role as Chair of Malherbe Limited, Savernake Management Limited,
Savernake Capital Limited and Savernake Technology Limited on 03 December 2021. She ceased her role as a
Director of NCL Investments Limited on 08 December 2021. She ceased her role as Vice Chair of Power to
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Change Trustee Limited on 31 January 2022. On 26 July 2022 she joined the Board as an independent Non-
Executive Director and Chair of the Audit & Risk Committee at Telecom Plus plc.
Ken McCall is a Non-Executive Director of Brambles Ltd. He is also a Member of its Audit and Risk Committee.
Tom Cooper is a Director at UKGI and TKGC Consulting Limited. From 20 November 2020 to 23 November
2021, Tom was a Director at OneWeb Holdings Limited.
Alisdair Cameron is a Non-Executive Director of Dover Harbour Board.
Zarin Patel is a trustee and Chair of the Audit and Risk Committee at the National Trust. She is also an
Independent Director at Anglian Water Services Financing Plc, Anglian Water Services Holdings Limited and
Anglian Water Services UK Parent Co Limited. She is an Independent Director at Anglian Water Services
Limited and the Chair of the Audit & Risk Committee since March 2020. Zarin ceased her role at John Lewis on
14 April 2021. She started her role as Non-Executive Director & member of the Remuneration and ESG
Committees at Pets at Home Group Plc on 14 April 2021. On 01 January 2022, she was appointed as a Board
Member and Chair of the Audit and Risk Committee at HM Treasury.
Lisa Harrington was appointed as an Independent Director and Chair of the Nominations Committee at Digital
9 Infrastructure Plc on 05 March 2021. She ceased her role as Acting Managing Director of Infrastructure at
Hyperoptic Ltd on 12 December 2021. She joined the Board of the Children's Book Project as a Trustee on 01
May 2022. She also joined the Board of the Supporting Education Group (SEG) as a Non-Executive Director on
06 May 2022. Lisa was appointed to the Cabinet Office on 01 June 2022. This is a voluntary advisory post and
she will sit on their Digital Advisory Board.
Elliot Jacobs is currently a Non-Executive Director at Office Friendly Dealer Association Limited. He is also a
Director at Universal Office Equipment (UK) Limited, UOE Holdings Limited, Onjoy Ltd and Jems Group Ltd.
Elliot is a Postmaster NED at Post Office and runs the following Post Office branches: N2 (0110043), EN6
(190005), SG14 (1671294), N8 (2050048), N10 (2070049), N16 (2080044) and NW1 (208005). He was
appointed as a Director at Quickdrop Delivery Limited on 04 February 2022.
Saf Ismail is a Director at IE Group UK and also a Postmaster NED at Post Office. He runs the following Post
Office branches: PR1 (223427), PR1 (228427), PR1 (220427), PR2 (189406), BL1 (3894061), OL10 (311424),
PR7 (0146270), BL4 (0034061). Saf is also a Board member of a non-profit community organisation PMF.
Ben Tidswell is a Chairman at the Competition Appeal Tribunal, which hears and decides cases involving
competition or economic regulatory issues in the UK. Ben was an LLP Designated member of Tractor Transfer
LLP and Ashurst LLP until 31 July 2021. He ceased his role as Global Chairman of international law firm Ashurst
on 31 July 2021, which included ending his Directorships at the following companies: Ashmor Nominees
Limited, Ashurst Group Limited, Ashurst Healthcare Trustee Limited and Ashurst Business Services Limited.
Brian Gaunt is a Non-Executive Director at Interdelta Ltd. He concluded his role as Chairman of MFS Group Co
in March 2022. He is the Director and co-owner of Cherry Blossom Developments Ltd and the Director and
Owner of B2CSupply Ltd.
All appointments during the financial year and up to the point of signing the ARA have been included. No
external appointments have been declared by the remaining Executive and Non-Executive Directors.
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Fairness, diversity and inclusion
In this section of the report we explain how Post Office is working to create a fair and progressive workplace
for everyone that will help to improve our diversity pay gap.
Equity, Diversity and Inclusion Policy
Equity, Diversity and Inclusion ("ED&dl") at Post Office goes beyond meeting the minimum legal requirements.
The Post Office is full of talented, committed people and we want to create an environment where difference
of thought, experience and background is encouraged, an environment where everyone has opportunities to
grow regardless of gender, race, sexuality, disability or other characteristics. And we want our people to trust
that decisions that affect them at any stage of working with us are based on merit and fairness.
ED&i is a business priority, not an HR initiative, and we hold Senior Leadership accountable for our performance
in this respect.
ED&l targets
The Group Executive ("GE") has agreed stretching gender and ethnicity diversity targets for the overall
workforce and specifically for Senior Management to reflect the communities that we serve. Our aspiration is
that we will have a Leadership team which is 50% female and 14% BAME (Black, Asian and Minority Ethnic)
by 2024. These targets will be reviewed once we have the information from the 2021 Census.
Performance in 2021/22
Our performance against our targets was mixed but showed some positive changes which is encouraging.
Summary data is shown in the table below:
Colleague Group 2021/22 2020/21
All colleagues 52.5% 53.9%
Group Executive 20.0% 12.5%
Senior Leadership 34.0% 34.6%
Gender Population
(data shows percentage [Senior Managers I 40.7% 44.0%
female)
Middle Managers 47.9% 46.0%
Graduates 60.0% 50.0%
NEDs 33.3% 33.3%
BAME All colleagues 20.0% 21.0%
(data shows percentage I Group Executive 0.0% 0.0%
BAME) r rn
Senior Leadership 5.7% 2.0%
Population
Senior Managers 14.3% 12.0%
Middle Managers 17.8% 16.0%
NEDs 22.0% 11.0%
Graduates Not disclosed due to small
numbers to respect
confidentiality of personal data
shared.
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Whilst progress is gradual, we believe that we are starting to see the impact of our efforts in building more
diverse slates of candidates at the recruitment stage, and in neutralising the language in job advertisements to
remove any type of gender or race bias.
With regard to internal promotions, around 51% of internal promotions into management level positions were
women, and 18.5% were BAME employees. This is broadly in line with the data we reported last year (55%
and 17% respectively). Our particular focus going forward will be promotions into the Senior Leadership
Population as there is still a significant gap between our overall figures and our performance at the most senior
level.
We remain committed to our targets and have taken a number of concrete actions this year to drive positive
change. These include:
+ Ways of Working
Our Ways of Working are critical to embedding a culture of positive change at Post Office. In early 2022,
we took the opportunity at the all-colleague conference to emphasise these Ways of Working, which
reinforce our values and the importance of respect, trust and integrity. These Ways of Working are now
embedded in our performance expectations of all our colleagues and especially our leaders. How people
apply these ways of working in how they behave day-to-day will inform reward and career development
decisions.
+ Talent Management and Career Development
In 2021, we invested in a new Talent Manager who joined us as a senior hire, bringing valuable additional
expertise to support managers in identifying and developing diverse high-potential talent.
+ Networks
We continue to support colleague-led networks to enhance community and connection for our people.
These include:
« Women at Post Office network group (Affinity) where those women who have been
identified as high potential meet with our senior female leaders for mutual support and
inspiration
e Prism which supports our LGBTQ+ community
¢ Post Office Ethnic Minorities ("POEM") which supports Black, Asian and Minority ethnic
colleagues
* Be You which supports wellbeing and colleagues with a disability
e¢ ED&l Council
This year, we established an ED&I Council to provide business leadership for refreshing our ED&l strategy
and overseeing the implementation of that strategy. The Council comprises a representative from our
Group Executive, together with a senior leader and the Chairs of the Colleague networks. The Council
reports to the Board. We believe that the Council will add powerful focus and business leadership which
will help to accelerate our progress towards our ED&l goals.
© ED&l Survey
We ran an ED&l survey for the first time in June 2021 to capture insights and feedback from our
colleagues on their everyday experiences at the Post Office and to help us identity priorities for future
action. The results against some of the key questions is shown below:
Question ercentage male BAME
I feel included in my team 80% 67%
My manager believes in Diversity and Inclusion 79% 65%
Post Office has diverse representation of 58% 47%
background and identities across all levels in the
organisation
Post Office is a diverse organisation to work in 79% 75% 71%
When I speak up at work, my opinion is valued 62% 62% 49%
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These results are a baseline against which to measure progress and assess the effectiveness of our
actions. We will run the survey on an annual basis.
+ “Let's talk about Race”
We rolled out a virtual real-time two-hour session for all colleagues: "Let's talk about Race” aimed at
building awareness and understanding of issues faced by our ethnic minority colleagues. The
programme was run on a voluntary basis over a six-month period and we were delighted that over
90% of colleagues participated. Feedback from the sessions was very positive and we plan to
continue the format in 2022 to cover different topics.
+ “Advocacy and Allyship”
We ran a virtual “face-to-face” session with our most senior leaders in the business (Group Executive
and Senior Leadership Group) on “Advocacy and Allyship” which provided guidance on how senior
leaders can best support diverse employees in their teams.
* ED&l Days
We supported two major events this year — Diversity Day and International Women’s Day. These
days celebrate diversity through a varied and fun programme of events throughout the day which
raise awareness and build understanding of specific diversity issues. They are always a big success
with strong levels of participation and great feedback.
* Diversity Newsletter
Every two months we publish an ED&l Newsletter that is distributed to all colleagues. This showcases
our work, shares information, signposts resources and publicises upcoming diversity-related events
both at Post Office and elsewhere.
+ — Information and Understanding
Underpinning all our initiatives is data. We continue to improve our base data and we have over 90%
of colleagues who choose to disclose ethnicity. On an annual basis, we run a targeted campaign to
encourage employees to share diversity data so that we have better insights into other areas of
diversity such as sexual orientation and disability.
We maintain a Diversity Dashboard which presents a clear picture across our whole workforce, our
leadership team, promotions and new hires. Through the year we have been working to improve the
information we can include in the dashboard so that it provides broader insights and stimulates better
conversations at Group Executive level.
We published our 2021 Gender Pay Gap in April 2022. This showed a slight increase in the mean
gap from 15% to 16%. The median pay gap remains the same at 10%.
We published our Ethnicity pay gap data for the first time in April 2022 (data as of April 2021). We
had tracked this internally since 2020, so were able to report two years of data. Our overall mean
ethnicity pay gap is 12%, up slightly from 11% in 2020. The median ethnicity pay gap is -2%, up
from -6% in 2020. Our ethnicity pay gap reflects the lack of ethnic diversity at senior levels in our
organisation.
We encourage you to read our full Diversity Pay Gap report on our website for more information.
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Looking forward
Achieving our goals of creating a truly inclusive workforce and having better representation of women and
BAME employees at senior levels requires sustained commitment and continuous action. Our main focus for
2022/23 will be:
« Embedding our Ways of Working into our everyday interactions with each other. We will be rigorous
in keeping the focus on these ways of working and their connection with performance management,
reward, recognition and career development. In particular, we will provide our people with clear
examples of ways of working to help them with the everyday conversations that bring our Ways of
Working to life.
* Working with the new Diversity Council to create an ED&d Strategy with supporting commitments that
will be approved by the Board.
* Providing “Let's talk.....” sessions every two months which will feature people from underrepresented
groups sharing their experiences and providing an opportunity for colleagues to ask questions in an
open and non-challenging environment.
« Re-running the Diversity survey to track progress and help inform our future agenda.
« Undertaking a deep dive audit of our ED&l processes. Using external expertise, we plan to review our
end-to-end processes to identify key areas for improvement and where we can make most impact
against our goals.
* Continuing to build our ability to use data to generate insights by integrating ED&l data in a broader
range of talent metrics.
* Focussing on those areas that will make a tangible difference to our representation at Senior Leadership
levels since we need to accelerate our progress in this respect. This will primarily relate to:
* Recruitment: re-launching our external employer brand, promoting more diverse job boards
and reviewing our end-to-end selection and assessment process.
* Talent Development: improving talent identification and offering development programmes
specifically targeted at underrepresented groups.
We know that meeting our ED&l targets and aspirations will be a significant challenge. We are committed to
maintain the sustained focus needed to create an environment where everyone can fulfil their highest potential
and deliver their best for our postmasters, customers and colleagues.
Lisa Harrington
Chair of the Remuneration Committee
17 August 2022
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Management of Risk
Our Approach to Risk
As a commercial business with a social purpose, the Post Office must balance the need to provide essential
services to our customers with maintaining and enhancing profitability. The Post Office is, and will continue to
be, exposed to many sources of risk as a result of its various activities and the external environment in which it
operates.
The Post Office adopts an enterprise-wide approach to the management of the risks. This involves; the (i)
identification and evaluation of significant risks, (ii) assignment of ownership, and (iii) completion and
monitoring of mitigating actions to manage these risks within risk appetite. This enterprise risk approach seeks
to improve efficiency and the delivery of its services, improve allocation of resources to business improvement.
and enhance risk reporting to the Shareholder.
Our Risk Management Framework
The Post Office's risk management framework is designed to support the consistent and robust identification
and management of opportunities and risks across the organisation. It is based on the principles that risk
management is:
. Fundamental to how we are directed, managed and controlled at all levels;
. An integral part of all our organisational activities which support decision-making in achieving objectives;
and
. Collaborative and informed by the best available information and expertise, and that processes include
risk:
© Identification and assessment to determine how our risks should be managed;
© treatment options that manage our risks to an acceptable level;
© monitoring options; and
© reporting to enhance the quality of decision-making and to support management oversight.
In line with industry best practice our Framework is made up of three inter-related components: governance,
strategy and protocols.
Risk Management Governance
The Post Office’s Risk Management Governance arrangements are concerned with how we manage and
communicate risks in the organisation, underpinned by a risk reporting structure. The Board (along with
operational management), Risk & Compliance Committee ("RCC") and the Board Audit, Risk & Compliance
Committee ("ARC") provide the three lines of oversight for risk management.
The Board, informed and advised by the ARC, lead on the assessment and management of risk, taking a
strategic view of the risks faced by the Post Office. The Board ensures there are clear accountabilities for
managing key risks, as well as the associated internal controls, and our staff are equipped with the relevant
skills and guidance to perform their assigned roles effectively and efficiently. The Board also ensure roles and
responsibilities are clear to support effective governance and decision-making at each level with appropriate
rules around escalation, aggregation and delegation.
In providing such oversight the Board assesses the nature and extent of the existing and emerging key risks
being encountered, as the Post Office aims to achieve its objectives. The Board agrees the frequency and scope
of its risk discussions and ensures processes are in place to bring significant issues to its attention. It also
examines potential long-term threats, risks, emerging issues and opportunities to assure itself on the
effectiveness of our risk management framework.
The ARC supports the Board in its assessment and management of key risks. In doing so the ARC ensures the
Board understand the business strategy, operating environment and the associated risks. The ARC reviews the
Post Office’s policy, risk appetite and attitude to risk to ensure these are appropriately defined and
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communicated so that parameters and expectations are understood. They regularly and critically challenge and
review our risk management framework to evaluate how well the arrangements are working. In doing so they
also review the adequacy and effectiveness of our internal contro! framework.
We continue to follow the industry standard “Three Lines of Defence” assurance model in managing the risks
across our organisational tiers as it provides a simple and effective way to delegate and coordinate risk
management roles and responsibilities.
In this structure the 1% Line function is performed by Post Office Individual Business Units and Subsidiary
Departments who identify, assess, own and manage the risks. They are also accountable for the design,
implementation and maintenance of the associated internal control measures. The Group Executive ("GE") form
part of the 1* Line function providing clear communication of our goals, objectives, strategy and achievement
metrics. The GE also set the Risk Appetites and approved tolerance levels that ensure enough risk is being
taken to ensure Post Office strategic objectives are met.
A Central Risk team perform the 2™ Line function. It oversees our corporate approach to risk management. This
involves defining and implementing risk standards, policies, procedures and guidance. They also assist, with
Central Compliance, the 1* Line function in developing controls in line with good practice as well as monitor
compliance and effectiveness. Furthermore, they are accountable for identifying and alerting the Board, the GE
and the ARC to emerging risks and changing risk scenarios.
Internal Audit, who operate independently of 1* and 2" Line functions, are the 3 Line of defence. They provide
an independent evaluation of the adequacy and effectiveness of the Post Office's framework of governance,
risk management and control.
All Post Office risks are monitored, reviewed and recorded regularly to determine whether, or not, the corporate
risk profile has changed and to gain assurance that corporate risk management rules and procedures are
effective.
Risk Management Strategy
The Post Office's Risk Management Strategy is concerned with our specific risk policies and framework, our
appetite and attitude to risk, the techniques by which we assess risks as well as the key priorities in any given
year.
Risk Management Protocols
The Post Office Risk Management Protocols are the guidelines provided to the organisation for the
management of risk. These include detailed rules and procedures, how we classify risks, as well as the risk
management methodologies, tools and techniques we use.
Our Control Framework
We have an internal control framework in place for our financial reporting, IT processes, and change
programmes which fall under our self-assessment regime. These are managed through our on-line Governance,
Risk & Compliance ("GRC") tool. in addition, we have a suite of Post Office policies which define the minimum
control standards, such as Postmaster service and support, which we expect to be performed within the
applicable business areas. Work is underway to undertake a phased migration of these off-line minimum control
standards onto the GRC tool.
Risk Appetite
The Risk Policy outlines an approach to Risk Appetite such that we could meet our strategic objectives of (i)
supporting Postmasters, (ii) building a fit for purpose network, and (iii) focusing relentlessly on Post Office core
strengths and customers.
The Policy defines Risk Appetite as the amount of overall risk the Post Office is willing to pursue (or retain) to
achieve its strategic objectives. It also outlined a five-tiered appetite scale (ranging from ‘Averse’ which borders
‘on zero tolerance, through ‘Neutral’ to ‘Open’) against which individual risks would be assessed. In doing so,
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the Policy requires several factors to be considered including (i) our tolerance for uncertainty (ii) our decision
choices and (iii) our strategic priorities.
ARC have approved risk appetites for legal & compliance, operational (including Postmaster-centric) and people
risks. Technology (including cyber), finance and commercial are being developed.
What has changed since last year?
Risk Harm Table
During 2021/22 we undertook a comprehensive review of our Corporate Risk Harm Table. We reviewed the
current version to simplify the scoring of risks for risk owners when determining the Impact and the Likelihood
of the risk. The revised Harm Table now focuses on the impacts of risks on (i) us (as Post Office Group), (ii)
our Postmasters and strategic partners and (iii) our customers. The Harm table was formally approved by
ARC in March 2022 and is embedded within the Risk Policy.
Central Risk Function
During 2021/22 work has focused on the integration of the GRC Service Now platform with the business,
enabling Ist line to actively manage risk. The integration of risk management equips the business with the
ability to monitor, manage and act on different risks in real time. Integrated risk management is an important
aspect of a risk conscious organisation that can improve performance and decision making.
Governance, Risk & Compliance (“GRC”) framework
During 2021/22 we have formalised a Post Office Governance, Risk and Compliance Oversight Group. The
overall purpose of this forum is to design and deliver a Post Office GRC strategy and provide an aligned
assurance view on the Post Office's internal control and risk environments take all reasonable steps to ensure
accurate and informative Governance, Risk & Compliance reporting.
The scope of the Committee will focus on;
Governance
. Review statements to be included in the Annual Report concerning internal controls and risk
management.
. Support the embedding of a compliant risk and controls culture across the Group where the various
accountabilities and responsibilities across the three lines of defence are understood and followed.
. Support an aligned risk and controls strategy to utilise the benefits of the GRC tool as a whole and reduce
siloed working practices.
. Make decisions about the strategy and key processes impacting risk and control management.
Risk
. Monitor the Group's overall risk management framework and strategy in place including its risk appetites
and tolerance for different risk groupings developed under the Risk Policy.
* Review regular reports from the Group Head of Risk on the adequacy and effectiveness of the Group's
Central Risk function.
. Oversee a common tooling approach to the corporate management of risk supported by appropriate
processes.
Controls
. Monitor the adequacy and effectiveness of the Group's internal control and risk management systems.
. Review regular reports from the Director of Compliance on the adequacy and effectiveness of the Group's
compliance function.
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* Design, deliver and oversee a common tooling approach to the corporate management of controls
supported by appropriate processes.
Key Risks
During 2021/22 there has been no change to the 13 Enterprise Risks reported in the 2020/21 ARA. Our
reporting of risk to the Risk & Compliance Committee and the Board Audit, Risk & Compliance Committee is.
aligned to ‘Our Intent 2025’ providing clear visibility of risks that may prevent the business from achieving its
objectives. The table below identifies a number of (but not all) Intermediate risks faced by the Post Office that
have a residual risk rating of ‘high’ or are outside of agreed appetite. Every risk has a supporting response plan
which will either Mitigate the risk or Accept the risk as we may not be able to remediate due to financial
constraints. This level of detail is provided at the Audit and Risk Committee.
Our Intent Become o cuecasstul, susteinadta, and sought-aner tremdtisa
and an arganisation thet callsaguas teal proud to work for
Osea) of Key Swans ay Risk Acca
1. Group Litigation Order Remediation (including
Horizon Issues Judgement & Common Issues
Long-Term: We will prioritise strong, trusting
and rewarding relationships with all our 4 Pele aca ioe
Strong, Postmaster. 3. Management of Union relationships
Short-Term: Engage our Postmasters more in
trusting and 4. Legal & Regulatory Compliance, including tax risks
1 I ewardin how decisions are taken which impact them, arising from complexities in the organisation and its
arding Show that we have learned from past mistakes ie ia %
relationships I snd see benefits of changes we are makin oe ae.
following the judgements inthe chil and 5, Hesith.&. Safety breach
ie 6. Postmasters lose faith in our ability to change
criminal courts.
7. Ineffective Corporate Governance
Long-Term: We will grow our network, making
sure we have the right branches in the right 8. Cyber Security - Loss of Availability
2 I Strengthen I locations nationwide 9. Inadequate Business Continuity Plans
our network I Short-term: Having over 11,500 branches open I 10. Inadequate testing of System Resilience
and start to make progress towards having
more than 12,000 post offices by 2025
Long-Term: We will innovate in Mails, working
with more carriers and delivering more of what
. customers want and small businesses need. 11. Postmaster proposition not profitable
Innovate in
3I ene Short-Term: Focus on our core strengths ~
Mails and Parcels ~ as well as introducing new
complementary services that optimise the
benefit of our network and our brand
12. Impact of new access to cash legislation and
regulation on our banking services
Long-Term: We will secure free, convenient 13. _ Increasing money laundering through our branch
and reliable access to cash in every community. network
14, Anti- Money Laundering compliance
4 I Access to cash
Long-Term: We will build commercial
partnerships, to launch new products and
ices in our branches and online. ;
i aabin alninaemeibaigvan 15. Long term Commercial sustainability of Post Office
Aud ss iShort-Terer: Foctis:on our core strengtis 16. Ineffective management of commercial partnerships
5.I commercial I Mails and Parcels, Cash and Banking; Bill saa
° " . 17. Increased Digitalisation
partnerships I Payments and Travel ~as well as introducing
new complementary services that optimise the
benefit of our network and our brand, such as
digital identity.
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Long-Term: We will invest in new branch
technology for Postmasters and online for their I 18. IT suppliers fail to meet contractual expectations
customers. 19. Legacy Hardware & Software within our
I Newbranch I Short-Term: We plan to roll out a modern IT Infrastructure
technology system for our branches to replace Horizon. We I 20. Misconfiguration of IT/Security Infrastructure
will begin to pilot different elements of its
replacement.
