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POLB(03)3" RMH(03)74x
POLB03/31 to 33
Post Office Limited
(company no. 2154540)
Minutes of the meeting of the Board of Directors
held at 80-86 Old Street, London
on 19" May 2003
Present:
Mike Non-Executive Chairman
Hodgkinson
Alan Barrie Information Technology Director
Peter Corbett Finance Director
John Main Human Resources Director
David Miller Chief Operating Officer
In attendance:
Jonathan Evans Company Secretary
Neil Owen Notes
Jeff Triggs Corporate Lawyer, Slaughter & May
Charles Accounting & Reporting Manager
Colquhoun
Apologies
David Mills Chief Executive
Allan Leighton Chairman, Royal Mail Holdings
Elmar Toime Executive Deputy Chairman, Royal Mail Holdings
Gordon Steele Director Sales & Marketing
WELCOME
The Board welcomed Mike Hodgkinson to his first meeting of
the Post Office Ltd Board.
POLB03/31 GOING CONCERN
(a) __ It was reported that the Board needed to consider whether it
was appropriate for the accounts of the Company for the year
ended 31st March 2003 to be prepared on a going concern
basis. Jeff Triggs of Slaughter and May had been invited to
the meeting to provide external legal advice to the Board on
this subject.
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(b)
(c)
()
(e)
(f)
(g)
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The Board was reminded that the accounts should be
prepared on a going concern basis only if the directors were of
the view that the Company was likely to be able to continue
trading, and to meet its liabilities as they fell due, over the
foreseeable future. Should the Board decide that the going
concern basis was no longer appropriate, adjustments would
need to be made to the Company’s balance sheet to reduce
the value of the assets to their realisable amount, to provide
for any future liabilities that might arise and to reclassify fixed
assets and long term liabilities as current assets and current
liabilities.
In considering what was meant by the foreseeable future it
was reasonable for the Board to have in mind the period up to
March 2006 for which funding commitments had been
obtained. It was necessary for the Board to have some
justifiable faith that appropriate arrangements were being
contemplated which would extend the Company's viability
beyond that date, but it was not necessary to have entered
into binding agreements for committed funding for the longer
term future in order to conclude that the Company was
currently a going concern.
The Board was reminded that the Company had entered into
a Framework Agreement in December, 2002 under which
funding had been agreed by way of:
(i) the writing off of a debt of £464m. owing