21, Inability to pay creditors
22. Failure to complete restructuring of cost base
23. Post Office operating model non-compliant with new
regulation
Short-Term: We will create value for our 24. Insufficient Operational Capacity to deliver core
Value for our ’ i
7 I croreholder. I Shareholder with a successful, sustainable and - services
efficient business. 25. Lack of insight and easily accessible data into how to
support branches easily
26. Failure to implement adequate processes which may
; adversely impact our Environmental, Social and
Governance compliance requirements.
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Streamlined Energy & Carbon Reporting
This report summarises the energy usage, associated emissions, energy efficiency actions and energy
performance for Post Office Limited for the data reporting year 1 April 2021 - 31 March 2022, under the
Government policy Streamlined Energy & Carbon Reporting (“SECR"), as implemented by the Companies
(Directors' Report) and Limited Liability Partnerships (Energy and Carbon Report) Regulations 2018.
It also summarises the methodologies utilised for all calculations related to the elements reported under Energy
& Carbon.
The organisational boundary for the reporting has been set to relate to the Post Office Limited only, as the only
organisation within the Group meeting the SECR qualification criteria, and its direct operations. The
organisational boundary includes the impact of Post Office Limited's directly managed network only and not
the total independent franchise network.
Under the SECR legislation we are mandated to include energy consumption, emissions, intensity metrics and ,
all energy efficiency improvements implemented in our most recent data reporting year.
Consumption (kWh) and Greenhouse Gas emissions (tCO2e) totals
The following figures show the consumption and associated emissions for this third year of reporting for Post
Office Limited, with figures from the previous reporting period included for comparison.
Scope 1 consumption and emissions relate to direct combustion of natural gas, and fuels utilised for
transportation operations, such as company vehicle fleets.
Scope 2 consumption and emissions relate to indirect emissions relating to the consumption of purchased
electricity in day-to-day business operations.
Scope 3 consumption and emissions relate to emissions resulting from sources not directly owned by the
reporting company. For Post Office Limited, this is related to grey fleet (business travel undertaken in employee-
owned vehicles) only.
Post Office has chosen to examine the emissions of each stream of transportation within the business from this
year, to ensure visibility of carbon reductions across each stream of transportation operations for the business.
The total consumption (kWh) figures for energy supplies reportable by Post Office Limited are on the next page.
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. 2021/22 manele
Utility and Scope Consumption Consumption
(kWh) (kWh)
Gaseous and other fuels (Scope 1) 10,207,452 10,765,410
Transportation: Mobile Post Office ("MPO") Fleet (Scope 1)* 1,294,858 1,130,016
Transportation: CIT Fleet (Scope 1) 9,712,863 9,895,288
Transportation: Company Car Fleet (Scope 1) 1,063,773 1,011,911
Grid-Supplied Electricity (Scope 2) 10,149,233 11,785,422
Transportation: Grey Fleet (Scope 3) ** 433,327 366,080
Tou 32,861,506 34,954,127
* Methodology for 2021/22 transportation emissions calculations, and scope categorisation has been revised, as such
consumption, emissions and intensity metric for 2020/21 have been recalculated, and restated in this report.
** Includes personal vehicles purchased through a benefit scheme provided to employees that do not wish to join the
company car scheme.
The total Greenhouse Gas ("GHG") emission figures (tCO2e) for energy supplies reportable by Post Office
Limited are as follows. Conversion factors utilised in these calculations are detailed in the reporting
methodology section on page 61.
Utility and Scope moni saa
Gaseous and other fuels (Scope 1) 1,869.60 1,979.44
Transportation: MPO Fleet (Scope 1)* 306.70 271.85
Transportation: CIT Fleet (Scope 1) 2,300.59 2,380.51
Transportation: Company Car Fleet (Scope 1) 250.90 239.70
Grid-Supplied Electricity (Scope 2) 2,154.99 2,747.65
Transportation: Grey Fleet (Scope 3)** 101.37 86.72
Total 6,984.15 7,705.87
* Methodology for 2021/22 transportation emissions calculations, and scope categorisation has been revised, as such
consumption, emissions and intensity metric for 2020/21 have been recalculated, and restated in this report.
** Includes personal vehicles purchased through a benefit scheme provided to employees that do not wish to join the
company car scheme.
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Intensity Metric
An intensity metric of tCOze per FTE has been applied for the annual total emissions of Post Office Limited. The
methodology of the intensity metric calculations is detailed in the Reporting Methodology section on page 62,
and results of this analysis is as follows:
2021/22 Intensity 2020/21 Intensity
Metric Metric*
Intensity Metric
tCOze / FTE 2.11 2.25
* 2020/21 FTE value has been revised following report production and has been included in the revision of the eneray intensity metric
following 2020/21 emissions restatements, as noted in the Greenhouse Gas emissions table above.
Energy efficiency improvements
Post Office Limited is committed to year-on-year improvements in its operational energy efficiency. As such, a
register of energy efficiency measures available to Post Office Limited has been compiled, with a view to
implementing these measures in the next 5 years.
Measures ongoing and undertaken through 2021/22
Staff Engagement Programme
With staff returning to offices throughout the portfolio through the reporting year, the staff engagement
programme has been maintained, with increased emphasis on ensuring the efficient operation of equipment
through the properties when occupied. This has included training sessions for staff, and additional visual aids
to encourage efficient habits to be formed.
Equipment Replacement Policy
Post Office Limited have in place replacement policies that ensure that when heating and lighting, plant is of
the most efficient standard. This includes the replacement of fluorescent lighting with LED equivalents, in
addition to efficiency standards of replacement boiler plant when this is required by the business. Lighting
controls such motion sensors are also installed throughout the main office spaces for Post Office Limited,
ensuring that lighting is only operational when spaces are occupied.
Renewable Procurement Policy
Post Office Limited have in place a renewable electricity procurement policy, ensuring that where they have the
responsibility of directly purchasing electricity, this is through a renewable generation source. This supports the
business goals of overall carbon reduction, and will be continued in future energy purchasing for the business.
Driver Engagement Programme
Following the maintained focus on telemetry throughout the vehicle fleet of the business, Post Office Limited
have been reviewing data collected and including driver scoring on periodic reporting for the business. This
data reviews driver habits (braking, idling time etc.), and identifies areas in which driver training reviews may
be required in order to maintain good practices in operation of the vehicle fleet. These installations have been
shown to have positively impacted the business over the years since installation, and will continue to be
maintained and utilised by Post Office Limited.
Electric and Hybrid Vehicle Implementation
Post Office Limited has increased the numbers of electric and hybrid vehicles in the company car fleet and have
removed pure internal combustion engine ("ICE") vehicles from the vehicle choice options. Approximately 70%
of company cars ordered by staff have been an electric vehicle, and the business will continue to encourage the
uptake of electric options. There have also been a small number of electric vehicles within the grey fleet for the
business also on board in the reporting year. The business looks to further increase the numbers of hybrid and
electric vehicles in the fleet to further work towards the decarbonising of the fleet.
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The Cash In Transit ("CIT") fleet have also seen an increase in the number of vehicles of a Euro 6 standard (i.e.
being within a set of limits for harmful exhaust emissions) during the reporting year, increasing the proportion
of vehicles of this standard in the fleet to 32%. It is expected in 2022/23 that this percentage will increase with
the addition of Euro 6 standard vehicles to 34%.
Measures prioritised for implementation in 2022/23
Office Space Consolidation
Throughout the 2021/22 reporting year, office space requirements have been evaluated by Post Office Limited.
As a result of a change to working habits following the pandemic, it has been determined that a smaller office
space would be suitable to house the office operations of the business. To this end, in 2022/23, Post Office
Limited will be relocating the operations of one of the larger office spaces to a smaller space. It is expected that
this will positively impact on the resulting emissions from office operations.
Maintenance Visit Policy
Post Office Limited aim to work with their outsourced maintenance teams for the portfolio moving forwards in
order to reduce the travel required to conduct a number of maintenance visits at a single site. Through
combining a number of maintenance tasks required at a single site, and conducting these in a single visit, this
will have a positive impact on the emissions associated with these journeys in the supply chain of Post Office
Limited.
Supply Chain Review
In 2022/23 Post Office Limited will seek to undertake a full review of its supply chain, and the associated
emissions of those operations. This exercise will support a full carbon footprint for the business, enabling Post
Office Limited to demonstrate the results of efforts to reduce emissions across all operations. The increase in
scope of emissions reporting for the business will also support the Net Zero goals for Post Office Limited, and
impending additional reporting requirements such as the Task Force for Climate Related Financia! Disclosures
("TCFD").
Reporting methodology
Scope 1, 2 and 3 consumption and CO2e emissions data has been calculated in line with the 2019 UK
Government environmental reporting guidance. Emissions Factor Database 2021, Version 1.0 has been used,
utilising the published kWh gross calorific value ("CV") and kgCO2e emissions factors relevant for data
reporting year 1 April 2021 - 31 March 2022.
Estimations undertaken to cover missing billing periods for properties directly invoiced to Post Office Limited
were calculated on a kWh/day pro-rata basis at meter level. These estimations equated to 13.9% of reported
consumption (2020/21 these estimations equated to 6.1%). The increase in estimations required is a result of
billing or re-billing activity that has not been possible to source from suppliers at the time of reporting.
For properties where Post Office Limited is indirectly responsible for utilities, an average consumption for
properties with similar operations was calculated and applied to the properties with no available data. An
average kWh/m2 was calculated for directly invoiced properties also, and for leased properties with floor area
data available, this was utilised in the consumption estimate calculations.
These full year estimations were applied to 106 electricity supplies, and 100 gas supplies for Post Office
Limited.
Methodology for the Mobile Post Office ("MPO") Fleet has been updated from utilising fuel purchase data to
mileage data for this 2021/22 reporting, with 2020/21 values also recalculated and restated. It was identified
in 2022 by the transport team that fuel purchase data (previously thought to be complete) was not received for
a number of vehicles in the MPO fleet, so total emissions were not represented in that dataset. Mileage data
was confirmed to be received from all vehicles in the MPO fleet, so 2020/21 figures were recalculated based
on the recorded mileage to ensure total emissions are recorded for the fleet.
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Intensity metrics have been calculated utilising the 2021/22 reportable figures for the following metrics, and
tCOve for both individual sources and total emissions were then divided by this figure to determine the tCOze
per metric:
Average full-time equivalents ("FTE") for the year was 3,303 (2020/21: 3,430).
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Directors’ Report
The Directors present the Group Annual Report and Financial Statements and Company Financial Statements
for the year ended 27 March 2022.
Expected future developments
Expected future developments are detailed in the Chief Executive's statement on pages 6 to 8.
Stakeholder Engagement
Details of stakeholder engagement is included in the S172(1) statement on page 29 and 30 and the
Remuneration Committee Chairman's Statement on page 31.
Corporate Governance
Details of corporate governance are included in the Governance report on page 18.
Results and dividends
The loss after taxation for the year was £130 million (2021: £661 million restated). The Directors do not
recommend the payment of a dividend (2021: fnil).
Share issues
During the year, two ordinary shares of £1 were issued in return for £125 million, see note 19 to the financial
statements for further details.
Political contributions
No political contributions were made in the year (2021: fnil).
Research and development
Research and development activities took place during the year in relation to IT transformation projects such as
Branch Hub, PCI compliance and transitioning to cloud data storage.
Directors and their interests
The Directors of the Company who were in office during the year and up to the date of signing the financial
statements were:
TC Parker
ACJ Cameron
TK G Cooper
LC Harrington
K S McCall (stood down 25 January 2022)
ZH Patel
NJ Read
CR Stent
SG Ismail (appointed 3 June 2021)
EM Jacobs (appointed 3 June 2021)
BJ Tidswell (appointed 27 July 2021)
B Gaunt (appointed 25 January 2022)
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No Director has a beneficial interest in the share capital of Post Office Limited. The emoluments of Directors are
set out in the Remuneration Committee Chairman's Statement on pages 33 to 48.
Directors’ indemnity
As at the date of approval of the Directors’ report a qualifying indemnity provision, made by the company, is in
force for the benefit of all Directors of the company. No provision was in place during the financial year.
People
Our people are critical to our success to meet our organisational purpose and to allow our Postmasters to serve
the communities in which we operate by attracting, motivating and developing our people. To do this we:
¢ Conduct regular employee surveys, including culture surveys, and use the feedback to track progress and
make improvements.
* Regularly provide information on Company performance, policies and organisational developments
through our weekly CEO presentations, intranet, briefing sessions and company-wide emails.
° Operate our Learning Academy to provide high quality learning for all employees and Postmasters,
aiming to ensure that everyone is supported into reaching their full potential.
* Invest in developing the best talent to support our business, including graduate recruitment and active
participation in the apprenticeship programme, available for new and existing colleagues.
* Are committed to providing a safe working environment that promotes the health, safety and wellbeing
of employees. A range of services are provided to help all employees stay mentally and physically healthy,
including trained mental health first-aiders.
. Collect and report the diversity information of our employees to track and ensure that diversity
programmes are moving in the right direction.
. Promote diversity and inclusion and celebrate the diversity of the workforce and communities we serve.
We have a number of active employee network groups such as: Affinity - Women at Post Office, to
support and nurture female talent; Prism, which supports and celebrates our LGBTQ+ community; Post
Office Ethnic Minorities ("POEM") which supports Black, Asian and Minority Ethnic colleagues, and Be
You which supports colleagues with a disability.
. Proactively communicate that we are a Disability Confident Leader and actively try to attract talented
people to Post Office from diverse backgrounds. We do this through our corporate careers webpage and
by working with our recruitment agencies.
* Set diversity and inclusion targets including 50% equal gender representation and 14% BAME
representation through all levels of the Post Office by 2024. See page 49 to 52 for more detail.
. Ask all applicants to inform us of any reasonable adjustments we can make to ensure they are not
disadvantaged due to a particular disability during the selection process and throughout their
employment, including training, career development and promotion.
. Before hiring new team members, line managers must undertake unconscious bias training to reduce
instances of bias in the recruitment process.
* — Donot tolerate any form of bullying, harassment, victimisation or discrimination whether written, verbal,
visual or physical. We are committed to taking the necessary action to ensure that they do not occur, or
where they do occur that they are dealt with quickly and eliminated, by following a consistent, fair and
robust Bullying and Harassment Policy and Procedure. All managers are required to complete Dignity at
Work training to ensure they understand their responsibilities and that they demonstrate the correct
behaviours and treat everyone with dignity and respect at all time.
Disabled employees
As noted above, Post Office has been recognised as a Disability Confident Employer. We have a Disability
Confidence networking group called ‘Be You’. This group provides support and advice andhelps the business
to do the best it can for employees with disabilities. We also make necessary adjustments for colleagues who
are disabled or become disabled during the course of their employment to allow them to carry out their role and
fulfil their potential, including any specific training needs.
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Gender and Ethnicity pay gaps
Our Gender and Ethnicity pay gaps are detailed in the Fairness, Diversity and Inclusion section of the
Remuneration Committee Chairman's Report on pages 49 to 52.
Post balance sheet events
The Directors would like to draw attention to the following post balance sheet event items:
«© 2022/23 Government funding receipts,
« Extension to the working capital facility.
Further details are provided on page 128.
Going concern
After careful consideration of the plans for the coming years, factoring in the continued support of Government,
we are satisfied that the Group (being the group of companies headed by Post Office Limited) will be able to
meet its liabilities as they fall due for a period of at least 12 months from the date of approval of these financial
statements. In assessing the going concern position, the Board has considered the Group's financial forecasts
for the 15 months from the date of approval of these financial statements.
In recent years, the Group has become profitable at a trading level with trading profit peaking in 2019/20. The
subsequent fall in trading profit over recent years is due to the ongoing impact of the COVID-19 pandemic,
notably on the travel business, rising inflationary pressures on the costs of both the Group and Postmasters
and the removal of the trading profit contribution of the Telecoms business following its sale in 2020/21.
The Government has been providing investment funding, subsidy payments and working capital facilities. Such
funding was steadily declining as the business improved its profitability. It is now of increasing importance
again, partly because of the reduced profitability described above and partly because the Group must fund the
very considerable costs of supporting and enabling compensation and legal justice for wronged Postmasters
and Sir Wyn Williams’ Statutory Inquiry. In addition, the business needs to make ongoing investments, notably
replacing the Horizon IT system. As set out below, compensation for Postmasters is mostly being funded
directly by Government. However, £86 million of the compensation under the HSS must be funded by the Group
from trading profit and the proceeds of the sale of the Telecoms business.
For 2021/22, the Group received £50 million of Network Subsidy Payments and £177 million in funding, made
up of a £125 million equity injection and a £52 million loan. in March 2022 the Government continued to
evidence its support of Post Office by committing to provide £150 million in Network Subsidy Payments and
£185 million in investment funding, to be received as a grant, over the period 2022/23 through to 2024/25. In
addition, in July 2022 the Government extended the £950 million working capital facility to 31 March 2025.
Compensation and settlement for Postmasters remains highly material and deeply uncertain. The continued
support of Government is therefore critical in the Directors’ view of the Group's going concern position.
For the specific one-off matters, Government has agreed to provide sufficient financial support to Post Office
to ensure that the HSS can proceed and settlement payments for OHC can be made, with agreed funding in
excess of the current provisions. Funding of up to £233 million has been guaranteed for the HSS provided that
the Government's operational and approval processes are followed and all initial offers are sent out by 31 March
2023. Funding of up to £780 million has been guaranteed for compensation to Postmasters who were wrongly
convicted of criminal offences or were prosecuted but not convicted and suffered detriment. Discussions are
underway on funding other Postmaster Remediation and the Government has written a letter of comfort stating
its intention to ensure the provision of support, subject to future approval processes.
There is significant estimation uncertainty within the HSS and OHC provision calculations, which are explained
further within note 1 to the financial statements. Funding is currently being sought and finalised in relation to
Postmaster Remediation. The funding commitments received provide evidence of continued support from
Government. Further assurances related to unquantified potential cash outflows, such as any possible
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additional aspects of Postmaster Remediation, cannot be given as it is not the nature of Government's budget
process to provide guarantees for unquantifiable potential liabilities.
In 2019/20 the Group agreed and subsequently made payment of a full and final settlement with the GLO
claimants, thus extinguishing any liabilities which the Group had in respect of the GLO. In March 2022 the
Government announced its intention to provide additional compensation payments to the individual claimants
that formed the GLO. It is clear that Post Office will not be asked to fund this additional compensation.
Government's announcement does not create a liability for the Group.
However, the Government have yet to announce the process through which additional compensation will be
paid to the GLO claimants. Presently, the Group has not been asked by Government to either run or partake in
any such process. When considering the HSS and OHC processes, where compensation is partly funded by
Government, Post Office has been required to oversee and pay for the running costs of the processes.
Confirmation has therefore been sought from Government to provide assurances that if Post Office is requested
to partake in or oversee any such process for GLO claimants then the costs associated will not be borne by the
Group. This assurance has not been forthcoming.
The going concern assessment does not include cashflows associated with Government's intention to provide
additional compensation to GLO claimants, either compensation payments or process running costs. The costs
of any future process are not known. However, there are circumstances where the costs of supporting such a
process could call into question whether the Group can remain in compliance with its borrowing covenants and
therefore remains a going concern. The Directors have assessed that excluding such cashflows from its
forecasts is reasonable on the basis that Post Office has no present liability in respect of GLO claimants and the
Government has provided general assurances about their intentions to continue to support Post Office.
The Directors have received written assurances from BEIS that they place a high priority on Post Office's ability
to continue delivering vital public services and as such will continue to support the Group. This includes the
intention to provide support if / when required in respect of HSS, OHC and PR to the extent that contractual
support has not already been committed or is not sufficient to cover the eventual costs.
There still remains an element of funding uncertainty, with the existence of some potential future liabilities,
which may or may not have a significant adverse impact on the Group, for which guaranteed funding is not in
place. However, the Directors believe the guarantees and assurances received, when considering the legislated
nature of the Government funding process which creates restrictions on guarantees, provide enough
assurances to evidence Government's continued support should future material liabilities arise in relation to the
items highlighted within these financial statements.
Management has performed a cashflow assessment for a period of 15 months from the date of approval of
these financial statements, factoring in no further funding beyond that agreed above, whilst assuming any cash
outflows arising as a result of potential Postmaster Remediation will be funded by Government and that there
will be no cashflows associated with the GLO claimants and the process which may ensue. This assessment
supports the Directors’ view that the Group can continue to meet its liabilities as they fall due for the period
under review.
The assumption of continued Government support in relation to i) potentially material future cash outflows,
which may or may not arise in respect of HSS and OHC related settlements in excess of amounts already
guaranteed by Government; ii) potential payments to be made for Postmaster Remediation for which
Government funding is not yet guaranteed; and iii) possible future requests by Government resulting in cash
outflows for Post Office to meet compensation payments or process running costs associated with the
Government's intention to provide additional compensation to GLO claimants, which could occur during the
going concern period such that Post Office requires additional support, represent material uncertainties which
may cast a significant doubt on the Group's and Company's ability to continue as a going concern. The financial
statements do not include adjustments that would result if the Group and Company were unable to continue
as a going concern.
Further details regarding the going concern assessment and the associated significant judgements are included
in note 1 of the financial statements.
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Financial instrument risk
The exposure of the Group to market risk, credit risk and liquidity risk has been disclosed in note 17 to the
financial statements on pages 111 to 113.
Independent Auditors
Appointment of the auditors for financial year 2022/23 is due to take place after the date of this report.
Directors’ responsibilities statement
The directors are responsible for preparing the Annual Report and the financial statements in accordance with
applicable law and regulation.
Company law requires the directors to prepare financial statements for each financial year. Under that law the
directors have prepared the group financial statements in accordance with UK-adopted international
accounting standards and the company financial statements in accordance with United Kingdom Generally
Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101 “Reduced
Disclosure Framework”, and applicable law).
Under company law, 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 company and of the profit or loss of the group
for that period. In preparing the financial statements, the directors are required to:
. select suitable accounting policies and then apply them consistently;
. state whether applicable UK-adopted international accounting standards have been followed for the
group financial statements and United Kingdom Accounting Standards, comprising FRS 101 have been
followed for the company financial statements, subject to any material departures disclosed and explained in
the financial statements; .
. make judgements and accounting estimates that are reasonable and prudent; and
. prepare the financial statements on the going concern basis unless it is inappropriate to presume that
the group and company will continue in business.
The directors are responsible for safeguarding the assets of the group and company and hence for taking
reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are also 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 company and enable them to ensure that the financial statements comply with the
Companies Act 2006.
The directors are responsible for the maintenance and integrity of the company's website. Legislation in the
United Kingdom governing the preparation and dissemination of financial statements may differ from
legislation in other jurisdictions.
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Directors' confirmations
In the case of each director in office at the date the directors’ report is approved:
so far as the director is aware, there is no relevant audit information of which the group’s and company’s
auditors are unaware; and
«they have taken all the steps that they ought to have taken as a director in order to make themselves
aware of any relevant audit information and to establish that the group's and company’s auditors are
aware of that information.
Alisdair Cameron
Group Chief Finance Officer
(Company Number 2154540) Finsbury Dials, 20 Finsbury Street, London EC2Y 9AQ
17 August 2022
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Financial Statements
Independent auditors’ report to the members of Post
Office Limited
Report on the audit of the financial statements
Opinion
In our opinion:
* Post Office Limited's group financial statements and company financial statements (the “financial
statements") give a true and fair view of the state of the group's and of the company's affairs as at 27
March 2022 and of the group's loss and the group's cash flows for the 52 week period then ended;
* the group financial statements have been properly prepared in accordance with UK-adopted
international accounting standards;
* the company financial statements have been properly prepared in accordance with United Kingdom
Generally Accepted Accounting Practice (United Kingdom Accounting Standards, comprising FRS 101
“Reduced Disclosure Framework”, and applicable law); and
«the financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
We have audited the financial statements, included within the Annual Report & Consolidated Financial
Statements (the “Annual Report”), which comprise: the Consolidated and Company Balance Sheets as at 27
March 2022; the Consolidated income Statement, the Consolidated Statement of Comprehensive Income, the
Consolidated Statement of Cash Flows, and the Consolidated and Company Statements of Changes in Equity
for the period then ended; and the notes to the financial statements, which include a description of the
significant accounting policies.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) ("ISAs (UK)") and
applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for
the audit of the financial statements section of our report. We believe that the audit evidence we have obtained
is sufficient and appropriate to provide a basis for our opinion.
Independence
We remained independent of the group in accordance with the ethical requirements that are relevant to our
audit of the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to other
entities of public interest, and we have fulfilled our other ethical responsibilities in accordance with these
requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical
Standard were not provided.
Other than those disclosed in Note 4, we have provided no non-audit services to the company or its controlled
undertakings in the period under audit.
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Material uncertainty related to going concern
In forming our opinion on the financial statements, which is not modified, we have considered the adequacy of
the disclosure made in note 1 to the Consolidated financial statements and note 1 to the Company financial
statements concerning the group's and the company's ability to continue as a going concern. The cash flow
forecasts for the Group and Company during the going concern period ended 15 months from the date of
approval of the financial statements contain assumptions regarding continued Government support in relation
to i) potentially material future cash outflows, which may or may not arise in respect of Historical Shortfall
Scheme (HSS) and Overturned Historical Convictions (OHC) related settlements in excess of amounts already
guaranteed by Government, ii) potential payments to be made for Postmaster Remediation (PR) for which
Government funding is not yet guaranteed; and iii) possible future requests by Government resulting in cash
outflows for Post Office to meet compensation payments or process running costs associated with the
Government's intention to provide additional compensation to Group Litigation Order (GLO) claimants. These
could occur during the going concern period and Government funding is not guaranteed for all potential
outflows. The directors have received written assurances from BEIS that it is the Government's intention to
continue to support the Post Office, however, given the nature of Government funding protocols, including the
requirement for appropriate approvals within Government, this support does not constitute a financial
guarantee. These conditions, along with the other matters explained in those notes to the financial statements,
indicate the existence of a material uncertainty which may cast significant doubt about the group's and the
company's ability to continue as a going concern. The financial statements do not include the adjustments that
would result if the group and the company were unable to continue as a going concern.
In auditing the financial statements, we have concluded that the directors’ use of the going concern basis of
accounting in the preparation of the financial statements is appropriate.
Our evaluation of the directors’ assessment of the group's and the company’s ability to continue to adopt the
going concern basis of accounting included:
* assessing the budgets and cash flow forecasts prepared by management and assessing the severe but
plausible downsides for both trading profit and exposures relating to OHC, HSS and PR, with the latter
leading to a material uncertainty over going concern. We challenged management on their
assumptions, including on the severity of their trading profit downside, validating the mathematical
accuracy of the mode''s calculations, including headroom;
* corroborating the existence of government funding and the extension of working capital facilities to
signed agreements; and.
* reviewing the disclosures made in the Group and Company basis of preparation and the Directors
report.
Our responsibilities and the responsibilities of the directors with respect to going concern are described in the
relevant sections of this report.
Emphasis of matter - Estimation uncertainty in relation to the valuation of
Historical Matters related provisions
In forming our opinion on the financial statements, which is not modified, we draw attention to the estimation
uncertainty which is disclosed in relation to the valuation of the HSS provision, the OHC provision and the PR
“provision as explained in note 1 of the consolidated financial statements (Critical accounting estimates and
judgements in applying accounting policies) to the financial statements. Post Office Limited ("POL") has
recognised provisions of £172 million related to the HSS, £487 million related to the OHC and £62 million
related to PR. In aggregate the financial statements include provisions in respect of these Historical Matters of
£721 million. As disclosed in note 1, Government has stated its intention to ensure the provision of sufficient
financial support to ensure that POL can meet the cost of these liabilities. Although the directors have based
the provisions on their best estimate, including input from legal advisors, there is significant estimation
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uncertainty in determining the ultimate amounts that will be payable in respect of these Historical Matters. In
particular the provisions are highly sensitive to assumptions regarding i) the estimated average payment value
per claim in respect of the HSS; ii) the estimated number of claimants to whom payments will be made and the
estimated average value of such payments in respect of OHC settlements; and iii) the number of eligible
Postmasters who will receive payments and the average value of such payments in respect of PR. Changes in
any of these assumptions could result in highly material changes to the valuation of the provisions.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements
and our auditors’ report thereon. The directors are responsible for the other information. Our opinion on the
financial statements does not cover the other information and, accordingly, we do not express an audit opinion
or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and,
in doing so, consider whether the other information is materially inconsistent with the financial statements or
our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent
material inconsistency or material misstatement, we are required to perform procedures to conclude whether
there is a material misstatement of the financial statements or a material misstatement of the other information.
If, based on the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors' Report, we also considered whether the disclosures
required by the UK Companies Act 2006 have been included.
Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report
certain opinions and matters as described below.
Strategic Report and Directors’ Report
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic
Report and Directors' Report for the period ended 27 March 2022 is consistent with the financial statements
and has been prepared in accordance with applicable legal requirements.
In light of the knowledge and understanding of the group and company and their environment obtained in the
course of the audit, we did not identify any material misstatements in the Strategic Report and Directors' Report.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors' responsibilities statement, the directors are responsible for the
preparation of the financial statements in accordance with the applicable framework and for being satisfied that
they give a true and fair view. The directors are also responsible for such internal control as they determine is
necessary to enable the preparation of financial statements that are free from material misstatement, whether
due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the group's and the company’s
ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the
going concern basis of accounting unless the directors either intend to liquidate the group or the company or
to cease operations, or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free
from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our
opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in
accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise
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from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be
expected to influence the economic decisions of users taken on the basis of these financial statements.
Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design
procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of
irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities,
including fraud, is detailed below.
Based on our understanding of the group and industry, we identified that the principal risks of non-compliance
with laws and regulations related to the Proceeds of Crime Act 2002, the Money Laundering Regulations 2007,
Data Protection Act, and health and safety legislation, and we considered the extent to which non-compliance
might have a material effect on the financial statements. We also considered those laws and regulations that
have a direct impact on the financial statements such as the Companies Act 2006 and UK tax laws. We
evaluated management's incentives and opportunities for fraudulent manipulation of the financial statements
{including the risk of override of controls), and determined that the principal risks were related to posting
inappropriate journal entries to manipulate financial performance and management bias in determining
significant accounting estimates. Audit procedures performed by the engagement team included:
e¢ ~Enquiring with management, internal audit and those charged with governance to understand the
relevant laws and regulations applicable to the Group and Company, and their assessment of fraud
related risks;
«Evaluation of management's controls designed to prevent and detect fraudulent financial reporting;
* Identifying and testing journal entries using a risk-based targeting approach for unusual account
combinations that could impact revenue and Trading Profit;
« Challenging assumptions and judgements made by management in determining significant accounting
estimates including historical matters related provisions, the assumptions within the property, plant
and equipment and intangible impairment assessments, and the assumptions underpinning the defined
benefit pension obligation; and
e Reviewing financial statement disclosures and testing to supporting documentation, where
appropriate, to assess compliance with applicable laws and regulations.
There are inherent limitations in the audit procedures described above. We are less likely to become aware of
instances of non-compliance with laws and regulations that are not closely related to events and transactions
reflected in the financial statements. Also, the risk of not detecting a material misstatement due to fraud is
higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by,
for example, forgery or intentional misrepresentations, or through collusion.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s
website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the company's members as a body in
accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in
giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where expressly agreed by our prior consent in
writing.
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Other required reporting
Companies Act 2006 exception reporting
Under the Companies Act 2006 we are required to report to you if, in our opinion:
© we have not obtained all the information and explanations we require for our audit; or
© 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
¢ certain disclosures of directors’ remuneration specified by law are not made; or
© the company financial statements are not in agreement with the accounting records and returns.
We have no exceptions to report-arising from this responsibility.
Andrew Paynter (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
Leeds
17 August 2022
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Consolidated Income Statement
for the 52 weeks ended 27 March 2022 and 52 weeks ended 28 March 2021
2022 2021
Note im £m
(Restated)*
Revenue from contracts with customers 2 4 834I 815
[Costs (796) (793)
(Costs - investment spend 5 (28) (29)
(Costs - exceptional items 4 (90) (626)
Total costs (914) (1,448)
Other operating income 1 3
Funding for exceptional items 4 6 *
Network Subsidy Payment 50 50
Depreciation, amortisation and impairment 45 (104) (126)
Share of post-tax profit/(loss) from joint venture 11 3 (7)
Operating loss from continuing operations 4 I (124)I (713)
[Operating loss before exceptional items from continuing operations i (40)I (87)I
Finance costs 7 4 al (7)
Loss before taxation from continuing operations (131) (720)
Taxation credit ‘ 8 1 1
Loss for the financial year from continuing operations i (130)] (719)
Profit after taxation for the financial year from discontinued operation 21 I -I 58
Loss for the financial year I {130)I (661)
*See note 26 for detail of which line items have been restated.
For the year ended 27 March 2022 trading profit was £42 million (2021: £35 million).
Trading profit is one of the Group's key financial measures and is calculated as operating loss excluding
exceptional items, depreciation, amortisation, impairment, investments, Network Subsidy Payment and profit
on disposal of discontinued operations. Further detail is given in note 24 — alternative performance measures.
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Consolidated Statement of Comprehensive Income
for the 52 weeks ended 27 March 2022 and 28 March 2021
2022 2021
£m £m
Note (Restated)*
Loss for the financial year from continuing operations I (130)I (719)
Profit for the financial year from discontinued operations 21 I . -I 58
Items that may be reclassified to profit or loss
Loss on cash flow hedge 7 * (2)
tems that will not be reclassified to profit or loss ‘
Re-measurements on defined benefit surpluses 18 1 >
Total other comprehensive income/(expense) I Ei] (2)
Total comprehensive expense for the year I (129)I (663)
*See note 26 for detail of which line items have been restated.
There are no additional other comprehensive income items (2021: £nil) that will be reclassified to the profit and
loss in future periods.
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Consolidated Statement of Cash Flows
for the 52 weeks ended 27 March 2022 and 28 March 2021
2022 2021
£m £m
Note
Cash flows from operating activities ! !
Operating loss before investment spend and exceptional items 25 (12) (39)
Adjustment for:
Share of (profit) /Ioss from joint venture uw I (3) 7
Depreciation and amortisation 9,10 104 124
Pension defined contribution charge 18 13 11
Other (losses)/gains (a 2
Working capital movements: 24 94
increase in trade and other receivables (excluding exceptional funding) I (8) I (9)
[Decrease in contract assets -I 2
Increase in trade and other payables 33 98
[Decrease in inventories 1 -
I(Decrease)/increase in trading provisions i I 3
Pension contributions paid (12) ‘ (18)
Net payment in respect of investments and exceptional items: (223) I (115)
IRestructuring and other exceptional costs (129) (114)
[Funding for exceptional costs 6! :
Litigation costs - GLO -! on
Net cash (outflow)/inflow from operating activities (20) I 66
Cash flows from investing activities {
Dividends received from joint ventures u = 14
Proceeds from sale of discontinued operation 2 = 59
Proceeds from the sale of property, plant and equipment 5 9
Purchase of tangible non-current assets 10 (10) (9)
Purchase of intangible non-current assets E} (45) (27)
Net cash (outflow)/inflow from investing activities (50) 46
Cash (outflow)/inflow before financing activities t (60) 112
Cash flows from financing activities I
Share issue 19 vs I -
Finance costs paid (5) (4)
Lease capital 20 (1) (a2)
Lease interest 20 (2) (2)
Proceeds from new borrowings 15 521 -
Net repayments of borrowings from BEIS 15, (97) I (191)
Net cash inflow(outflow) from financing activities { 62] (209)
Net increase/(decrease) in cash and cash equivalents I 2 i (97)
Cash and cash equivalents at the beginning of the year a I 365° 462
Cash and cash equivalents at the end of the year 3} 3671 365
Post Office Limited
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Consolidated Balance Sheet
at 27 March 2022 and 28 March 2021
2022 2021
£m £m
Note (Restated)*
Non-current assets
Intangible assets 9 178 191
Property, plant and equipment 10 127 149
Investments in joint venture 11 49 46
Retirement benefit surplus 18 1 1
Trade and other receivables 12 11 10
Total non-current assets ii 366 397
Current assets
Inventories 1 2
Trade and other receivables 12 274 268
Cash and cash equivalents 13, 17] 367 365
Total current assets I 642 I 635
Total assets I 1,008 I 1,032
Current liabilities
Trade and other payables 14 (541) (505)
Financial liabilities - interest bearing loans and borrowings 15 (329) (426)
Provisions 16 (201) (54)
Total current liabi I a.074) I (985)
Non-current liabilities
Other payables 14 * (42) (43)
Financial liabilities - interest bearing loans and borrowings 15 (52) e
Provisions 16 (567) (724)
Total non-current liabilities I 661) I (767)
Net liabilities I (724) I (720)
Equity
Share capital 19 - -
Share premium 19 590 465
Accumulated losses (1,316) (1,187)
Other reserves 19 2 2
Total equity I (724) I (720)
*See note 26 for detail of which line items have been restated.
The notes on pages 79 to 129 form an integral part of the consolidated financial statements.
The financial statements on pages 74 to 129 were approved by the Board of Directors on 17 August 2022 and
signed on its behalf by:
N Read
Chief Executive Officer
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Consolidated Statement of Changes in Equity
for the 52 weeks ended 27 March 2022 and 28 March 2021
Share Share Accumulated Other Total
capital . premium losses reserves equity
£m £m £m £m £m
Note
At 29 March 2021 (Restated)* i - 465 (1,187) 2 (720)
Loss for the year - - (130) - (130)
Share Issue 19 - 125 - - 125
Re-measurements on defined - - 1 - a
benefit surplus
At 27 March 2022 < 590 (1,316) 2 (724)
Share Share Accumulated Other Total
capital premium losses reserves equity
£m £m £m £m £m
Note
At 30 March 2020 - 465 (526) 4 (57)
Loss for the year (Restated) 26 = 7 (661) - (661)
Other comprehensive expense - - - (2) (2)
At 28 March 2021 (Restated)* - 465 (1,187) 2 (720)
*See note 26 for detail of which line items have been restated.
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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
for the 52 weeks ended 27 March 2022 (2021: 52 weeks ended 28 March 2021).
Basis of preparation
The Group financial statements on pages 74 to 129 have been prepared in accordance with UK-adopted
International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to
companies reporting under those standards. Unless otherwise stated in the accounting policies below, the
financial statements have been prepared under the historic cost accounting convention.
The financial statements have been prepared on a going concern basis. This basis is predicated on the
assumption that Government will continue to provide support to the Group as required. A material uncertainty
has been identified in respect of this assumption, specifically in relation to several potentially material future
cash outflows which may or may not arise and for which Government funding is not at this point guaranteed.
Further details can be found in the going concern assessment on pages 80 to 84.
The principal accounting policies applied in the preparation of these consolidated financial statements are set
out below. These policies have been consistently applied to all the years presented, unless otherwise stated.
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. The financial statements have been prepared in accordance with the requirements of the Companies
Act 2006.
Post Office Limited is a private company limited by shares incorporated in England and Wales.
Discontinued operations
During 2020/21, the Group disposed of the Telecoms operation, which represented a separate line of business.
The net results of the Telecoms operation, up until disposal, are presented as discontinued operations in the
Group consolidated income statement in the prior year — see note 21 for further details.
Prior year restatement
See note 26 for details regarding the prior year restatement in relation to funding by Government of the liabilities
for Historical Matters.
Basis of consolidation
The consolidated financial statements comprise the financial statements of the Company and its subsidiary
undertakings as at 27 March 2022. 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 such control ceases. A
separate set of financial statements has been prepared for both Post Office Management Services Limited
(subsidiary, registered address: Finsbury Dials, 20 Finsbury Street, London, EC2Y 9AQ) and Payzone Bill
Payments Limited (subsidiary, registered address: Finsbury Dials, 20 Finsbury Street, London, EC2Y 9AQ) for
the 52 weeks ended 27 March 2022.
The year-end dates of these subsidiaries are in line with the Company. The subsidiaries use consistent
accounting policies where appropriate and their results have been consolidated into the Group financial
statements. All intra-group balances, transactions, and unrealised gains and losses resulting from intra-group
transactions are eliminated in full.
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New and amended standards
New standards and interpretations applied
The following accounting standards and interpretations became effective for the current reporting period:
« Amendments to IFRS 7, IFRS 4 and IFRS 16 Interest rate benchmark reform — phase 2;
« Amendments to IFRS 9, IAS 39 and IFRS 7; and
« Amendment to IFRS 16, ‘Leases’ - COVID-19 related rent concessions Extension of the practical
expedient.
The introduction of these standards has not had a material effect on the net assets, results and disclosures of
the Group.
New and revised standards and interpretations not applied
There are a number of new and revised IFRSs that have been issued but are not yet effective. Of these, there
are none that are expected to have a material impact on the net assets, results and disclosures of the Group.
Basis of preparation — going concern
After careful consideration of the plans for the coming years, factoring in the continued support of Government,
we are satisfied that the Group (being the Group of companies headed by Post Office Limited) will be able to
meet its liabilities as they fall due for a period of at least 12 months from the date of approval of these financial
statements. In assessing the going concern position the Board has considered the Group's financial forecasts
for a period of 15 months from the date of approval of these financial statements.
This judgement is predicated on the assumption that Government will continue to provide financial support
when it is needed. The assumption of continued Government support is in relation to: i) potentially material
future cash outflows, which may or may not arise in respect of the Historical Shortfall Scheme ("HSS") and
Overturned historical Convictions ("OHC") related settlements in excess of amounts already guaranteed by
Government; ii) potential payments to be made for Postmaster Remediation (“PR”) for which Government
funding is not yet guaranteed; and iii) possible future requests by Government resulting in cash outflows for
Post Office to meet compensation payments or process running costs associated with the Government's
intention to provide additional compensation to Group Litigation Order ("GLO") claimants, which could occur
during the going concern period such that Post Office requires additional support.
In addition to providing funding for investments and to subsidise the loss-making branches, what we might
term “traditional” funding, we are facing significant liabilities and uncertainties:
* HSS: A provision of £172 million has been recognised (2021: £150 million). Guaranteed Government
funding in excess of this level is in place through to March 2024. As outlined in the critical accounting
estimates section on pages 84 and 85, significant estimation uncertainty around this provision balance
remains, however we believe the level of funding agreed should be adequate.
* —OHC:A provision of £487 million has been recognised (2021: £502 million) after adjusting for the impact
of discounting of £21 million (2021: £nil). In 2021/22 Government committed to provide funding of up to
£780 million, which is in excess of the current estimated liability. As outlined in the critical accounting
estimates section on page 85 and 86, significant estimation uncertainty around this provision balance
remains, however we believe the level of funding agreed should be adequate.
* Postmaster Remediation: A provision of £62 million has been recognised (2021: £59 million). However,
the Directors also recognise there is the potential for further liabilities to arise in future years should
ongoing reviews identify any further areas of potential redress. See critical accounting estimates section
on page 86.
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e GLO: In March 2022 the Government announced its intention to provide additional compensation
payments to the individual claimants that formed the GLO. It is clear that Post Office will not be asked to
fund this additional compensation and Government's announcement does not create a liability for Post
Office. However, assurances have not been forthcoming from Government around its intention to request
Post Office to partake in, or oversee a process for compensation payments to be made and if such a
request was made whether the costs of running such a process would be funded by Government. Any
such costs have not been included within the going concern assessment. This represents an uncertainty
for management albeit the risk of costs being incurred without associated funding is deemed remote.
Government has and continues to demonstrate its commitment to support Post Office, albeit significant funding
uncertainty remains:
«The nature of our funding, all of which is essentially provided by Government, is that it is provided when
needed;
* Commitments to future funding have either to be part of a wider departmental spending review or be
based on a specific, quantified case;
© Departmental spending commitments and our funding contract with BEIS last until March 2025, with the
working capital facility with the Department for Business, Energy and Industrial Strategy ("BEIS”) having
recently been extended to March 2025;
e¢ Weare not in a position to quantify any possible future liabilities which might arise as a result of Post
Office’s continued review of historical policies and processes or the financial implications if Government
were to request Post Office partake in the compensation process for GLO claimants and incur unfunded
costs; and
e It is clear that Government can, if it believes it is in the public interest, change its mind and stop funding
Post Office, the HSS or the OHC.
Nonetheless, traditional funding has been provided and funding for HSS and OHC has been committed. The
Shareholder has provided letters of comfort. Every indication has been given that Government considers the
work of Post Office to be vital and our underlying commercial progress valued. We have been assured that if
Government support were to come into question we would be told promptly.
Having reviewed the Group's going concern position for the period to 15 months from the date of approval of
these financial statements and taking the Shareholder support into account, the Board has concluded that the
Group is a going concern and can continue to settle its liabilities as they fall due. As part of this assessment, the
Board considered the net liability position of the Group, created by the recognition of the HSS, OHC and
Postmaster Remediation provisions, for which there is no corresponding recognition of the funding, in line with
accounting standards and the accounting policy adopted.
The lack of a formal signed agreement for continued Government support represents a material uncertainty
which may cast a significant doubt on the Group's and Company's ability to continue as a going concern. The
financial statements do not include adjustments that would result if the Group and Company were unable to
continue as a going concern.
Performance and position
In recent years, facilitated by continued Government support, the Group has been on a transformational journey
which has enabled it to become profitable at a trading level, see note 24 regarding alternative performance
measures. However, the ongoing impact of the COVID-19 pandemic, notably on the travel business, along with
increasing inflationary cost pressures for the Group and Postmasters alike, continues to impact profitability.
These pressures, when combined with the removal of trading profit contribution from the Telecoms business
following its sale in 2020/21, mean that despite the Group remaining profitable at a trading level this is not to ©
the same levels as those seen in 2019/20.
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However, trading profit has increased year on year, from £35 million in 2020/21 to £42 million in 2021/22 and
the overall cash position has remained consistent year on year at £367 million (2021: £365 million). During the
early stages of 2020/21, reduced trading activity resulted in a notable decline in cash transactions, leading to
significant reduction in security headroom and a security headroom waiver was obtained from BEIS for the
period 30 April 2020 through to 28 June 2020. Although ultimately the waiver was not required. No such
requirement arose in 2021/22 and there are no forecast breaches. However, the position from 2020/21 has
provided the Directors with comfort that should short-term headroom breaches be forecast, the funding
facilities should still be available, subject to further waivers being granted. At its lowest point, security headroom
reduced to £103 million in December 2021.
Post Office's current financial position is not dissimilar to that seen historically, being in a net liability position
and reliant on Government funding. Given the expectation of necessary Government support, the net liability
position is not deemed to have an adverse impact on the going concern position.
The underlying trading performance of the Group and its ability to therefore generate cash is not deemed to be
an area of concern, notwithstanding the need for investment and Network Subsidy funding from Government.
Funding - traditional
The Group's activities are funded by Government. This traditional funding has been in different forms:
« Investment funding: Funding received for transformational activities. The funding, which is combined with
the Group's own funds derived from trading, is used to fund transformational projects which are assessed
via a formal business case review process. Monitoring and review activities are undertaken, with routine
reporting to the Shareholder.
* Network Subsidy: Payment received to partially subsidise the gross losses incurred by Post Office as a
result of making available the network of public post offices that the Secretary of State for BEIS considers
appropriate. If the subsidy were to exceed the cost of making the network available, the excess would be
repaid to Government.
¢ Financing facilities: £950 million working capital facility, £50 million same day facility and membership of
the Bank of England ("BOE") Note Circulation Scheme ("NCS"). The working capital facility exists to
provide liquidity to the Group, with forecasting, monitoring and reporting of security headroom occurring.
Security headroom is a covenant which ensures there is sufficient collateral in the form of cash and other
assets to cover the borrowings under the facility. The same-day facility has not been used but is in place
to provide short-term liquidity should an operational need arise in the period between requesting the
appropriate balance on the working capital facility and this balance being provided, currently 24 hours.
The continued participation in the NCS ensures that Post Office has an adequate supply of notes to meet
customer demand across its network, see note 23 for further details.
The continued availability of this funding, or a suitable alternative, is necessary to allow the Group to continue
to be assessed as a going concern.
In respect of these items, and therefore playing a crucial part in the going concern assessment, is the status and
availability of each of these over the going concern period being assessed.
The agreed Government funding which falls within the going concern period under review includes: £185
million investment funding for the three year period 2022/23 through to 2024/25; £150 million Network
Subsidy Payment for the same three year period; and the existence of the £950 million working capital facility
and £50 million same-day liquidity facility. The £950 million working capital facility was recently extended to
31 March 2025.
The continued inclusion in the BOE NCS is assumed, given the role Post Office plays in ensuring the distribution
of notes across the UK.
When compared with the forecasted future cashflows of the Group and considering severe but plausible
downside trading scenarios, including the ongoing impact of the COVID-19 pandemic, the level of funding
available to support regular operations, including the impact of inflationary rises, and continued development
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of the organisation is deemed adequate. From the perspective of traditional funding, the Group can therefore
be considered a going concern.
Funding - exceptional and contingent
There are three items which have the potential to result in significant cash outflows in the going concern period
and beyond, for which the traditional funding could be insufficient. These include:
* HSS: Payments due to be made to claimants as part of the HSS. A provision of £172 million has been
recognised, increased from £150 million in 2020/21. Government funding in excess of the current
provision is in place. Post Office will fund a significant portion of the payments before drawing down on
Government funding.
¢ OHC: Compensation payments to be made in respect of civil claims following the overturning of historical
criminal convictions. A provision of £487 million has been recognised (2021: £502 million), representing
management's best estimate of potential future payments to claimants. Government has agreed to
provide funding up to £780 million in respect of these payments.
« Postmaster Remediation: Payments to be made to Postmasters as financial redress in respect of historical
policies and processes. A provision of £62 million has been recognised (2021: £59 million), representing
management's best estimate of potential future payments to eligible Postmasters who did not receive
remuneration during periods of suspension before March 2019, when this policy changed. Government
has provided a comfort letter stating its intention to ensure the provision of support in respect of these
liabilities and as such management has assumed this financial support will be forthcoming as part of their
going concern assessment. The Directors acknowledge that as the Group continues to review its historical
policies and processes further associated liabilities may arise, in addition to suspension remuneration,
and the impact of those liabilities could fall within the going concern period.
Where provisions have been recognised in respect of the above, there is a significant level of management
estimate included in the provision calculations, which is explained further within the critical accounting
estimates section on pages 84 to 86. As such, the quantum and timing of potential cash outflows could vary
materially from the estimates made.
The costs of historically managing and settling the GLO, of settling a significant portion of the HSS and of
managing both the HSS and OHC have been and will be funded through Post Office’s trading cashflows. The
costs are determined in part by the processes and approvals that Post Office must follow. Without
Government's support, Post Office does not have the financial resources to fund HSS, OHC, Postmaster
Remediation or any cashflows which may arise as a result of Government's intention to provide additional
compensation to GLO claimants.
The nature of Government's budget process does not typically enable Government to give uncapped
guarantees or future funding commitments that sit outside Government spending review timelines. As such,
Government funding cannot be assured in respect of future liabilities which may arise in respect of Postmaster
Remediation or in respect of any cashflows which may arise as a result of Post Office assisting Government
with providing additional compensation to the GLO claimants.
This lack of guaranteed funding for what could be material cash outflows is a source of material uncertainty
impacting the going concern assumption. BEIS has provided written assurances that its present intention is to
continue providing support to Post Office, including providing financial support for the settlement of Postmaster
Remediation claims. This does not constitute a financial guarantee.
Management has made the assessment that support from Government will continue to be made available, as
recently evidenced by the renewed traditional funding arrangements, the extension of the £950 million working
capital facility through to 31 March 2025 and the agreement to fund HSS and OHC.
As such, the basis of preparation of these financial statements on a going concern basis is predicated on the
assumption that should additional funding be required for the significant items highlighted above, it will be
provided by Government.
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The position the Group faced in 2020/21 remains the same with regards to uncertainties and reliance on
Government, with the existence of potentially material future cash outflows associated with Postmaster
Remediation, for which funding is not guaranteed as well as the potential for HSS and OHC related settlements
to exceed amounts already guaranteed by Government. There also remains uncertainty around what role Post
Office may play in the process for providing compensation to GLO claimants in line with Government's
announced intentions, and to what extent this will impact our future cashflows.
As noted above, we believe that Government support will be available when there is clear evidence that it is
required. If that situation changes, the Shareholder has assured the Board that it will be informed.
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 financial statements. The most significant areas where judgements and estimates are made,
and which will most likely have a significant effect on the amounts recognised in the financial statements in
the next twelve months, are outlined below.
Critical accounting estimates:
Historical Shortfall Scheme
In December 2019, Post Office reached an out-of-court settlement with the claimants in the High Court
proceedings which were being conducted under a Group Litigation Order dated 22 March 2017 (the “Post
Office Group Litigation"). As part of the settlement reached with the claimants in the Post Office Group
Litigation, Post Office agreed to establish a remediation scheme open to Postmasters who had not participated
in the Group Litigation but who had experienced similar issues relating to shortfalls indicated by the previous
Horizon system, known as the Historical Shortfall Scheme ("HSS"). The agreement to establish this scheme
was deemed to be a triggering event on which to recognise a provision in the 2019/20 accounts.
Under the framework for the operation of the HSS, eligible applications are being investigated by Post Office
before being presented to an Independent Advisory Panel (the “Panel") by case assessors from Post Office's
legal advisers, Herbert Smith Freehills LLP. The Panel comprises independent experts in the fields of law,
forensic accounting and retail. The Panel will independently assess each claim that is presented to it and
formulate a recommended offer based on its understanding of the relevant legal principles to be applied and
guided by broad considerations of fairness. Following assessment of a claim by the Panel, Post Office will write
to the individual applicant setting out the outcome of their application, including the terms of any offer. There
is a dispute resolution mechanism available to applicants if they are dissatisfied with the outcome of their
application. This includes a mediation stage to be conducted under the auspices of Wandsworth Mediation
Services, a charitable organisation. In the event that claims are not resolved through the dispute resolution
mechanism, disputes will be referred to and be resolved by the County Court (for smaller disputes) or through
arbitration (for disputes in excess of £10,000).
The HSS launched on 1 May 2020 and officially closed for applications on 27 November 2020. As at 31 July
2022, the HSS had received 2,370 eligible applications from current and former Postmasters. Of these 87%
are partly or wholly quantified. Settlement offers have been issued to 1,729 claimants and of these 1,353 have
been settled which equates to c. 13% of the provision value.
A provision of £172 million (2021: £150 million) has been retained in respect of the HSS, with the increase
being due to revisions to the estimated volume and value of claims to be settled, offset by payments made in
year. This represents management's best estimate of the most likely outcome of the potential future payments
associated with the claims. The provision requires a number of significant estimates and assumptions by
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management, with the level of estimation risk increased as a result of the volume and range of claims received
and the early stage of the settlement process.
As a result of the stage of the HSS settlement process and the range of claims received, with limited trends and
patterns currently arising out of the Panel's assessments on which management can base its estimates, many
of the assumptions remain subjective. As a result, the eventual outcome of the HSS could vary significantly to
that which has been estimated.
Analysis performed over the assumptions used indicates a wide range of possible outcomes, with the upper
range indicating that the cost of payments could double when compared with that recognised as a provision,
to in excess of £300 million. If the estimated average payment value per claim increased/decreased by 10%, as.
compared to the average value assumed in arriving at the provision calculation, the provision would
increase/decrease by £18 million and could have a further highly material impact on the financial statements.
Government has confirmed it will provide sufficient financial support to Post Office to ensure that the scheme
can continue, based on current expectations of the potential cost. As outlined above, significant uncertainty
around the provision balance remains, however we believe the level of funding agreed should be adequate. In
2020/21 an asset of £64 million was recognised in respect of the portion of the HSS provision to be funded by
Government, based on estimates at that time. The difference between the provision and asset value would be
funded by Post Office through its trading cashflows and cashflows from the sale of the Telecoms business.
During 2021/22, the Directors reassessed the treatment pertaining to the funding by Government of the
liabilities for Historical Matters and concluded that a more appropriate treatment would be to recognise an asset
only when the quantum for each specific claim settlement becomes virtually certain. This is due to the current
significant estimation uncertainty associated with settlement cashflows. As such, in 2021/22 application of this
reassessment resulted in the previously recognised asset being derecognised and the prior year comparatives
being restated. See note 26 to the financial statements for further details.
Overturned Historical Convictions
In relation to Overturned Historical Convictions ("OHC"), further information of which can be found on page 14
of the Financial and Business Review, management's view is that liabilities arising from any future civil claims
or requests for compensation arising out of the overturned convictions to date represent a probable obligation
arising from past events. Post Office communicating its decision in 2020/21 not to oppose a number of appeals
was deemed to be a triggering event for liability recognition. The triggering event was deemed to apply to the
population of all potential claimants as opposed to only those currently going through the various stages of
appeal as outlined above.
A provision of £487 million (2021: £502 million) has been recognised in respect of the Overturned Historical
Convictions which represents the present value of the estimated future payments. This represents
management's latest and best estimate of the most likely outcome of the potential future payments associated
with civil claims which may be received, assessed across the whole population of potential claimants. The
provision requires a number of significant estimates and assumptions by management, with the level of
estimation risk increased as a result of the early stage of the proceedings.
Given the volume of and uncertainty around the number of potential claimants, the spread of potential claim
values and the early stage of the process, with no payments having been made except for a small number of
interim payments, there is a significant level of estimation uncertainty. In estimating the provision, management
have made two key estimates: the number of claimants to whom payment will be made and the potential
average value of payments to be made. The assumptions used are subjective, but represent management's
best estimate based on advice from external legal advisors. The potential outcomes are wide ranging, with
analysis indicating the provision could increase or decrease by a material level if key assumptions were altered
and could have a further highly material impact on the financial statements. A 20% change in the key
assumptions could lead to an increase / decrease of c. 40% in the provision level. In accordance with paragraph
92 of IAS 37, detailed information in respect of the key assumptions underpinning this provision as required by
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the standard has been excluded on the grounds that the Directors consider that it would be seriously prejudicial
to individual settlement discussions which need to take place on a case by case basis.
Government has confirmed it will provide financial support in respect of future payments arising as part of the
OHC. Should the future payments exceed the current funding level guaranteed by Government of £780 million,
additional support will be sought from Government. See the Going Concern section on pages 80 to 84 for
further details surrounding Government support. During 2021/22, £6 million (2021: £nil) of interim payments
were made resulting in utilisation of the provision and recognition of funding being recognised through
exceptional items, as presented in note 4.
Postmaster Remediation — suspension remuneration
Historically, before March 2019, Postmasters did not receive remuneration during the period of any contract
suspension. Post Office has subsequently changed this policy, resulting in Postmasters being remunerated
during a period of suspension.
A provision of £62 million (2021: £59 million) has been recognised at the balance sheet date. This represents
management's best estimate of the potential future payments to eligible Postmasters whose contract with Post
Office Limited was suspended before March 2019. A number of significant estimates and assumptions have
been made in deriving the accounting provision. The primary estimates are the number of eligible Postmasters
who may receive a payment and the average value of such potential payments.
As the redress process is currently being worked through and formal funding arrangements are still to be
finalised, no trends or patterns exist on which management can utilise when forming its estimates. As such,
many of the assumptions are subjective and therefore the eventual outcome could vary significantly to that
which has been estimated. In accordance with paragraph 92 of IAS 37, detailed information in respect of the
key assumptions underpinning this provision as required by the standard has been excluded on the grounds
that the Directors consider that it would be seriously prejudicial to individual settlement discussions which need
to take place on a case by case basis.
Analysis performed over the assumptions used indicates a wide range of possible outcomes. If the estimated
average individual payment value increased/decreased by 20%, as compared to the average value assumed in
arriving at the provision calculation, the provision would increase/decrease by £12 million and could have a
further material impact on the financial statements.
Government has stated its intentions to provide sufficient financial support to Post Office for this, with formal
funding arrangements being progressed. As assurances over Government funding were not formally in place
at the balance sheet date, and in line with accounting standards, no asset has been recognised on the balance
sheet. This position will be revisited in future financial years, once Government funding has been finalised.
Key assumptions used in impairment tests for non-current assets
The Group assesses whether there are any indicators of impairment for all non-current assets at each reporting
date as well as if events or changes in circumstances indicate that the carrying value may be impaired. Factors
considered important that could trigger an impairment review include the following:
* Significant underperformance compared to historical or projected future operating results.
. Significant changes in the manner of use of the acquired assets or the strategy of the overall Group.
* Significant negative micro- or macro-economic trends.
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 ("CGU") exceeds its recoverable amount. The recoverable
amount is determined based on value in use calculations which require the use of assumptions. The calculations
use cash flow projections based on three-year financial forecasts approved by management, factoring in current
economic circumstances such as inflationary pressures and challenges such as the recovery out of the COVID-
19 pandemic. Where applicable, cash flows beyond this period are extrapolated using estimated growth rates.
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Refer to notes 9 and 10 for the results of the latest impairment tests, including sensitivity analysis where
relevant.
Actuarial assumptions
The costs, assets and liabilities of the pensions operated by the Group are determined using methods relying
on actuarial estimates and assumptions.
The 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 and in accordance with published statistics and experience. Refer to note 18 for
details of the key assumptions and sensitivity analysis performed.
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.
Property provisions
The Group recognises provisions for property contracts that are vacant and onerous. Assumptions are made to
determine whether the unavoidable costs of meeting the obligations of a contract exceed the economic benefits
expected to be received under it. These include estimates around the future trading performance of the site and
cost allocations.
Critical accounting judgements:
Pension schemes
Post Office participates in two defined benefit pension schemes. The Group recognises only the Post Office
section of the Royal Mail Pension Plan and a 7% share of the Royal Mail Senior Executives Pension Plan. These
key judgements are based on the sectionalised nature of the schemes as well as contractual arrangements and
existing funding contribution agreements.
Network Programmes
The Group recognises provisions for payments due to Postmasters in relation to the major network
transformation programme. A key judgement is required as to whether payments are expected to be made
beyond the current contractual period for which the associated agreements relate.
Cash generating units (“CGU")
Post Office has determined that it has two CGUs: Post Office Limited and Post Office Management Services
Limited. Post Office Management Services Limited is a standalone entity with an identifiable asset base and
therefore is deemed to be one CGU. Post Office runs a national network of branches which provide a distinct
retail offering, resulting in a fluid customer base across the network. As such the network as a whole is deemed
to be one CGU.
CGU impairment review — network subsidy payments
The Network Subsidy Payment ("NSP") is received from Government to contribute to the costs of Post Office
making available the network of public post offices that the Secretary of State for BEIS considers appropriate.
The Post Office Limited CGU impairment review assumes continued provision of the NSP by Government, into
perpetuity, in order to maintain the network.
Going concern assumption
Akey judgement is required as to whether support will be provided by Government, to a level which allows the
Group to settle its liabilities as they fall due, incorporating potential future cash outflows in respect of significant
one off items which may or may not occur. The judgement that support will be provided by Government, to the
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extent no formal guarantees are in place, has been made by management, as outlined within the going concern
section, from page 80 to 84, and fundamentally impacts the going concern decision made.
Revenue from contracts with customers
The Post Office business was organised in the period into three strategic commercial pillars plus the Telecoms
operation which was subsequently sold in March 2021. As such, revenue segments have been updated to
reflect these changes.
Mails, Retail & Government Services
Mails
The Group provides Mails support services to Royal Mail and Parcelforce. Each Mails product and service has
an associated transaction price. The transaction price may vary due to the volume transacted in the period.
Revenue from providing Mails support services is recognised in the accounting period in which the services are
rendered.
Retail
The Group acts as a selling agent and earns commission on the sale of lottery tickets, scratch cards and gift
vouchers. The transaction price is a contractual commission rate, which is based on the value of sales in the
period. Revenue from the sale of lottery tickets, scratch cards and gift vouchers is recognised in the accounting
period in which these sales are made.
Government Services
Government services are provided under contract to Government departments, such as the DWP, DVLA and
the Home Office. Each Government service has an associated transaction price. Revenue is recognised in the
accounting period in which the services are rendered and is based on the transaction price multiplied by the
volume of each service provided in the period. Post Office Limited is the agent for identity services revenue.
Banking, Payments & Transactional Services
Banking
Through the Banking Framework Agreement, the Group provides over-the-counter banking services, such as
withdrawals, deposits and balance enquiries, on behalf of banks. A transaction price is associated with each
banking service provided. Revenue is recognised in the accounting period in which the services are rendered
and is based on the transaction price multiplied by the volume of each service provided in the period. In addition,
the Banking Framework Agreement provides a fixed fee element based on activity levels over a 12 month rolling
period. Accrued income is recognised until amounts earned are settled.
Payment & Transactional Services
Payment services comprise bill payments (including the subsidiary Payzone Bill Payments Limited). The
transaction price is the fee that the Group earns for each bill paid in a branch. Revenue from bill payments is
recognised in the accounting period in which the service is rendered and is based on the transaction price
multiplied by the volume of bill payments in the period.
Financial Services, Identity Services & Insurance
Financial Services
Our Financial Services products include mortgages, credit cards, savings, travel and banking. The Group earns
commission on the sale of these products. The transaction price is a contractual commission rate. This
commission rate varies by product and is based on volume or value of products sold in the period as well as the
channel of sale, for example online or through the branch network. Revenue is recognised in the accounting
period in which the new products are sold. Post Office Limited is the agent for Financial Services revenue.
Identity Services
Each Identity service has an associated transaction price. Revenue is recognised in the accounting period in
which the services are rendered and is based on the transaction price multiplied by the volume of each service
provided in the period.
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Insurance
Through its subsidiary, Post Office Management Services Limited, the Group provides general and life insurance
intermediation. The transaction price is a contractual commission rate. This commission rate varies by product
and is based on the volume or value of products sold in the period as well as the channel of sale, for example
online or through the branch network. Revenue is recognised in the accounting period in which the new
products are sold. Post Office Limited is the agent for insurance revenue.
Telecoms
The Telecoms operation, prior to being sold on 15 March 2021, included Post Office HomePhone and
Broadband services. The transaction price was the subscription fee, consisting primarily of charges for access
to broadband and other internet access or voice services. Revenue was recognised as the service was provided
because the customer received and used the benefits simultaneously. Post Office Limited was the principal for
Telecoms revenue.
For all the revenue streams noted above, a receivable is recognised when the goods are delivered or the services
are provided, as this is the point in time that the consideration is unconditional, because only the passage of
time is required before the payment is due.
The Group does not expect to have any contracts where the period between the transfer of the promised goods
or services to the customer and the payment by the customer exceeds one year. As a consequence, the Group
does not adjust any of the transaction process for the time value of money.
Accrued and deferred income
Income is accrued on the balance sheet for goods and services for which control has transferred to the customer
before consideration is due. Accrued income is reclassified as trade receivables when the right to payment
becomes unconditional and we have invoiced the customer. Banking, payment and transactional services
attract material amounts of accrued income.
Deferred income is recognised when we have received advance payment for goods and services that we have
not yet transferred to the customer. Telecoms attracted material levels of deferred income.
Other income
The Network Subsidy Payment is received from Government and is recognised as other income to match the
related costs of making available the network of public post offices that the Secretary of State for BEIS considers
appropriate. The subsidy is recognised in the year in which it is received. If the subsidy were to exceed the cost
of making the network available, the excess would be repaid to Government and the associated income would
be derecognised.
Other income also includes commission income relating to Government Services.
Exceptional costs
Exceptional items are significant, one off-items which management consider require separate disclosure within
the financial statements in order to enhance understanding of the financial performance of the Group.
Exceptional items include legal fees and settlement costs for ongoing litigation and one-off costs associated
with the COVID-19 pandemic. Refer to note 4 for further details.
Exceptional funding
Funding received from Government to offset cash outflows to claimants as part of the Historical Shortfall
Scheme and Overturned Historical Convictions is recognised when the quantum for each specific claim
settlement becomes virtually certain.
Investment spend
Investment spend relates to costs associated with significant, transformational activities which do not form part
of the underlying trading of the business. Refer to note 5 for further details.
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Investment funding
Investment funding is received from Government and recognised at the point of receipt. The funding is received
for transformational activities.
Leases
The Group leases various offices, depots, branches, equipment and vehicles in accordance with IFRS 16.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset
is available for use by the Group. Assets and liabilities arising from a lease are initially measured on a present
value basis. Lease liabilities include the net present value of the following lease payments:
. Fixed payments (including in-substance fixed payments), less any lease incentives receivable.
. Variable lease payments that are based on an index or a rate, initially measured using the index or rate
as at the commencement date.
. Amounts expected to be payable by the Group under residual value guarantees.
. The exercise price of a purchase option if the Group is reasonably certain to exercise that option.
. Payments of penalties for terminating the lease, if the lease term reflects the Group exercising that
option.
Lease payments to be made under reasonably certain extension options are also included in the measurement
of the liability. The lease payments are discounted to their present value. In accordance with the terms of the
lease contract, the Group may exercise extension or termination options as part of ordinary business operations.
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which
are not included in the lease liability until they take effect. When adjustments to lease payments based on an
index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Right-of-use assets are measured at cost comprising the following:
. The amount of the initial measurement of lease liability.
. Any lease payments made at or before the commencement date less any lease incentives received.
. Any initial direct costs.
. Restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset's useful life and the lease term ona
straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is
depreciated over the underlying asset's useful life. Testing for impairment on right-of-use assets is done on a
CGU basis.
Taxation
The amount charged or credited as current income tax is based on the results for the year adjusted for items
which are not taxed or are disallowed. It is calculated using tax rates in legislation that have 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: ‘
. On the initial recognition of goodwill.
. On 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.
° On the 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.
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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.
Borrowings
Borrowings are initially recognised at fair value, net of transaction costs incurred. Borrowings are subsequently
measured at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption
amount is recognised in profit or loss over the period of the borrowings using the effective interest method.
Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent
that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the
draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be
drawn down, the fee is capitalised as a prepayment for liquidity services and amortised over the period of the
facility to which it relates.
Borrowings are removed from the balance sheet when the obligation specified in the contract is discharged,
cancelled or expired. The difference between the carrying amount of a financial liability that has been
extinguished or transferred to another party and the consideration paid, including any non-cash assets
transferred or liabilities assumed, is recognised in profit or loss as other income or finance costs.
Borrowings are classified as current liabilities unless the Group has an unconditional right to defer settlement
of the liability for at least 12 months after the reporting period.
Under IAS 7 section 22b, proceeds and repayments are shown as net in the Statement of Cash Flows.
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 joint venture is an integral
part of the Group's operations.
Property, plant and equipment
Property, plant and equipment excluding freehold property, long leasehold property and land:
Property, plant and equipment is recognised at cost, including attributable costs in bringing the asset into
working condition for its intended use. These assets are depreciated on a straight-line basis over the following
useful lives:
Range of asset lives
Plant and machinery 3-15 years
Motor vehicles 3-12 years
Fixtures and equipment 3-15 years
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Freehold property, long leasehold property and land:
As with property, plant and equipment this is recognised at cost, including attributable costs of bringing the
asset into working condition for its intended use. These assets have a long useful life and a fair market value.
They are depreciated on a straight-line basis over the following useful lives:
Range of asset lives
Freehold land Not depreciated
Freehold buildings Up to 50 years
Long leasehold and short The shorter of the period of the lease, 50 years or the estimated remaining
leasehold useful life
The remaining useful lives of freehold buildings are reviewed periodically and adjusted where applicable on a
prospective basis. Where freehold property and long leasehold includes the fit-out of those properties, the fit-
out is depreciated over its useful economic life in line with fixtures and fittings.
Assets in the course of construction are carried at cost, with depreciation charged on the same basis as all other
assets once those assets are ready for their intended use.
Leased assets:
Long leasehold, short leasehold and motor vehicles categories include right-of-uses assets. Further detail is
included in note 20.
Intangible assets
Goodwill:
Goodwill is initially recognised at cost, being the excess of the aggregate of the consideration transferred and
the amount recognised for non-controlling interests, and any previous interest held, over the net identifiable
assets acquired and liabilities assumed. After initial recognition, goodwill is recognised at cost less any
accumulated impairment losses. The Group’s management undertakes an impairment review annually or more
frequently if events or changes in circumstances indicate that the carrying value may not be recoverable.
Software:
Costs associated with maintaining software programmes are recognised as an expense as incurred.
Development costs that are directly attributable to the design and testing of identifiable and unique software
products controlled by the Group are recognised as intangible assets when the following criteria are met:
. It is technically feasible to complete the software so that it will be available for use;
. Management intends to complete the software and use or sell it;
. There is an ability to use or sell the software;
. It can be demonstrated how the software will generate probable future economic benefits;
. Adequate technical, financial and other resources to complete the development and to use or sell the
software are available; and
. The expenditure attributable to the software during its development can be reliably measured.
Directly attributable costs that are capitalised as part of the software include employee costs and an appropriate
portion of relevant overheads.
Capitalised development costs are recorded as intangible assets and amortised from the point at which the
asset is ready for use.
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Research and development:
Research expenditure and development expenditure that does not meet the criteria above are recognised as an
expense as incurred. Development costs previously recognised as an expense are not recognised as an asset
in subsequent periods.
Software-as-a-service (“SaaS”) arrangements:
The Group revised its accounting policy in relation to configuration, customisation and access costs incurred in
SaaS arrangements in the prior year, following the IFRS IC agenda decision in March 2021. The Group adopted
the treatment set out in the IFRS IC agenda decision and such costs are recognised as expenses in the income
statement when the services are received. The Group may incur related costs for the development of software
code that enhances the capability of existing Group controlled software. Where such costs lead to future
economic benefit and meet all other recognition criteria for an intangible asset as set out in IAS 38, they are
recognised as intangible assets and amortised over the useful economic life of the software.
Intangible assets with a finite useful life:
Intangible assets acquired separately or generated internally are initially recognised at cost. They are
amortised on a straight-line basis over the following useful lives:
Range of asset lives
Software 3-6 years
Customer relationships 5 years
Merchant relationships 5-10 years
Brands 15 years
Assets in the course of construction are carried at cost, with amortisation commencing once the assets are
ready for their intended use.
Inventories
Inventories include stationery and Royal Mint coin products and are carried at the lower of cost and net
realisable value after adjusting for obsolete or slow-moving stock.
Trade receivables
Trade receivables are recognised and carried at original invoice amount. An allowance is made when collection
of the full amount is no longer probable. The Group applies IFRS 9 to measure this allowance for expected credit
losses, grouping trade receivables based on shared risk characteristics and days past due. Bad debts are written
off when identified.
Cash and cash equivalents
Cash and cash equivalents in the balance sheet comprise cash at bank and on hand, including cash in the Post
Office network and short-term deposits (cash equivalents) with an original maturity date of three months or
less.
For the purpose of the statement of cash flows, cash and cash equivalents are as defined above, net of bank
overdrafts.
The subsidiary Post Office Management Services Limited holds fiduciary cash balances, these are held on trust
on behalf of third parties, see note 13 for details.
Pensions and other post-retirement benefits
Membership of occupational pension schemes is open to most permanent UK employees of the Group.
The Group is the principal employer of the Post Office Section of the Royal Mail Pension Plan (“RMPP”) and is
a participating employer within the Royal Mail Senior Executives Pension Plan ("RMSEPP"). RMPP and RMSEPP
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are both defined benefit plans closed to new members and closed to future accrual. All members of these plans
are contracted out of the earnings-related part of the State pension scheme.
A Memorandum of Understanding was executed in 2016/17 which removed the unconditional right to refund
from the RMPP. As a result of these events the surplus relating to this Plan was derecognised.
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.
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). As noted above, the RMPP Plan has been closed and no future
refunds will be made to the Group.
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. As the Group has no right to a future surplus in the RMPP, an equal and opposite
adjustment to the asset ceiling is recognised in other comprehensive income. There is no effect on the net assets
position of the Group.
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.
Bonus plans — short-term incentives
The Group recognises a liability and an expense for bonuses based on a mix of financial and non-financial
measures. The Group recognises a provision where contractually obliged or where there is a past practice that
has created a constructive obligation.
Bonus plans — long-term incentives
Long-term incentive awards are made annually and are cash settled if performance is achieved over a 3-year
cycle. Performance measures are drawn from the Post Office Strategic Plan agreed with BEIS. The Group
recognises a liability and an expense for long-term incentives as milestones are hit.
Foreign currencies
The functional and presentational currency of the Group is sterling (£).
Foreign currency transactions are translated into the functional currency using the exchange rates at the dates
of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and
from the translation of monetary assets and liabilities denominated in foreign currencies at year-end exchange
rates are recognised in profit or loss.
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. Due to the nature of provisions the future amount settled may be
different from the amount that has been provided. 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. The Group has
considered the provisions recognised in the balance sheet and adjusted for the impact of discounting where
material to the financial statements.
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Financial instruments
Initial measurement of financial instruments
All financial instruments are initially measured at fair value plus or minus, in the case of a financial asset or
financial liability not at fair value through profit or loss, transaction costs.
Subsequent measurement of financial assets
IFRS 9 divides all financial assets into two classifications — those measured at amortised cost and those
measured at fair value.
Where assets are measured at fair value, gains and losses are either recognised entirely in profit or loss (fair
value through profit or loss, “FVTPL”), or recognised in other comprehensive income (fair value through other
comprehensive income, “FVTOCI").
The classification of a financial asset is made at the time it is initially recognised. If certain conditions are met,
the classification of an asset may subsequently need to be reclassified.
Subsequent measurement of financial liabilities
IFRS 9 divides all financial liabilities into two measurement categories: FVTPL and amortised cost. All of the
Group's financial liabilities are measured at amortised cost.
Derecognition of financial assets
A financial asset is derecognised when the Group determines that it has transferred substantially all of the risks
and rewards of ownership of the asset.
Derecognition of financial liabilities
A financial liability is removed from the balance sheet when it is extinguished; that is, when the obligation
specified in the contract is either discharged or cancelled or expires.
Derivatives and hedging activities
Derivatives are initially recognised at fair value on the date that a derivative contract is entered into, and they
are subsequently re-measured to their fair value at the end of each reporting period. The accounting for
subsequent changes in fair value depends on whether the derivative is designated as a hedging instrument
and, if so, the nature of the item being hedged. The Group designates certain derivatives as either:
© Hedges of the fair value of recognised assets or liabilities or a firm commitment (fair value hedges).
¢ Hedges of a particular risk associated with the cash flows of recognised assets and liabilities and highly
probable forecast transactions (cash flow hedges).
e Hedges of a net investment in a foreign operation (net investment hedges).
At inception of the hedge relationship, the Group documents the economic relationship between hedging
instruments and hedged items, including whether changes in the cash flows of the hedging instruments are
expected to offset changes in the cash flows of hedged items. The Group documents its risk management
objective and strategy for undertaking its hedge transactions.
The fair values of derivative financial instruments designated in hedge relationships are disclosed in note 17.
Movements in the hedging reserve are shown within other reserves in the statement of changes in equity. The
full fair value of a hedging derivative is classified as a non-current asset or liability when the remaining maturity
of the hedged item is more than 12 months; it is classified as a current asset or liability when the remaining
maturity of the hedged item is less than 12 months.
Cash flow hedges that qualify for hedge accounting
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow
hedges is recognised in other reserves within equity. The gain or loss relating to the ineffective portion is
recognised immediately in profit or loss.
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When the forecast transaction subsequently results in the recognition of a non-financial asset or non-financial
liability, the associated cumulative gain or loss is removed from equity and included in the initial cost or other
carrying amount of the non-financial asset or liability. If a hedge of a forecast transaction subsequently results
in the recognition of a financial asset or financial liability, the associated gains or losses that were previously
recognised in the statement of comprehensive income are reclassified into the income statement in the same
period or periods during which the asset acquired or liability assumed affects the income statement.
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2. Revenue from contracts with customers
All Group sales occur in the UK. The Group derives revenue from the transfer of goods and services at a point in
time in the following major product lines:
2022 2021
Revenue segments £m £m
Mails, Retail & Government Services 411 445
Banking, Payments & Transactional Services 329 306
Financial Services, Identity Services & Insurance a ce
Other* 12 12
834 815
Total revenue
* Principally relates to Supply Chain income of £9 million (2021: £9 million) predominantly for warehousing of Royal Mail stock, transport of
high value mails and release of Bank of Ireland deferred income of £2 million (2021: £2 million). The remaining £1 million (2021: £1 million) is
made up of individually immaterial revenue balances.
3. Staff costs and numbers
Employment and related costs were as follows:
2022 2021
People costs (excluding investments): £m £m
Wages and salaries 136 137
Social security costs 15 15
Pension costs (note 18) 13 1
Total people costs (excluding investments) I 164 163
People costs within investments relate to severance costs as part of restructuring and are disclosed within note 5.
Period end and average monthly employee numbers were as follows:
Period end employees Average monthly employees
f 2022 I 2021 I 2022 I 2021
Total employees I 3,380 I 3.449 I 3,415 I 3,556
Total employee numbers can be categorised as follows:
Period end employees ‘Average monthly employees
2022 2021 2022 2021
‘Administration 1,258 1172 1,215 1,131
Directly managed branches ("DMB") 1,242 1,390 1,316 1,491
Supply Chain 775 769 772 792
Network programmes - - - 16
Post Office Management Services 34 42 38 42
Payzone 71 76 74 84
Total I 3,380 3,449 3,415 3,556
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4. Operating loss
The following items are included within operating loss:
2022 2021
£m £m
. (Restated)*
Postmasters’ remuneration 392 412
People costs (excluding investments) 164 163
Depreciation and amortisation 104 118
Cost of inventories recognised as an expense 1 1
Profit on disposal of fixed assets (3) (4)
Exceptional items: £m £m
* Historical Shortfall Scheme 65 26
© Overturned Historical Convictions 4 524
* Postmaster Remediation . 59
© Inquiry 12 e
© Group Litigation Order > 1
* — COVID-19 pandemic - 9
© Other Legal 6 ?
Funding for exceptional items: £m £m
© Overturned Historical Convictions funding (6) -
Fees payable to the Group's auditors for audit and other services: £'000 £'000
* parent Company and Group audit 969 1,035
© audit of subsidiaries 110 110
* other assurance services 156 104
* other non-audit services 9 19
*See note 26 for details regarding the prior year restatement.
Exceptional costs:
Exceptional costs of £90 million (2021: £626 million) were recognised in the year. This includes Historical Matters
related costs of £84 million (2021: £610 million) broken down as follows:
* Historical Shortfall Scheme ("HSS") costs relate to legal costs and costs to run the scheme of £36 million
(2021: £26 million) and an increase in the provision value of £39 million offset by a release of £10 million
(2021: £3 million release).
¢ Overturned Historical Convictions ("OHC") costs relate to legal costs and costs to run the scheme of £13
million (2021: £22 million) and a decrease in the provision value of £9 million (2021: £524 million increase).
* Postmaster Remediation provision increase of £3 million to £62 million (2021: £59 million).
e Inquiry related costs of £12 million (2021: £nil) relating to Sir Wyn's public Inquiry into the Horizon IT
scandal which was placed onto a statutory footing and began its oral hearings in February 2022.
Other legal relates to costs of defending the Employment Tribunal of £6 million (2021: £7 million).
Historical Matters related provisions are explained in the critical accounting estimates section in note 1.
Exceptional funding:
Funding for exceptional items of £6 million was recognised in the year (2021: £nil restated) in line with agreed
Government funding for Historical Matters.
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Fees payable to the Group’s auditors:
Non-audit services are £9,000 (2021: £19,000) and relate to a service contracted prior to PwC's formal
appointment as financial statement auditors in 2019 and the service has ceased prior to 2021/22 year-end. The
parent Company and Group audit fee for 2021/22 includes £100,000 additional billing for the 2020/21 audit, billed
during 2021/22 (2021: £150,000 additional billing for the 2019/20 audit).
5. Investment spend
2022 2021
£m fm
Restructuring:
Business transformation (6) (6)
Network programmes (9) 5
IT transformation (11) (12)
Severance _ 2) (16)
Total restructuring costs I (28) I (29)
Impairment of intangible assets (note 9) I ={ (8)
Total investments charge I (28) { 7)
Restructuring: Restructuring costs are transformational spend incurred in order to implement major change
programmes. Business transformation is an overarching programme that will transform the business, driving Post
Office toward commercial sustainability through technological innovation and the fundamental re-envisaging of
long-term contracts. Network programmes is a multi-year initiative designed to simplify the retailer proposition,
with key areas of focus being simplification and automation. IT transformation includes programmes to restructure
our IT operating model and overhaul legacy back office systems, transitioning to a cloud-based architecture.
Impairment: See note 9.
6. Directors’ emoluments
No Directors were accruing pension entitlements during the period (2021: none).
Disclosures required by the Companies Act 2006 in relation to Directors’ emoluments are provided on pages 37
to 46.
7. Finance costs
2022 2021
£m £m
Interest payable on loans (3) (3)
Finance charges (4) (4)
Total - net finance costs i) I (7)
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8. Taxation
(a) Taxation recognised in the year
Current and deferred income tax is credited to the income statement as follows:
2022 2021
£m £m
Current income tax:
Corporation tax credit for year (1) (1)
Deferred income tax: .
Deferred tax income relating to the utilisation of losses brought forward -
Taxation credit (1) (1)
The current income tax credit recognised in the income statement is £1 million (2021: £1 million).
The deferred income tax result recognised in the income statement is Enil (2021: £nil).
In the current year no deferred income tax has been recognised in other comprehensive income.
No current or deferred income tax was recognised directly in equity in the current or prior year.
(b) Factors affecting current tax credit on loss
As in 2021, the tax assessed for the year differs from the standard rate of corporation tax in the UK of 19% (2021:
19%). The differences are explained below:
2022 2021
in £m
Restated*
Loss before taxation from continuing operations (132) (720)
Profit before taxation from discontinued operations - 58
Total loss before taxation multiplied by the standard rate of corporation tax in the (25) (126)
UK of 19% (2021: 19%)
Effect of unutilised losses carried forward 33 125
Adjustments to tax charge in respect of previous periods 1 -
Research and development tax credit (1) -
Increase in tax charge as a result of change in unrecognised deferred tax assets 1 11
Surrender of tax losses to joint venture 1 -
Expenses not deductible for tax purposes 4 1
Income not taxable (12) (10)
Fixed asset differences (@) (2)
Taxation credit (a) (1)
*See note 26 for details regarding the prior year restatement.
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(c) Deferred tax
Deferred tax relates to the following:
Consolidated balance sheet Consolidated income statement
2022 2021 2022 2021
£m £m £m £m
Acquired intangible assets (1) . (1) -
Tax losses 1 7 I 1 I =
Deferred tax assets / (liability) I - -} “I -
Deferred tax (expense) / income I . - I “I -
In the current year, a deferred tax liability of £1 million (2021: Enil) was recognised in relation to the acquisition of
intangible assets as part of the 2018/19 business combination, with a corresponding deferred tax asset of £1
million (2021: nil) recognised for the value losses up to the same liability (2021: Eni).
The Group has significant tax losses which are available indefinitely for offsetting against future taxable profits. As
at the balance sheet date no deferred tax asset has been recognised in relation to these tax losses (2021: £nil).
The UK Budget on 3 March 2021 included an announcement that the corporation tax rate will increase to 25%
from 1 April 2023 for certain companies and was substantively enacted on 24 May 2021. This will increase the
Group's future tax charge accordingly. Under IAS 12, deferred tax is required to be calculated using rates that have
been substantively enacted at the balance sheet date, hence 25% has been used.
(d) Factors that may affect future tax charges
The Group has unrecognised deferred tax assets of £480 million (2021: £348 million), comprising £327 million
(2021: £338 million) relating to tax losses that are available to offset against future taxable profits, £15 million
(2021: £10 million) relating to fixed asset timings, £137 million (2021: £nil) relating to temporary differences
on provisions and £1 million (2021: nil) relating to temporary differences on pension relief. The Group has
considered future trading conditions and determined that there is uncertainty as to whether there will be
sufficient taxable profits in the future against which the assets could be utilised.
The Group has rolled over capital gains of £2 million (2021: £2 million); no tax liability would be expected to
crystallise should the assets into which the gains have been rolled be sold at their residual value, as it is anticipated
that a capital loss would arise.
The Finance (No.2) Act 2017 was substantively enacted on 16 November 2017. This includes a restriction on the
utilisation of brought forward tax losses and corporate interest in certain circumstances effective from 1 April 2017.
In the Spring Budget 2021, the Government announced that from 1 April 2023 the corporation tax rate will
increase to 25%. The change was substantively enacted on 24 May 2021. This will increase the Group's future
current tax charge accordingly.
The corporation tax disclosures include assumptions around the tax treatment of the provision expense and
funding income related to the unique processes by which Post Office is seeking to make payments to claimants,
namely HSS and OHC.
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9. Intangible assets
Other
Software Goodwill intangibles Total
£m £m £m £m
Cost
At 30 March 2020 566 53 13 632
Reclassification 8) - - 8)
Additions 35 - - 35
Disposals (12) (y) (6) (19)
Adjustments (13) ; = (13)
At 28 March 2021 ! 573 52 7 632 I
Additions 44 - - 44 I
Disposals ; (61) - - (61) °
At 27 March 2022 a 556 52 7 615 I
Accumulated amortisation :
At 30 March 2020 364 17 4 385
Amortisation 70 - 3 73
Impairment - 8 - 8
Disposals (11) - (6) (17)
Adjustments. (8) = - (8)
At 28 March 2021 ; 415 25 i ai I
Amortisation I 57 - - 57
Disposals (61) - - 61)
At 27 March 2022 \ 411 25 1 437 ;
Net book value
At 27 March 2022 145 27 6 178 i
At 28 March 2021 : 158 27 6 191
Included within software in the above table are assets under construction of £64 million (2021: £37 million).
Other intangibles include customer relationships, merchant relationships and brands.
Additions to software relate to IT transformation projects undertaken during the current year. These include
capitalised development costs being an internally generated intangible asset.
In the current year, the useful lives of some software intangible assets have been extended whilst others have
been reduced to better reflect expected usage. This change in accounting estimate is within the range of asset
lives stated on page 93 and did not result in a net adjustment to amortisation in the year (2021: £15 million).
Goodwill and intangible assets are tested for impairment annually or more frequently if events or changes in
circumstances indicate that the carrying value may not be recoverable. Management determined that no
impairment was necessary for the current year in relation to goodwill (2021: £8 million), software (2021: £nil) or
other intangible assets (2021: fnil). Refer to note 10 for details of impairment reviews performed during the year
over cash generating units.
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In the prior the year, the Group revised its accounting policy in relation to configuration, customisation and access
costs incurred in SaaS arrangements, following the IFRS Interpretations Committee agenda decision in March 2021.
The prior year impact of this change in accounting treatment was assessed and was found to be immaterial, as
such this change was accounted for prospectively, resulting in an additional charge of £5 million in the 2020/21
income statement in respect of brought forward intangible assets. The impact on intangible assets is shown within
adjustments in the above table.
Amortisation rates are disclosed on page 93 within the accounting policies note.
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10. Property, plant and equipment
Land and buildings
Plant Fixtures
Long Short Motor and and
Freehold leasehold leasehold ~—vehicles_ = machinery ~— equipment Total
£m £m £m £m £m £m £m
Cost
‘At 30 March 2020 33 60 56 28 2 843 1,022
Reclassification - ; 1 - - 2 3
Additions 1 - 1 1 - 6 9
Right-of-use additions - 2 7 7 = : 9
Disposals (3) (6) (3) (1) - (23) (36)
Right-of-use disposals - (9) (5) ; > 7 (14)
At 28 March 2021 31 47 57 28 2 828 993
Reclassification* . (9) 9 - - - -
Additions 1 1 1 - - 9 12
Right-of-use additions - 2 14 - 1 = 7
Disposals (4) (1) (1) (2) - (6) (14)
Right-of-use disposals = (2) - - - - (2)
At 27 March 2022 28 38 80 26 3 831 1,006
Accumulated depreciation
At 30 March 2020 24 17 25 24 2 731 823
Reclassification - : ; - - 1 1
Depreciation 1 2 - - - 38 41
Right-of-use asset B - 9 1 - . 10
depreciation
Right-of-use impairment - (2) () - - - Q)
reversal
Disposals (3) (4) (3) (1) * (16) (27)
Right-of-use disposals - (y) ; ; : - (y)
At 28 March 2021 22 12 30 24 2 754 844
Reclassification* - (5) 5 = - - -
Depreciation 1 4 1 - - 30 36
Right-of-use asset . . 10 7 . . u
depreciation
Disposals (3) . . (2) = (7) (12)
At 27 March 2022 I 20 li 46 23 2 777 879 I
Net book value
At 27 March 2022 I 8 27 34 3 1 54 127 I
At 28 March 2021 9 35 27 4 = 74 149
“During the current year, a review of property, plant and equipment took place and resulted in reclassifications between categories to
give a more appropriate representation of the nature of the assets.
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Included within fixtures and equipment in the above table are assets under construction of £7 million (2021: £4
million).
The closing net book value of right-of-use assets by asset class is presented within note 20.
Depreciation rates are disclosed on pages 91 and 92 within the accounting policies note. No depreciation is
provided on freehold land, which represents £1 million (2021: £1 million) of the total cost of freehold land and
buildings as included in the table above.
An impairment test was performed during the year. Intangible assets and property, plant and equipment were
tested for impairment by comparing the carrying amount of each Cash Generating Unit (“CGU") with the
recoverable amount determined from value in use calculations.
Post Office has determined that it has two CGUs: Post Office Limited and Post Office Management Services
Limited. Post Office Management Services Limited is a standalone entity with an identifiable asset base and
therefore is deemed to be one CGU. Post Office Limited runs a national network of branches which provide a
distinct retail offering, resulting in a fluid customer base across the network. As such the network as a whole is
deemed to be one CGU.
The discounted net cash flows from the value in use calculations were used to determine the recoverable amount
of the CGU's identified, being Post Office Limited and Post Office Management Services Limited. Value in use is
determined using the Group's net cash inflows from the continued use of the assets within each CGU over a three-
year period and then continued into perpetuity, with no nominal growth rate assumed outside of this period. Pre-
tax discount rates for Post Office Limited of 8.7% (2021: 9.3%) and for Post Office Management Services Limited
of 10% (2021: 10%) have been used to discount the forecasted cash flows.
A sensitivity analysis has been performed in assessing the value in use of property, plant and equipment and
intangible assets. This was based on changes in key assumptions considered to be reasonably possible by
management. This included an increase in the discount rate of up to 12% and a reduction in forecasted cashflows
to that of a plausible downside scenario factoring in key cashflow variables. The sensitivity analysis showed that
no impairment would arise under each of these reasonably possible scenarios assessed.
Akey assumption with the Post Office Limited CGU impairment review is that Network Subsidy Payments ("NSP")
which are received from Government to contribute to the costs of Post Office making available the network of
public post offices that the Secretary of State for BEIS considers appropriate, will continue into perpetuity. If NSP
were excluded an impairment of approximately £250 million could arise, assuming the network of Post Office's is
not fundamentally altered. This is deemed an unlikely scenario given there is a balance between maintaining the
network and receiving appropriate funding, with the removal / reduction in the latter impacting the former.
Management therefore believes that any reasonable possible change in the key assumptions would not cause the
carrying amount of any CGUs to exceed their recoverable value.
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11. Investments in joint venture
The following entity has been included in the consolidated financial statements using the equity method:
Joint venture
During the current and prior year, the Group's only joint venture investment was a 50% interest (1000 £1 ordinary
A shares) in First Rate Exchange Services Holdings Limited, whose principal activity is the provision of foreign
currency exchange services. First Rate Exchange Services Holdings Limited ("FRESH") is a company registered in
the United Kingdom. The registered address of FRESH is Great West House, Great West Road, Brentford,
Middlesex, TW8 9DF.
The principal activity of FRESH is the supply of foreign currency in the UK, which complements the Group's
operations and contributes to achieving the Group's overall strategy. The principal risks of the Group are disclosed
on pages 53 to 57.
The financial year-end date of FRESH is 31 March. For the purposes of applying the equity method of accounting,
the financial statements of FRESH for the year ended 31 March 2022 have been used; this is considered
appropriate given the proximity of this year-end date to the Group's own year-end date of 27 March 2022.
2022 2021
Joint venture Joint venture
£m £m
Share of net assets
Total net investment at 28 March 2021, 29 March 2020 46 67
Share of post-tax pre dividend profit/(loss) 3 (7)
Dividend - (14)
Total net investment at 27 March 2022, 28 March 2021 49 46
2022 2021
i Joint itt
Share of assets and liabilities: sili oink venture
£m £m
Receivables 218 158
Cash and cash equivalents 11 8
Non-current assets 5 8
Share of gross assets 234 174
Current liabilities (183) (128)
Share of net assets I 51 46
Share of revenue and profit/(loss):
Revenue 34 17
Profit/(loss) after tax 3 (7)
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12. Trade and other receivables ,
2022 2021
£m £m
(Restated)*
Current:
Trade receivables 74 52
Accrued income 61 67
Prepayments 22 18
Client receivables 103 112
Other receivables 14 19
Total 274 268
Non-current:
Accrued income 4 4
Other assets 6 5
Other receivables 1 1
Total 11 I 10
*See note 26 for details regarding the prior year restatement.
The Group receives and disburses cash on behalf of Government agencies and other clients to customers through
its branch network. Amounts owed from and to Government agencies and other clients are disclosed separately
as client receivables (as above) and client payables (see note 14).
£nil (2021: £nil) has been recognised within current prepayments for costs incurred to fulfil contracts. Non-current
other receivables constitute costs incurred to fulfil contracts, in both the current and prior year.
The Group applies IFRS 9 when measuring expected credit losses. The Group has assessed all relevant assets and
concluded that expected credit losses are not material in both the current and prior year, with the exception of
trade receivables. Trade receivables have been grouped based on shared credit risk characteristics and the days
past due to measure the expected credit losses. The loss allowance for the current and prior year has been
determined as follows:
>30 days >60 days
and<60 and <120
dayspast dayspast — >120 days.
27 March 2022 Current due due past due Total
Expected loss rate - % 0% 0% 0% 81%
Gross carrying amount - £m 66 2 1 26 95
Loss allowance - £m I - - : 21 21 I
>30 days >60 days
and<60 and <120
days past days past >120 days
28 March 2021 a due due past due Total
Expected loss rate - % 0% 0% 0% 91%
Gross carrying amount - £m 46 3 1 23 73
Loss allowance - £m - - - 21 21
There is a loss allowance in the current, more than 30 days and more than 60 days ageing categories, however it
is immaterial for disclosure.
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The closing loss allowance for trade receivables as at 27 March 2022 reconciles to the opening loss allowance as
follows:
2022 2021
£m £m
Opening loss allowance 21 20
Increase in loss allowance 5 6
Receivables written off as uncollectible (2) (2)
Unused amounts reversed 3) (3)
Closing loss allowance 21 21
The fair value of trade and other receivables is not materially different from the carrying value.
13. Cash and cash equivalents
2022 2021
£m £m
Cash in the Post Office Limited network 342 354
Short-term bank deposits 13 6
Fiduciary cash balances held on behalf of third parties 12 5
Total cash and cash equivalents 367 365
Cash in the Post Office Limited network represents the notes and coins in circulation in branches and cash centres.
Refer to note 23 for further detail.
Where interest is earned, it is at a floating or short-term fixed rate. The fair value of cash and cash equivalents is
not materially different from the carrying value.
The fiduciary cash balances are held within Post Office Management Services Limited and are held on trust on
behalf of third parties and cannot be called upon should either company become insolvent.
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14. Trade and other payables
2022 2021
£m £m
Current:
Trade payables 70 76
Accruals 106 103
Deferred income 23 9
Social security . 6 8
Client payables 315 288
Lease liabilities 11 12
Capital accruals 10 9
Total 541 I 505
Non-curre!
Lease liabilities 42 39
Other payables EB 4
Total 42 43
The fair value of trade and other payables is not materially different from the carrying value. Trade payables are
unsecured and usually paid within 30 days of recognition.
15. Financial liabilities — interest bearing loans and borrowings
2022 2021
£m £m
Current:
Department for Business, Energy and Industrial Strategy — facility 329 426
Total 329 I 426
Non-current:
Department for Business, Eneray and Industrial Strategy — fixed term loan 52 I -
Total I 52 I -
Department for Business, Energy and Industrial Strategy - facility
The loan under the facility is short dated on a programme of liquidity management and matures within one day of
drawdown (2021: one day). The fair value of borrowings approximates 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. At 27
March 2022 the Group had an unused Working Capital Facility of £621 million (2021: £524 million). In addition,
the Group has a further £50 million facility available from BEIS to provide same-day liquidity. This facility was
undrawn at the year-end. The average interest rate on the drawn down loans is 0.63% (2021: 0.55%). The
Working Capital Facilities were due to expire in March 2022 but were extended in 2020/21 through to March
2024. In July 2022 the £950 million facility was extended further, through to end of March 2025.
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
(excluding shares in FRESH and lease of any property which Post Office Limited is a tenant) and a negative pledge
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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.
Department for Business, Energy and Industrial Strategy — fixed term loan
On 1 April 2021 Post Office Limited received a £52 million loan. Quarterly principal repayments of £1.75 million
are scheduled from the 2023/24 financial year, with a bullet payment of £25.75 million due in March 2027. Interest
of the Central Bank rate plus 0.55% per annum is charged on the loan.
16. Provisions
Postmaster Network
Hss OHC Programmes Property Severance Other_—‘Total
£m £m £m £m £m £m £m £m
At 28 March 2021 150 502 55 21 23 10 13. 778
Charged to investment spend - - - - 3 7 - 10
Charged to exceptional items 39 12 3 . : . - 54
Charged to trading : : - - - - 8 8
Utilisation (7) (6) - (4) (4) (10) (5) (36)
Provisbomsreteasesinemeyear I yg) : - : - (0)
Pinel released in the year . . . - - . ® ©
Impact of discounting - (21) - - - - - (2
At 27 March 2022 172 487 62 15 19 3 10 768
Postmaster Network
HSS OHC Remediation Programmes Property Severance Other Total
£m £m £m £m £m £m £m £m
At 27 March 2022
Current 136 13 30 5 5 3 9 201
Non-current 36 474 32 10 14 - i 567
172 487 62 15 19 3 10 768
At 28 March 2021
Current 6 7 - 9 12 10 10 54
Non-current 144 495 59 12 11 - 3 724
150 502 59 21 23 10 13 778
The Network Programmes provision relates to payments due to Postmasters in relation to the major transformation
programme. Provisions are recognised when either Postmasters agree to terminate their existing contracts, sign the
new format contracts or when there is a legal or constructive obligation under Network Transformation and Post
Office expect a payment to be made.
Property provisions relate to vacant and onerous contracts, and dilapidations. Vacant and onerous contract
provisions are recognised on leasehold properties when the unavoidable costs of meeting the obligations of the
contract exceed the benefits expected to be received under it. However, in accordance with IFRS 16, this only
includes business rates and dilapidations costs.
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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.
Historical Matters related provisions of £721 million includes; £172 million (2021: £150 million) related to the
Historical Shortfall Scheme provision which is management's best estimate of future payments to be made to the
scheme's claimants, £487 million (2021: £502 million) related to the Overturned Historical Convictions provision
which is management's best estimate of potential future payments to be made to claimants who may have / have
had convictions overturned and £62 million (2021: £59 million) related to the Postmaster Remediation provision
which is management's best estimate of future payments to be made to both current and former Postmasters who
did not receive remuneration during periods of suspension. These provisions are subject to significant management
estimation, see the critical accounting estimates section in note 1 for further details.
Other provisions of £10 million (2021: £15 million) includes; £6 million (2021: £11 million) for other network related
provisions and £4 million (2021: £4 million) which sits within the subsidiary Post Office Management Services
Limited and relates to the repayment of commission received in the event of the cancellation of insurance policies.
17. Financial assets and liabilities
a. Financial assets and liabilities by category
The breakdown of the Group's financial instruments at 27 March 2022 and 28 March 2021 is shown below:
2022 2021 (Restated)*
Non - Non -
Current current Total Current current Total
£m £m £m £m £m £m
Financial assets
Trade and other receivables** 191 1 192 183 1 184
Cash and cash equivalents 367 t 367 365 - 365
Financial liabilities
Trade and other payables** (512) (42) (554) (488) (43) (531)
Interest bearing loans (329) (52) (381) (426) - (426)
Net financial liabilities I _ (283) (93) (376) (366) (42) (408)
*See note 26 for details regarding the prior year restatement.
** Excluding non-financial assets and liabilities.
With the exception of cash, all of the Group's financial assets and liabilities are carried at amortised cost.
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 which the
Group would expect to receive upon selling an asset or pay to transfer a liability in a transaction between market
participants at the measurement date.
All of the Group's financial assets and liabilities are considered to be Level 2 in the fair value hierarchy. The nature
of the inputs used in determining the values of the financial assets and liabilities are those other than quoted prices
included within Level 1 that are observable for the asset or liability, either directly (i.e. as prices) or indirectly (i.e.
derived from prices).
The Group has no Level 1 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 and 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.
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Interest rate risk
The Group is exposed to changes in interest rate on floating rate debt, cash deposits, current account balances,
and commission income. Interest rate risk on borrowings is managed through determining the right balance of
fixed and floating debt within the financing structure. In the year, the Group has benefited from a lower rate on
borrowing, but post year-end has agreed to hedge the risk through a fixed rate of borrowing with BEIS.
Foreign currency risk
The Group is exposed to foreign currency risk resulting from balances held to operate foreign currency exchange
services.
The currencies in which these transactions are primarily denominated are US dollar and Euros. 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.
The following table demonstrates the sensitivity of financial instruments to a reasonably possible change in the US.
dollar and Euro exchange rates, assuming they are unhedged and with all other variables held constant, on profit
before tax and equity. The underlying holdings in 2021/22 have remained significantly lower than previous years
due to the COVID-19 pandemic.
Strengthening Effect on Strengthening Effect on
; Effect —_/ (weakening) profit Effect
(weakening) Profit on equity in euro rate before tax on equity
% £m £m % £m &m
Increase / Increase/ _Increase/ Increase / Increase / Increase /
(Decrease) (Decrease) (Decrease) (Decrease) (Decrease) (Decrease)
2022 - : i0 1 1 ° 10 I “at
(10) (1) (4) (10) (a) (2)
2021 10 ri 1 10 Fl FT
(10) () (v) (10) (2) (1)
Credit risk
Credit risk refers to the risk that a counterparty 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 its behalf.
The Group aims to minimise its financial credit risk through the application of risk management policies
approved by the Board. Counterparties are limited to major banks and financial institutions. The policy restricts
the exposure to any one counterparty 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 level of bad debt provision is 3% (2021: 2%) of revenue.
Capital management
The Group's objectives when managing capital (defined as the net of borrowings 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.
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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 reserves to meet operating requirements for at least the next 12 months from the
date of approval of these financial statements. See going concern disclosures in note 1 for more detail.
At 27 March 2022 the Group had an unused working capital facility with BEIS of £621 million (2021: £524 million).
The working capital facility is due to expire in 2025.
In addition to the security interest provided to BEIS in connection with the £950 million Working Capital Facility
(note 15), Post Office Limited has also created a first floating charge over its assets as security for the payment.
and discharge of certain liabilities arising in the normal course of its client-related activity. As at the balance sheet
date the outstanding liabilities amounted to £31 million (2021: £32 million).
The tables below analyses the Group's financial assets and liabilities into relevant maturity groupings based on the
remaining period at the balance sheet date to the contractual maturity date. The amounts disclosed in the table
are the contractual undiscounted cash flows and include interest, where applicable. Balances due within 12 months
equal their carrying balances as the impact of discounting is not significant.
Less than 1 Between
At 27 March 2022
year 1-5 years Over 5 years Total
£m £m £m £m
Financial assets
Trade and other receivables* 191 1 - 192
Cash and cash equivalents 367 - - 367
Financial liabilities
Trade and other payables* (512) (22) (273) (807)
Interest bearing loans (329) (56) - (385)
Net financial liabilities I (283) 7) (273) (633) I
Less than Between
At 28 March 2021 (Restated)**
lyear 1-5 years Over 5 years Total
£m £m £m £m
Financial Assets
Trade and other receivables* 183 1 - 184
Cash and cash equivalents 365 - - 365
Financial Liabilities
Trade and other payables* (488) (22) (241) (751)
Interest bearing loan (426) - - (426)
Total financial liabilities, (366) (21) (241) (628)
* Excluding non-financial assets and liabilities.
**See note 26 for details regarding the prior year restatement.
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18. Retirement benefit surplus
Disclosures in this note reflect the following pension schemes in which Post Office participates:
Name . Eligibility Type
Post Office Pension Plan ("POPP") UK employees Defined contribution
Royal Mail Pension Plan ("RMPP")* UK employees Defined benefit
Royal Mail Senior Executives Pension Plan ("RMSEPP") UK Senior Executives Defined benefit
* The RMPP closed to future accrual on 31 March 2017.
Defined Contribution
The charge in the income statement for the defined contribution scheme (“POPP”) was £13 million (2021: £11
million) and the Group contributions to this scheme were £12 million (2021: £18 million) during the year.
Defined Benefit
There are two defined benefit schemes in which Post Office participates:
the Post Office section of the Royal Mail Pension Plan ("RMPP") which is independent from the Royal
Mail section of the RMPP, and
* a7% share of the Royal Mail Senior Executives Pension Plan (“RMSEPP”). Royal Mail Group Ltd is the
principal employer of RMSEPP and Post Office Limited became a participating employer with effect
from 1 April 2012.
Aseries of changes to RMPP and RMSEPP have taken effect since July 2017.
The changes include the following:
© On 21 March 2017 Post Office executed a Memorandum of Understanding with the Trustee of the
RMPP. This clarified the Trustee's powers to distribute surplus without Post Office's agreement and
Post Office concluded that it no longer had an unconditional right to refund from the Plan. In light of
this, in accordance with IFRIC 14, the RMPP pension surplus was derecognised as at 26 March 2017.
* On 20 July 2017, the Trustee of the RMPP entered into two bulk annuity contracts with Rothesay Life
Plc. These contracts are assets of the Post Office Section of the RMPP that provide incomes closely
matching the benefit payments from the Plan. The largest of the two contracts is in respect of
crystallised benefits and benefits accrued after 31 March 2012. The smaller of the two contracts is in
respect of pre-April 2012 for members in Post Office employment at the time of the bulk annuity
purchase. The bulk annuities cover the vast majority of the Plan benefits, although uninsured liabilities
and costs may arise in relation to increases to the pre-April 2012 benefits arising as a result of certain
salary increases in excess of RPI inflation, deflation risk in relation to Section C members (while they
remain in Post Office employment, the pre-April 2008 gross benefit revalues with RPI on a year-by-
year basis, but revaluation of the deductible is based on cumulative RPI inflation to the date of leaving
service), and operational expenses.
e As noted in the prior year annual report, in January 2020 the Trustee of the Plan wrote to members to
inform them that it intends to convert the larger of the two policies into individual policies outside of
the Plan. This means that each member of the Plan will hold a policy in their own name and the benefits
under those policies will no longer be liabilities of the Plan. The Trustee is continuing to work with
Rothesay Life to implement the transfer to individual policies. To facilitate the transfer into individual
annuity policies the Trustee is continuing to implement a data cleanse exercise, which will result in some
adjustments to individual member benefits. To the extent that the adjustments are known, they have
been reflected in the defined benefit obligation shown in these financial statements.
The disclosures in this note show the value of the assets and liabilities that have been calculated at the balance
sheet date.
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Both RMPP and RMSEPP are funded by the payment of contributions to separate Trust administered funds. It
should be noted that the assumptions used for these pension disclosures are not the same as the assumptions
used for funding the plans.
The latest full actuarial funding valuation of the RMPP was carried out as at 31 March 2018 using the projected
unit method, concluding at a £24 million surplus on a Technical Provisions basis. Valuations are expected to be
carried out triennially, however the next triennial valuation has been delayed and is expected to take place
during 2022/23.
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 Section A members 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.
The latest full actuarial funding valuation for RMSEPP was carried out as at 31 March 2018 using the projected
unit method. For 100% of RMSEPP, the valuation concluded at £49 million surplus (31 March 2015 valuation:
£17 million surplus) on a Technical Provisions basis.
Even though RMSEPP had a funding surplus on a Technical Provisions basis at the date of the latest full
actuarial funding valuation, under the associated Schedule of Contributions, payments of £1 million per annum
have been made. Post Office’s share of these payments is 7% of the total. The payments will continue to 31
March 2025.
The weighted average duration of the Post Office section of the RMPP is around 25 years, and for RMSEPP it
is around 20 years.
The two bulk annuity policies with Rothesay Life provide an income to the Post Office section of the RMPP that
matches the vast majority of the required benefit payments; as shown in the following disclosures, the
estimated value of those policies (on the IAS 19 assumptions as at 27 March 2022) is £309 million (2021: £332
million), compared to the RMPP defined benefit obligation of £320 million (2021: £343 million). The £11 million
(2021: £11 million) difference in these figures is due to small differences between the insured benefits and the
actual benefit obligation.
A bulk annuity policy (with Scottish Widows) is also held by the Trustee of the RMSEPP. As shown in the
following disclosures, the estimated value of that policy, on the IAS 19 assumptions as at 27 March 2022, is
£28 million (2021: £29 million), compared to the RMSEPP defined benefit obligation of £28 million (2021: £29
million).
Therefore, as at 27 March 2022, 97% of the aggregate defined benefit obligation (i.e. £337 million out of the
£348 million) is matched by bulk annuities that provide income matching the required benefit payments. As
such, the majority of the investment and longevity risk associated with Post Office’s obligations in respect of
the defined benefit plans has been removed (noting that the bulk annuity policies are subject to protection from
insurance regulations, including access to the Financial Services Compensation Scheme, in the event of insurer
insolvency). Nevertheless, to the extent that 3% of the defined benefit obligation is not matched by bulk
annuities, some risk remains in respect of that 3%, in particular the risk that members with uninsured benefits
live for longer than expected, the risk that inflation is higher than expected, leading to higher than expected
increases to the uninsured benefits, the risk that the assets in excess of the bulk annuity policies generate poor
investment returns, and the risk that administration expenses are higher than anticipated. However, these risks
are expected to be mitigated by the surplus assets shown in the disclosures (before allowing for the fact that
the RMPP surplus is not recognised on Post Office’s balance sheet due to the Memorandum of Understanding
described above).
The following disclosures relate to the losses/gains and deficit/surplus in respect of Post Office's obligations to
RMPP and RMSEPP:
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a) Major long-term assumptions
The size of the defined benefit obligation shown in the financial statements is materially sensitive to the
assumptions adopted. Small changes in these assumptions could have a significant impact on this value. The
overall income statement charge and past service adjustment in the income statement are also sensitive to the
assumptions adopted. However, the majority of any change in the defined benefit obligation due to changes in
assumptions, will be matched by a corresponding change in the value in the bulk annuity policies (described
above).
The major long-term assumptions in relation to both RMPP and RMSEPP were:
At 27 March 2022 At 28 March 2021
% pa % pa
’ : : 37 34
Increases to benefits that retain a link to pensionable pay
Rate of pension increases - RMPP sections A/B 3.4 24
Rate of pension increases ~ RMPP section C 37 34
Rate of pensions increases - RMSEPP members transferred -
3.4 4
from Section A or B of RMPP
Rate of pension increases - RMSEPP all other members 37 3.4
Rate of increase for deferred pensions 3.4 24
Discount rate 2.8 2.0
Inflation assumption (RPI) - RMPP & RMSEPP. 37 34
Inflation assumption (CP!) - RMPP & RMSEPP 3.4 24
The following table shows the potential impact on the value of Post Office's defined benefit obligation in respect
of RMPP and RMSEPP of changes in key assumptions. As noted above, the bulk annuities held by the
arrangements provide an income that matches the vast majority of the RMPP benefit payments, and a
significant proportion of the RMSEPP benefit payments. Therefore the following changes in the defined benefit
obligation would be largely offset by a corresponding change in the asset values.
2022 2021
£m £m
Changes in RPI and CP inflation of +0.1% pa (8) 8)
Changes in discount rate of +0.1% pa 8 8
Changes in CPI assumptions of +0.1% pa 5 5
An additional one year life expectancy 13 13
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.
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Mortality: The mortality assumptions used to calculate the value of Post Office's defined benefit obligation in
respect of RMPP and RMSEPP are based on the latest self-administered pension scheme (SAPS “S2" series)
mortality tables as shown in the following table:
Base mortality tables 2022 2021
Male members 100% x S2PMA 100% x S2PMA
Male dependants 100% x S2PMA 100% x S2PMA
Female members 100% x S2PFA 100% x S2PFA
Female dependants 100% x S2DFA 100% x S2DFA
c
one CMI 2020 Core
. Projections witha} “
Future improvements Projections with a 1.5%
1.5% pa long-term ‘a long-term trend
trend tax
‘Average expected life expectancy from age 60 2022 2021
For a current 60 year old male RMPP member 27 years 27 years
For a current 60 year old female RMPP member 29 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 31 years 31 years
b) Plans’ assets
The assets in the plans for the Group were:
Sectionalised RMPP Market value 2022 Market value 2021
£m £m
Equities 19 17
Private Equity : 3
Cash and cash equivalents 27 22
Bond/index-linked funds 14 12
Other loan/debt funds 11 14
Bulk annuity policies* 309 332
Fair value of RMPP assets 383 400
Present value of RMPP liabilities (320) (343)
Surplus in plan before asset ceiling adjustment 63 I 57
Less effect of asset ceiling i (63) I (57)
Surplus in plan after asset ceiling adjustment I -I :
* As described above, the Post Office section of the RMPP holds two bulk annuity policies with Rothesay Life Plc. The value ascribed to
the policies has been calculated using the same assumptions as used to calculate the present value of the defined benefit obligation.
7% Share of RMSEPP Market value 2022 Market value 2021
£m £m
Cash and cash equivalents 1 1
Bulk annuity policy* I 28 29
Fair value of share in plan assets for RMSEPP I 29 30
Present value of share in plan liabilities for RMSEPP (28) (29)
Surplus in plan for the share of RMSEPP before tax I 1] 1
Tax effect 1 -I -
Surplus in plan for share of RMSEPP after tax I 1I 1
* RMSEPP holds a bulk annuity policy with Scottish Widows. The value ascribed to this policy has been calculated using the same
assumptions as used to calculate the present value of the defined benefit obligation.
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As described above, no surplus is recognised for RMPP because the Group no longer has an unconditional right
to refund from the Plan. A retirement benefit surplus of £1 million is disclosed on the balance sheet, representing
the surplus in the RMSEPP only.
There is no element of the above present value of liabilities that arises from plans that are wholly unfunded.
Bond/index-linked funds are securities with a quoted price in an active market.
c) Movement in plans’ assets and liabilities
Changes in the fair value of the plans’ assets are analysed as follows:
RMPP Assets ‘Sectionalised RMPP {__ Sectionalised RMPP
2022 2021
£m £m
Assets in sectionalised RMPP at beginning of period 400 349
Contributions paid - =
Finance income 7 6
Actuarial (losses)/gains (18) 52
Benefits paid to members (5) (5)
Administrative expenses (2) (2)
Assets in sectionalised RMPP at end of period 383 400
RMSEPP Assets Share of RMSEPP Share of RMSEPP
2022 2021
£m £m
Share of assets in RMSEPP at beginning of period 30 26
Contributions paid - -
Finance income - -
Actuarial (losses)/gains : 5
Benefits paid to members (1) (1)
Share of assets in RMSEPP at end of period 29 30
Changes in the present value of the defined benefit pension obligations are analysed as follows:
RMPP Liabilities Sectionalised RMPP Sectionalised
2022 RMPP
fm 2021£m
Liabilities in sectionalised RMPP at beginning of period (343) (286)
Past service cost = -
Finance cost (7) (6)
Experience adjustments on liabilities (2) 4
Financial assumption changes 27 (62)
Demographic assumption changes = 2
Benefits paid 5 5
Liabilities in sectionalised RMPP at end of period (320) (343)
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RMSEPP Liabilities Share of RMSEPP I Share of RMSEPP
2022 2021
Share of liabilities in RMSEPP plans at beginning of period (29) (25)
Finance cost : -
Experience adjustments on liabilities - -
Financial assumption changes ; (5)
Demographic assumption changes : -
Benefits paid 1 4
Share of liabilities in RMSEPP at end of period (28) (29)
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 RMPP
RMPP 2022 2021
£m £m
Analysis of amounts recognised in the income statement
Analysis of amounts charged to investments:
Administration expenses incurred 1 2
Loss due to curtailments = .
Total charge to operating profit 1] 2
Analysis of amounts charged/(credited) to net pensions interest:
Interest on plan liabilities 7 6
Interest income on plan assets (7) (6)
Net pensions credit to financing : -
Net charge to the income statement 1] 2
Analysis of amounts recognised in the statement of
comprehensive income
Actual (loss)/return on plan assets (11) 57
Less: expected interest income on plan assets (7) (6)
Actuarial (losses)/gains on assets (all experience adjustments) (18) 51
Actuarial (losses)/gains arising from changes in demographic assumptionsI - 2
Actuarial gains/(losses) arising from changes in financial assumptions 27 (63)
Actuarial (losses)/gains arising from experience adjustments (2) 4
Actuarial gains/(losses) on liabilities 25 I (57)
Effect of the asset ceiling (6) I 6
Total actuarial gains recognised in the statement of fi .
comprehensive income
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d) Recognised charges (continued)
Share of RMSEPP Share of RMSEPP
RMSEPP- 2022 2021
£m £m
Analysis of amounts recognised in the income statement
Analysis of amounts charged/(credited) to net pensions interest: .
Interest on plan liabilities 1 -
Interest income on plan assets () :
Net pensions credit to financing : :
Net charge to the income statement before deduction for tax a ba
Analysis of amounts recognised in the statement of
comprehensive income
Actual return on plan assets (1) (5)
Less: expected interest income on plan assets - :
Actuarial losses on assets (all experience adjustments) (1) (5)
Actuarial gains arising from changes in demographic assumptions - -
Actuarial gains arising from changes in financial assumptions 1 5
Actuarial gains on liabilities 4 5
Total actuarial losses recognised in the statement of
comprehensive income before tax effect
Tax effect
Total actuarial losses recognised in the statement of
comprehensive income after tax effect
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19. Equity
Share capital
2022 2021
£ £
Authorised
Ordinary shares of £1 each 51,000 51,000
Total I 51,000 I 51,000
Allotted and issued and fully paid
Ordinary shares of £1 each 50,005 50,003
Total I 50,005 I 50,003
Share premium
On 7 August 2007 one ordinary share of £1 was issued in return for £313 million cash paid by the Secretary of State
for Business, Enterprise and Regulatory Reform (now known as BEIS). A share premium of £313 million resulted
from this subscription. In April 2008 two ordinary £1 shares were issued in return for £152 million cash paid by the
Secretary of State for Business, Energy and Industrial Strategy. A share premium of £152 million resulted from this
subscription.
On 1 April 2021 one ordinary share of £1 was issued in return for £61 million cash paid by the Secretary of State for
Business, Energy and Industrial Strategy. A share premium of £61 million resulted from this subscription. On 9 March
2022 one ordinary £1 share was issued in return for £64 million cash paid by the Secretary of State for Business,
Energy and Industrial Strategy. A share premium of £64 million resulted from this subscription.
Other reserves
Other reserves of £2 million (2021: £2 million) relates to First Rate Exchange Services Holdings Limited, the joint
venture entity.
20. Commitments, contingent liabilities and contingent assets
Capital commitments contracted for but not yet provided in the financial statements amount to £3 million (2021: £2
million).
Leases
Amounts recognised in the consolidated balance sheet
The balance sheet shows the following amounts relating to leases:
2022 2021
Right-of-use assets ' £m £m
Short leasehold buildings 25 22
Long leasehold buildings 15 15
Equipment 2 1
Vehicles - 1
Total 42 39
Right-of-use assets in the table above are recognised within property, plant and equipment in the balance sheet
and included in the relevant asset class in the property, plant & equipment note (see note 10).
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Lease liabilities 2022 2021
ém £m
Current iy 12
Non-current 42 I 39
Total 33 I 51
Additions to right-of-use assets during the 2021/22 financial year were £17 million (2021: £9 million) and
disposals were £2 million (2021: £14 million).
Amounts recognised in the consolidated income statement
The consolidated income statement shows the following amounts relating to leases:
2022 2021
Depreciation charge of right-of-use assets £m £m
Short leasehold buildings 10 9
Vehicles 1 1
Total 11 10
Interest expense (included in finance cost) 2 2
The total cash outflow for leases in 2021/22 was £13 million (2021: £14 million).
Income from sub-leased right-of-use assets was £3 million (2021: £3 million) in the year and has been recognised
as a credit to costs.
Contingent liabilities
In 2019/20 a contingent liability was disclosed in relation to the Employment Tribunal claim issued on behalf of
a number of Postmasters against Post Office on 14 June 2018, in which they sought to establish that they are
"workers" of Post Office. The matter, originally listed to be heard in June 2021, has now been heard over 4 weeks
at a trial which commenced on 1 February 2022. The parties have been through an extensive case management
process, which involved identifying a small group of 10 “sample cases” whose cases were examined at the trial.
On 14 March 2022 Post Office successfully defended the Employment Tribunal on all counts, resulting in the
likelihood of a possible obligation arising from past events in relation to this matter being considered remote. As
such, and consistent with 2020/21, no contingent liability is disclosed for 2021/22.
Contingent assets F
At the balance sheet date, Government funding of up to £780 million in respect of OHC and £233 million in
respect of HSS has been agreed. However, the contingent asset has not been recognised as a receivable due to
the current significant estimation uncertainty associated with settlement cashflows. The Group will recognise
an asset only when the quantum for each specific claim settlement becomes virtually certain.
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21. Discontinued Operations
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In March 2021 the Group sold its Telecoms operation and this was reported as a discontinued operation. The results
of this operation are disclosed below for the period to the date of disposal in 2021.
2022
£m
2021
im
Revenue
Other operating costs
Depreciation
142
(125)
(6)
Operating profit before investment expenditure
11
Operating investment expenditure
(6)
Operating profit after investment expenditure
5
Taxation
Profit on disposal of discontinued operation
53
Profit for the year from discontinued operation
58
Net cash inflow from operating activities
Net cash inflow from investing activities
8
57
Net increase in cash generated by discontinued operations
65
In 2021, as at the date of sale, the carrying value of assets totalled £27 million, consisting of fixed assets of £8 million,
trade receivables of £8 million, prepayments of £8 million and other assets of £3 million. The carrying value of
liabilities as at the date of sale totalled £21 million, consisting of accruals of £8 million, deferred income of £9 million
and other liabilities of £4 million. The consideration received in respect of the sale was £65 million. The profit on
disposal, after deduction of costs of £6 million, was £53 million.
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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 United Kingdom 50 Foreign currency exchange
Holdings Limited
All shareholdings are equity shares. Summarised financial information for the joint venture is included in note 11.
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 / Amounts owed from Amounts owed to
related recharges from related party including __related party including
party related party outstanding loans outstanding loans
2022 2021 2022 2021 2022 2021 2022 2021
£m £m £m £m £m £m £m £m
First Rate Exchange
Services Holdings
Limited 26 23 44 24 2 1 6 -
The sales to and purchases from related parties are made at normal 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.
The Group trades with numerous Government (UK Government) bodies on an arm's length basis, such as the DWP,
the DVLA and the Home Office. The Group takes the exemption available to Government controlled entities not to
disclose transactions with other entities controlled by Government, or where Government has significant influence
over that entity.
Separately, the Group discloses significant transactions with Government related entities:
The Group has certain loan facilities of £1,000 million (2021: £1,000 million) with Government (page 82). This is
made up of the £950 million (2021: £950 million) working capital facility and the £50 million (2021: £50 million)
same day facility.
. The Group has received funding for exceptional items from Government of £6 million (2021: £nil restated), all
of which is recognised through the income statement and shown in note 4.
. The Group has received the Network Subsidy Payment of £50 million (2021: £50 million) from Government
(page 82).
Key management personnel comprises the Executive and Non-Executive Directors of the Post Office Limited Board
at 27 March 2022. The remuneration of the key management personnel of the Post Office Group is disclosed in the
Remuneration Committee Chairman's Statement on pages 37 to 46.
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23. Membership of the Bank of England’s Note Circulation Scheme
Post Office Limited is a member of the Bank of England ("BOE") Note Circulation Scheme ("NCS") which governs
the custody of BOE notes that are not in issue. The NCS promotes efficiency in the distribution and processing of
notes by allowing approved commercial organisations engaged in the wholesale distribution and processing of
cash, such as the Post Office Limited, to hold notes owned by the BOE.
The continued participation in the NCS ensures that Post Office Limited has an adequate supply of notes to meet
customer demand across its network.
The NCS mechanisms that enable Post Office Limited to hold Bank of England owned notes comprise of two
elements:
Bond Facility Cash ("Bond") - this is cash that is permanently owned by the BOE and is stored in secure vaults at
Post Office Limited cash centres, physically separate from other cash. Post Office Limited buys cash from and sells
cash to the Bond.
Note Recirculation Facility Cash ("NRF") - this is cash that is held securely, either in Post Office NCS cash centres
or in the branch network and that is sold to the BOE at the end of each day with a commitment from Post Office
Limited to buy it back the next morning. In order to sell notes in this way to the BOE, Post Office Limited must
ensure that gilts are lodged each night as collateral. Post Office Limited's ability to sell notes to the BOE under the
NRF is constrained by:
a) The amount of eligible notes available for sale.
b) The collateral available.
c) An annual limit imposed by the BOE dependent upon the volume of notes sorted and issued from Post Office
cash centres.
During the prior year, BOE relaxed one of its rules over the use of the NRF. The change allows Post Office Limited
to over-borrow against the annual limit historically imposed but retains the daily facility limit. The impact is that
Post Office Limited can borrow more against NRF and reduce borrowings on the working capital facility. BOE
confirmed that at least six months’ notice would be given before this amendment is reversed or revised.
In order to support its participation in the NCS, Post Office Limited has bank facilities of up to £350 million in place
("Facilities"), comprising:
a) An overnight collateral facility.
b) An intra-day overdraft facility.
The Facilities may be cancelled by the lender with 60 days’ notice.
As at 27 March 2022 £322 million (2021: £240 million) of NRF was held in this way and has not been recognised
in the balance sheet.
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24. Alternative performance measures
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An alternative performance measure is a financial measure of historical or future financial performance, position or
cash flows of the Group which is not a measure defined or specified in IFRS.
Trading profit
Trading profit is one of the Group's key financial. measures in the view of the Directors as it shows the underlying
performance of the Group. It is calculated by taking operating loss before depreciation, amortisation, impairment,
exceptional items, investments, Network Subsidy Payment and profit on disposal of discontinued operations. The
table below summarises the calculation of operating loss before exceptional items, trading profit including Network
Subsidy Payment and trading profit. -
2022 2021
£m £m
(Restated)*
Operating loss in respect of continuing operations (124) (713)
Operating profit in respect of discontinued operation a 5
Adjusted for:
Exceptional items (note 4) 90 626
Funding for exceptional items (note 4) 6) -
Operating loss before exceptional items (40) I (82)
Depreciation and amortisation (notes 9 and 10) 104 124
Investment spend (excluding interest) (notes 5 and 21) 28 43
Trading profit including Network Subsidy Payment (adjusted EBITDA) 92 I 85
Network Subsidy Payment (50) I (50)
Trading profit (EBITDAS) 42 { 35
*See note 26 for details regarding the prior year restatement.
Net debt
Net debt is an alternative performance measure disclosed in the financial statements and has been reconciled
in note 25.
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25. Cash flow information
The consolidated statement of cash flows starts at a non-statutory measure, being operating (loss) (before
exceptional items and investments) The table below reconciles (loss) for the financial year to operating loss
(before exceptional items and investments).
2022 2021
£m £m
(Restated)*
Loss for the financial year (130) (661)
Profit on disposal of the Telecoms operation - (53)
Investment spend — continuing operations 28 29
Investment spend — discontinued operation * 6
Impairment of intangible assets od 8
Exceptional items 90 626
Funding for exceptional items (6) 7
Finance costs 7 7
Taxation credit (1) (1)
Operating loss (before exceptional items and investment spend) I (12) (39)
*See note 26 for details regarding the prior year restatement.
Net debt
This section sets out an analysis of net debt and the movements in net debt for each of the periods presented.
Other non-
29March Financing New h 27 March
2021 cash flows leases cas 2022
changes
£m £m Em £m £m
Cash and cash equivalents 365 2 - 367
Borrowings (426) 45 - - (381)
Lease liabilities (51) 13 (17) 2 (53)
30 March Other non- 28 March
2020 Cash flow cash changes 2021
£m £m £m £m
Cash and cash equivalents 462 (97) 365
Borrowings (617) 191 - (426)
Lease liabilities (68) 14 3 (51)
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26. Prior year restatement
During 2021/22, the Directors reassessed the treatment pertaining to the funding by Government of the
liabilities for Historical Matters and concluded that a more appropriate treatment would be to recognise an asset
only when the quantum for each specific claim settlement becomes virtually certain. This is due to the current
significant estimation uncertainty associated with settlement cashflows. As such, in 2021/22, application of
this reassessment has resulted in the previously recognised asset of £64 million being derecognised and the
prior year comparatives being restated. The impact of the restatements on the primary statements has been
outlined below.
As previously stated Adjustment Restated
Consolidated Income Statement
£m £m £m
Funding for exceptional items 64 (64) pa I
Loss before taxation from continuing
(720)
operations (656) (64) ( ) I
Loss for the financial year from continuing
operations (655) (64) (719)
Loss for the financial year (597) (64) (661) I
Consolidated Statement of Comprehensive As previously stated Adjustment Restated
Income £m £m —m
Loss for the financial year from continuing} (655) (64) (719)
operations
Total comprehensive expense for the year (599) (64) (663) I
As previously stated Adjustment Restated
Consolidated Balance Sheet ,
£m £m m
Trade and other receivables I 74 (64) 10 I
Total non-current assets I 461 (64) 397 I
Total assets I 1,096 (64) 1,032 I
Net liabilities I (656) (64) (720) I
Total equity I (656) (64) (720) I
27. Post balance sheet events
The Directors would like to draw attention to the following post balance sheet events:
Funding receipts
Between the balance sheet date and the date of signing these financial statements Post Office has received
payments from BEIS in relation to Network Subsidy Payments and Investment funding. £25 million has been
received in respect of Network Subsidy Payments and £37.5 million in relation to investment funding. This is in
line with the agreements in place.
Extension to the working capital facility
On 8 July 2022 BEIS and Post Office Limited signed an agreement to extend the £950 million working capital
facility through to 31 March 2025.
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28. Ultimate controlling party
The Secretary of State for BEIS holds a special share in Post Office Limited and the rights attached to that
special share are enshrined within Post Office Limited Articles of Association. BEIS, through UK Government
Investments Limited ("UKGI"), has no day to day involvement in the operations of Post Office Limited or in the
management of its branch network and staff. As such, at 27 March 2022, the Directors regarded Post Office
Limited as the immediate and ultimate parent Company. BEIS is the ultimate controlling party.
The smallest and largest Group to consolidate the results of the Company is Post Office Limited, a company
registered in the United Kingdom. Post Office Limited financial statements can be obtained from Finsbury Dials,
20 Finsbury Street, EC2Y 9AQ.
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Post Office Limited
Company Financial
Statements
2021/22
Post Office Limited
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Company balance sheet
at 27 March 2022 and 28 March 2021
2022 2021
£m £m
Note (Restated)*
Non-current assets
Intangible assets 3 128 137
Property, plant and equipment 4 125 146
Investment in subsidiaries 5 43 48
Investments in joint venture 6 49 46
Retirement benefit surplus 12 1 1
Trade and other receivables 7 4 5
Total non-current assets 350 383
Current assets
Inventories 1, 2
Trade and other receivables 7 274 274
Cash and cash equivalents 8 346 352
Total current assets 621 628
Total assets 971 1,011
Current liabilities
Trade and other payables 9 (520) (490)
Financial liabilities - interest bearing loans and borrowings 10 (329) (426)
Provisions rey (199) (50)
Total current liabilities (1,048) (966)
Non-current liabilities
Other payables 9 (42) (42)
Financial liabilities - interest bearing loans and borrowings 10 (52) -
Provisions 11 (566) (724)
Total non-current liabilities (660) (766)
Net liabilities (737) (721)
Equity
Share capital 13 - -
Share premium 13 590 465
Accumulated losses (1,329) (1,188)
Other reserves 13 2 2
Total equity (737) (721)
*See note 17 for detail of which line items have been restated.
The notes on pages 133 to 145 form an integral part of the financial statements. The result dealt with in the financial
statements of the Company amounted to a loss after tax of £142 million (2021: £711 million restated) in respect of
the continuing operations and a profit after tax of fnil (2021: £58 million) in respect of the discontinued operations.
The financial statements on pages 131 to 145 were approved by the Board of Directors on 17 August 2022 and
signed on its behalf b’
Chief Executive Officer
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Company statement of changes in equity
for the 52 weeks ended 27 March 2022 and 52 weeks ended 28 March 2021
Share Share Accumulated Other Total
Capital Premium losses _ reserves equity
Notes Em > £m £m £m. £m
At 29 March 2021 (Restated)* - 465 (1,188) 2 (721)
Loss for the year - - (142) - (142)
Share issue 13 - 125 - - 125
Re-measurements on defined
benefit surplus - : : : ,
At 27 March 2022 I - 590 (1,329) 2 (737) I
Share Share Accumulated Other Total
capital Premium losses _ reserves equity
Notes £m £m £m £m £m
At 30 March 2020 - 465 (535) 4 (66)
Loss for the year (Restated) 17 - - (653) - (653)
Loss on cash flow hedges : - - (2) (2)
At 28 March 2021 (Restated)* : 465 (1,188) 2 (721)
*See note 17 for detail of which line items have been restated.
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Notes to the financial statements
1. Accounting Policies
The accounting policies which follow, set out those which apply in preparing the Company financial statements
for the 52 week period ended 27 March 2022.
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 27 March 2022 (2021: 52 weeks ended 28 March 2021).
Authorisation of financial statements
The parent Company financial statements of Post Office Limited (the “Company”) for the year ended 27 March
2022 were authorised for issue by the Board of Directors on 17 August 2022 and the balance sheet was signed
‘on the Board's behalf by N Read. Post Office Limited is a company limited by share capital, incorporated and
domiciled in England and Wales. The address of the registered office is given on page 146.
Basis of preparation
These financial statements were prepared in accordance with the Companies Act 2006 as applicable to companies
using Financial Reporting Standard 101 Reduced Disclosure Framework (“FRS” 101). These financial statements
are prepared under the historical cost convention. The financial statements have been prepared in accordance with
the requirements of the Companies Act 2006.
As permitted by Section 408 of the Companies Act 2006 Post Office Limited has not presented its own income
statement.
The results of Post Office Limited are included in the consolidated financial statements of Post Office Limited which
are available from Companies House.
The Company has taken advantage of the following disclosure exemptions under FRS 101:
(a) The requirements of IFRS 7 ‘Financial Instruments: Disclosures’,
(b) The requirements of paragraphs 91-99 of IFRS 13 Fair Value Measurement,
(c) The requirements of paragraphs 10(d), 10(f), 39(c), 40.A and 134-136 of IAS 1 ‘Presentation of Financial
Statements’,
(d) The requirements of IAS 7 ‘Statement of Cash Flow’s,
(e) The requirements of paragraphs 30 and 31 of IAS 8 ‘Accounting Policies, Changes in Accounting
Estimates and Errors’,
(f) The requirements of paragraph 17 of IAS 24 ‘Related Party Disclosures’, and
(g) 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.
Basis of preparation — going concern
After careful consideration of the plans for the coming years, factoring in the continued support of Government,
we are satisfied that the Company (being Post Office Limited) will be able to meet its liabilities as they fall due
for a period of at least 12 months from the date of approval of these financial statements. In assessing the going
concern position, the Board has considered the Company's financial forecasts for a period of 15 months from
the date of approval of these financial statements.
In recent years, the Company has become profitable at a trading level with trading profit peaking in 2019/20. The
subsequent fall in trading profit over recent years is due to the ongoing impact of the COVID-19 pandemic, notably
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on the travel business, rising inflationary pressures on the costs to both the Company and Postmasters and the
removal of the trading profit contribution of the Telecoms business following its sale in 2020/21.
The Government has been providing investment funding, subsidy payments and working capital facilities. Such
funding was steadily declining as the business improved its profitability. It is now of increasing importance again,
partly because of the reduced profitability described above and partly because the Company must fund the very
considerable costs of supporting and enabling compensation and legal justice for wronged Postmasters and Sir
Wyn Williams’ Statutory Inquiry. In addition, the business needs to make ongoing investments, notably replacing
the Horizon IT system. As set out below, compensation for Postmasters is mostly being funded directly by
Government. However, £86 million of the compensation under the HSS must be funded by the Company from
trading profit and the proceeds of the sale of the Telecoms business.
For 2021/22, the Company received £50 million of Network Subsidy Payments and £177 million in funding, made
up of a £125 million equity injection and a £52 million loan. In March 2022 the Government continued to evidence
its support of Post Office by committing to provide £150 million in Network Subsidy Payments and £185 million
in investment funding, to be received as a grant, over the period 2022/23 through to 2024/25. In addition, in July
2022 the Government extended the £950 million working capital facility to 31 March 2025.
Compensation and settlement for Postmasters remains highly material and deeply uncertain. The continued
support of Government is therefore critical in the Directors’ view of the Company's going concern position.
For the specific one-off matters, Government has agreed to provide sufficient financial support to Post Office to
ensure that the HSS can proceed and settlement payments for OHC can be made, with agreed funding in excess
of the current provisions. Funding of up to £233 million has been guaranteed for the HSS provided that the
Government's operational and approval processes are followed and all initial offers are sent out by 31 March 2023.
Funding of up to £780 million has been guaranteed for compensation to Postmasters who were wrongly convicted
of criminal offences or were prosecuted but not convicted and suffered detriment. Discussions are underway on
funding other Postmaster Remediation and the Government has written a letter of comfort stating its intention to
ensure the provision of support, subject to future approval processes.
There is significant estimation uncertainty within the HSS and OHC provision calculations, which are explained
further within note 1 to the Group financial statements. Funding is currently being sought and finalised in relation
to Postmaster Remediation. The funding commitments received provide evidence of continued support from
Government. Further assurances related to unquantified potential cash outflows, such as any possible additional
aspects of Postmaster Remediation, cannot be given as it is not the nature of Government's budget process to
provide guarantees for unquantifiable potential liabilities.
In 2019/20 the Company agreed and subsequently made payment of a full and fina! settlement with the GLO
claimants, thus extinguishing any liabilities which the Company had in respect of the GLO. In March 2022 the
Government announced its intention to provide additional compensation payments to the individual claimants that
formed the GLO. It is clear that Post Office will not be asked to fund this additional compensation. Government's
announcement does not create a liability for the Company.
However, the Government have yet to announce the process through which additional compensation will be paid
to the GLO claimants. Presently, the Company has not been asked by Government to either run or partake in any
such process. When considering the HSS and OHC processes, where compensation is partly funded by
Government, Post Office has been required to oversee and pay for the running costs of the processes. Confirmation
has therefore been sought from Government to provide assurances that if Post Office is requested to partake in or
oversee any such process for GLO claimants then the costs associated will not be borne by the Company. This
assurance has not been forthcoming.
The going concern assessment does not include cashflows associated with Government's intention to provide
additional compensation to GLO claimants, either compensation payments or process running costs. The costs of
any future process are not known. However, there are circumstances where the costs of supporting such a process
could call into question whether the Company can remain in compliance with its borrowing covenants and
therefore remains a going concern. The Directors have assessed that excluding such cashflows from its forecasts
is reasonable on the basis that Post Office has no present liability in respect of GLO claimants and the Government
has provided general assurances about their intentions to continue to support Post Office.
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The Directors have received written assurances from BEIS that they place a high priority on Post Office's ability to
continue delivering vital public services and as such will continue to support the Company. This includes the
intention to provide support if or when required in respect of HSS, OHC and PR to the extent that contractual
support has not already been committed or is not sufficient to cover the eventual costs.
There still remains an element of funding uncertainty, with the existence of some potential future liabilities, which
may or may not have a significant adverse impact on the Company, for which guaranteed funding is not in place.
However, the Directors believe the guarantees and assurances received, when considering the legislated nature
of the Government funding process which creates restrictions on guarantees, provide enough assurances to
evidence Government's continued support should future material liabilities arise in relation to the items highlighted
within these financial statements.
Management has performed a cashflow assessment for a period of 15 months from the date of approval of
these financial statements, factoring in no further funding beyond that noted on the previous page, whilst
assuming any cash outflows arising as a result of potential Postmaster Remediation will be funded by
Government and that there will be no cashflows associated with the GLO claimants and the process which may
ensue. This assessment supports the Directors’ view that the Company can continue to meet its liabilities as
they fall due for the period under review.
The assumption of continued Government support in relation to i) potentially material future cash outflows, which
may or may not arise in respect of HSS and OHC related settlements in excess of amounts already guaranteed by
Government; ii) potential payments to be made for Postmaster Remediation for which Government funding is not
yet guaranteed; and iii) possible future requests by Government resulting in cash outflows for Post Office to meet
compensation payments or process running costs associated with the Government's intention to provide additional
compensation to GLO claimants, which could occur during the going concern period such that Post Office requires
additional support, represent material uncertainties which may cast a significant doubt on the Company's ability
to continue as a going concern. The financial statements do not include adjustments that would result if the
Company were unable to continue as a going concern.
Further details regarding the going concern assessment and the associated significant judgements are included in
note 1 of the Group financial statements.
Accounting policies
The following accounting policies are consistent with those of the Group as detailed in note 1 of the Group financial
statements:
¢ IFRS 9 Financial Instruments.
« IFRS 15 Revenue from Contracts with Customers.
« IFRS 16 Leases.
e Critical accounting estimates and judgements in applying accounting policies.
© Other income.
° Leases.
* Taxation.
e Investments in joint venture.
Property, plant and equipment.
¢ Intangible assets.
«Inventories.
¢ Trade receivables.
«Cash and cash equivalents.
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* Pensions and other post-retirement benefits.
« Foreign currencies.
« Provisions.
« Derivatives and hedging activities.
Accounting policies have been consistently applied to all the years presented, unless otherwise stated
Auditors’ 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). Directors for the
Company are the same as Group.
Investment in subsidiaries
Investment in subsidiaries are carried at cost less accumulated impairment losses.
Amounts owed by group undertakings
Amounts owed by group undertakings are recognised and carried at original transaction value and
subsequently at amortised cost, less any expected credit losses.
Critical accounting estimate:
Key assumptions used in impairment tests for investments in subsidiaries
The Company assesses whether there are any indicators of impairment for investments in subsidiaries at each
reporting date as well as if events or changes in circumstances indicate that the carrying value may be impaired.
Factors considered important that could trigger an impairment review include the following:
. Significant underperformance compared to historical or projected future operating results.
. Significant changes in the manner of use of the acquired assets or the strategy of the overall Company.
. Significant negative micro- or macro-economic trends.
Where appropriate, an impairment loss is recognised in the income statement for the amount by which the carrying
value of the investment exceeds its recoverable amount. The recoverable amount is determined based on value in
use calculations which require the use of assumptions. The calculations use cash flow projections based on four-
year financial forecasts approved by management, factoring in current economic circumstances and challenges
such as the ongoing impact of the COVID-19 pandemic. Where applicable, cash flows beyond this period are
extrapolated using estimated growth rates. Refer to note 4 for the results of the latest impairment tests.
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2. Staff costs and numbers
Employment and related costs were as follows:
2022 2021
People costs (excluding investments): £m £m
Wages and salaries 130 130
Social security costs 4 14
Other pension costs (note 12) 13 di
157 155
Total people costs (excluding investments)
Period end and average employee numbers we
re as follows:
Period end employees
Average employees
{ 2022 I 2021 2022 I 2021
Total employees I 3,275 I 3,331 3.303 I 3,430
Total employee numbers can be categorised as follows:
Period end employees
‘Average monthly employees
2022 2021 2022 2021
Administration 1,258 1,172 1,215 1,131
Directly managed branches ("DMB") 1,242 1,390 1,316 1,491
Supply Chain 775 769 772 792
Network programmes - - 16
Total 3275 3,331 3803 I 3,430
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3. Intangible assets
Other
Software Goodwill _ Intangibles Total
£m £m £m £m
Cost
At 30 March 2020 531 1 6 538
Reclassification (3) - S (3)
Additions 34 - - 34
Disposals (12) () (6) (19)
Adjustments (13) : - (13)
At 28 March 2021 I 537 - - 537 I
Additions \ 43 - - 43
Disposals I (61) - - (61) I
At 27 March 2022 { 519 : - 519 I
Accumulated amortisation and impairment :
At 30 March 2020 354 = 3 357
Amortisation 64 - 3 67
Disposals (10) - (6) (16)
Adjustments (8) - - (8)
‘At 28 March 2021 I 400 = = 4007
Amortisation i 52 - - 52 {
Disposals I (61) - - (61)
At 27 March 2022 I 391 - - 391 I
Net book value : :
At 27 March 2022 i 128 : - 128 ‘
At 28 March 2021 137 - - 137
Included within software in the above table are assets under construction of £61 million (2021: £35 million).
During the current year, reviews of property, plant and equipment and intangible assets took place and resulted in
reclassifications between categories to give a more appropriate representation of the nature of the assets.
Goodwill and intangible assets are tested for impairment annually, or more frequently if events or changes in
circumstances indicate that the carrying value may not be recoverable. Management determined that in relation to
software assets, no impairment charge (2021: £nil) was required during 2021/22.
In the prior the year, the Company revised its accounting policy in relation to configuration, customisation and
access costs incurred in SaaS arrangements, following the IFRS Interpretations Committee agenda decision in
March 2021. The 2020/21 impact of this change in accounting treatment was assessed and was found to be
immaterial, as such this change was accounted for prospectively, resulting in an additional charge of £5 million in
the 2020/21 income statement in respect of brought forward intangible assets. The impact on intangible assets is
shown within adjustments in the above table.
Amortisation rates are disclosed on page 93 within the Group accounting policies note.
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4. Property, plant and equipment
Land and Buildings
Plant Fixtures
Long Short Motor and and
Freehold leasehold leasehold ~—vehicles_-~—s machinery equipment Total
£m £m £m £m £m £m £m
Cost
At 30 March 2020 33 59 55 27 2 841 1,017
Reclassification - 2 1 = - 2 3
Additions 1 - 1 1 - 6 9
Right-of-use additions - 2 7 a - - 9
Disposals (3) (6) (3) (1) - (23) (36)
Right-of-use disposals - (9) (5) e - 2 (14)
At 28 March 2021 31 46 56 27 2 826 988
Reclassification* - (9) 9 e - - -
Additions 1 1 1 - - qt 4
Right-of-use additions - 2 14 7 1 - 17
Disposals (4) (1) (1) (2) - (7) (15)
Right-of-use disposals . (2) - e - - (2)
At 27 March 2022 28 37 79 Os 3 830 1,002
‘Accumulated depreciation and impairment
‘At 30 March 2020 24 7 25 24 1 731 822
Reclassification - : = - - : =
Depreciation 1 2 1 7 : 37 a
Right-of-use asset - . 9 1 . . Py
depreciation
Right-of-use impairment . (2) (1) - - B 3)
reversal
Disposals (3) (4) (3) (1) - (16) (27)
Right-of-use disposals = (1) - - - - (1)
At 28 March 2021, 22 12 31 24 1 752 842
Reclassification* 2 (5) 5 e - - -
Depreciation ft 4 1 - - 30 36
Right-of-use asset - - 10 1 - - 1
depreciation
Disposals (3) - - (2) - (7) (12)
Right-of-use disposals - . - - : - -
At 27 March 2022 i 20 11 47 23 1 775 877 I
Net book value
At27 March 2022 I 8 26 32 2 2 55 25 I
At 28 March 2021 9 34 25 3 1 74 146
“During the current year, reviews of property, plant and equipment and intangible assets took place and resulted in reclassification between
categories to give a more appropriate representation of the nature of the assets.
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Included within fixtures and equipment in the above table are assets under construction of £4 million (2021: £4
million).
Depreciation rates are disclosed on pages 91 and 92 within the Group accounting policies note. No depreciation
is provided on freehold land, which represents £1 million (2021: £1 million) of the total cost of freehold land and
buildings.
Included within the table above are right-of-use assets with a net book value of £42 million (2021: £38 million).
The split between categories has been disclosed in note 20 in the Group financial statements.
During the current year, a review of property, plant and equipment and intangible assets took place and resulted
in reclassifications between categories to give a more appropriate representation of the nature of the assets.
An impairment test was performed during the year. Intangible assets and property, plant and equipment were
tested for impairment by comparing the carrying amount of the Cash Generating Unit ("CGU"), being Post Office
Limited, with the recoverable amount determined from the value in use calculations.
The discounted net cash flows from the value in use calculations were used to determine the recoverable amount
of the CGU identified. Value in use is determined using the net cash inflows from the continued use of the assets
within the CGU over a three-year period and then continued into perpetuity, with no nominal growth rate assumed
outside of this period. A pre-tax discount rate for Post Office Limited of 8.7% (2021: 9.3%) has been used to
discount the forecasted cash flows.
°
A sensitivity analysis has been performed in assessing the value in use of property, plant and equipment and
intangible assets. This was based on changes in key assumptions considered to be possible by management. This
included an increase in the discount rate of up to 12% and a reduction in forecasted cashflows to that of a plausible
downside scenario factoring in key cashflow variables. The sensitivity analysis showed that no impairment would
arise under each scenario assessed. Management therefore believes that any reasonably possible change in the
key assumptions would not cause the carrying amount of the CGU to exceed its carrying value.
5. Investment in subsidiaries
The carrying value of £43 million (2021: £48 million) is made up of two investments in subsidiaries.
The carrying value of the Company's investment in Post Office Management Services Limited is £43 million (2021:
£43 million) - a 100% subsidiary of the Company with 60,000,000 shares at a nominal value of £1 and one share
with a nominal value of £100.
In 2021/22 the investment held by the Company in Payzone Bill Payments Limited, a 100% subsidiary of the
Company with one share at a nominal value of £1, was fully impaired, resulting in a carrying value of fnil at the
balance sheet date. The original carrying value of the investment was £19 million and was impaired by £14 million
in the prior year, resulting in a carrying value of £5 million in 2020/21.
The registered address of both Post Office Management Services Limited and Payzone Bill Payments Limited is
Finsbury Dials, 20 Finsbury Street, EC2Y 9AQ.
6. Investments in joint venture
2022 2021
£m £m
Investment in joint ventures I 49 I 46
During the current and prior year, the Company's only joint venture investment was a 50% interest (1,000 £1
ordinary A shares) in First Rate Exchange Services Holdings Limited with a carrying value of £49 million (2021:
£46 million), whose principal activity is the provision of foreign currency exchange. First Rate Exchange Services
Holdings Limited is a company registered in the United Kingdom. The registered address of First Rate Exchange
Services Holdings Limited is Great West House, Great West Road, Brentford, Middlesex, TW8 9DF.
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7. Trade and other receivables
2022 + 2021
£m £m
(Restated)*
Current:
Trade receivables 67 46
Amounts owed by Group undertakings 16 21
Accrued income 58 63
Prepayments 19 16
Client receivables 103 112
Other receivables 11 16
Total { 274 274
Non-current:
Accrued income 3 4
Other receivables 1 1
Total 4 5
*See note 17 for details regarding the prior year restatement.
The Company applies IFRS 9 when measuring expected credit losses. The Company has assessed all relevant
assets and concluded that expected credit losses are not material in both the current and prior year, with the
exception of trade receivables. Trade receivables have been grouped based on shared credit risk characteristics
and the days past due to measure the expected credit losses. The loss allowance for the current and prior year has
been determined as follows:
>30 days >60 days
and<60 and <120
dayspast dayspast >120 days
27 March 2022 Current due due past due Total
Expected loss rate - % 0% 0% 0% 95%
Gross carrying amount - £m 64 1 1 22 88
Loss allowance - £m - - - 21 21 I
>30 days >60 days
and<60 and <120
dayspast dayspast >120 days.
28 March 2021 Current due due past due tated
Expected loss rate - % 0% 0% 0% 95%
Gross carrying amount - £m 42 2 1 22 67
Loss allowance - £m - - - 21 21
There is a loss allowance in the current, more than 30 days and more than 60 days ageing categories, however it
is immaterial for disclosure.
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8. Cash and cash equivalents
2022 2021
£m £m
Cash in the Post Office Limited network 342 350
Short-term bank deposits . 4 . 2
Total I 346 352
9. Trade and other payables
2022 2021
£m £m
Current:
Trade payables 56 68
Accruals 100 97
Deferred income 22 8
Social security 6 8
Client payables 315 288
Lease liabilities 11 12
Capital payables 10 9
Total { 520 490
Non-current:
Lease liabilities 42 39
Other payables - 3
Total 42 I 42
10. Financial liabilities — interest bearing loans and borrowings
2022 2021
£m £m
Current:
Department for Business, Energy and Industrial Strategy — facility 329 426
Total 329 426
Non-current:
Department for Business, Energy and Industrial Strategy - fixed term loan 52 -
Total 52 -
Details of the financial liabilities are included in note 15 in the Group financial statements.
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11. Provisions
Postmaster N k
HSS OHC Remediation etwork property Severance —«Other--—‘Total
Programmes
£m £m £m £m £m £m fm £m
At 29 March 2021 150 502 59 21 23 10 9 774
Charged to investment spend - - - - 3 7 - 10
Charged to exceptional items 39 12 3 - - - : 54
Charged to trading - - - - - . 4 4
Utilisation 7) (6) - (4) (4) (10) (1) (32)
Provisions released in the year
- z z 2 3) -
~ investment spend 2 a) 4 )
Pr t :
rovisions released in the year 110) . - . . - - (10)
- exceptional items I
Provisions released in the year
-trading - - - - - - (5) (5)
Impact of discounting - (21) - - : - - (21) I
At 27 March 2022 I 172 487 62 15 19 3 i 765 I
Postmaster Network
; wi
eS OHC Remediation porammes Property Severance —«Other. Total
£m im £m £m £m £m £m £m
Disclosed as:
At 27 March 2022 7 1
Current 136 13 30 5 5 3 7 199 I
Non-current 36 474 32 10 14 - - 566 I
172 487 62 15 19 3 7 765 I
At 28 March 2021
Current 6 7 - 9 12 10 6 50
Non-current 144 495 59 12 11 - 3 724
150 502 59 21 23 10 9 «774
Details of the provisions are included in note 16 to the Group financial statements.
12. Retirement benefit surplus
The Company pension’'s disclosure is consistent with the Group disclosure included in note 18 to the Group financial
statements.
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13. Equity
Called up share capital
2022 2021
£ £
Authorised . ta
Ordinary shares of £1 each 51,000 51,000
Total ] 51,000, 51,000
Allotted and issued
Ordinary shares of £1 each 50,005, 50,003
Total I
50,005, 50,003
Share premium
On 7 August 2007 one ordinary share of £1 was issued in return for £313 million cash paid by the Secretary of
State for Business, Energy and Industrial Strategy. A share premium of £313 million resulted from this subscription.
In April 2008 two ordinary £1 shares were issued in return for £152 million cash paid by the Secretary of State for
Business, Energy and Industrial Strategy. A share premium of £152 million resulted from this subscription.
On 1 April 2021 one ordinary share of £1 was issued in return for £61 million cash paid by the Secretary of State
for Business, Energy and Industrial-Strategy. A share premium of £61 million resulted from this subscription. On 9
March 2022 one ordinary £1 share was issued in return for £64 million cash paid by the Secretary of State for
Business, Energy and Industrial Strategy. A share premium of £64 million resulted from this subscription.
Other reserves
Other reserves of £2 million (2021: £2 million) relate to First Rate Exchange Services Holdings Limited, the joint
venture entity.
14. Commitments and contingent liabilities
Details of the Company commitments and Company contingent liabilities are disclosed in note 20 of the Group
financial statements.
15. Related party disclosures
Related parties for Post Office Limited are as per the Group; details of which are disclosed in note 22 of the Group
financial statements. The Directors have taken advantage of the exemption permitted by FRS 101 not to disclose
transactions with wholly owned subsidiaries within the Group.
16. Discontinued operation
Details of the discontinued operation are included in note 21 of the Group financial statements.
17. Prior year restatement
During 2021/22, the Directors reassessed the treatment pertaining to the funding by Government of the
liabilities for Historical Matters and concluded that a more appropriate treatment would be to recognise an asset
only when the quantum for each specific claim settlement becomes virtually certain. This is due to the current
significant estimation uncertainty associated with settlement cashflows. As such, in 2021/22, application of
this assessment has resulted in the previously recognised asset of £64 million being derecognised and the prior
year comparatives being restated. The impact of the restatements on the primary statements has been outlined
below.
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As previously stated Adjustment Restated
Company Income Statement A P A
m m m
Funding for exceptional items I 64 (64) - I
Loss for the financial year from continuing (647) (64) (711)
operations Hl
Loss for the financial year I (589) (64) (653) I
As previously stated Adjustment Restated
Company Statement of Comprehensive Income p e Z
‘m m m
Loss for the financial year from continuing (647) (64) (711)
operations
Total comprehensive expense forthe year I (591) (64) (655) I
As previously stated Adjustment Restated
Company Balance Sheet . « ¢
m m m
Trade and other receivables I 69 (64) 5 I
Total non-current assets I 447 (64) 383 I
Total assets I 1,075 (64) 1,011 I
Net liabilities I (657) (64) (721) I
Total equity I (657) (64) (721) I
18. Post balance sheet events
Details of post balance sheet events are included in note 27 to the Group financial statements.
19. Ultimate controlling party
The Secretary of State for BEIS holds a special share in Post Office Limited and the rights attached to that special
share are enshrined within Post Office Limited Articles of Association. BEIS, through UK Government Investments.
Limited ("UKGI"), has no day to day involvement in the operations of Post Office Limited or in the management of
its branch network and staff. As such, at 27 March 2022, the Directors regarded Post Office Limited as the
immediate and ultimate parent Company. BEIS is the ultimate controlling party.
The largest and smallest Group to consolidate the results of the Company is Post Office Limited, a company
registered in the United Kingdom. Post Office Limited financial statements can be obtained from Finsbury Dials, 20
Finsbury Street, EC2Y 9AQ.
Post Office Limited corporate.postoffice.co.uk I Page 145,
Corporate information
Registered Office
Post Office Limited
Finsbury Dials
20 Finsbury Street
London
EC2Y 9AQ
Independent Auditors
PricewaterhouseCoopers LLP
Central Square
29 Wellington Street
Leeds
LS1 4DL
Post Office Limited
Actuary
Towers Watson Limited
Watson House
London Road
Reigate
Surrey
RH2 9PQ
Solicitor
Linklaters LLP
One Silk Street
London
EC2Y 8HQ
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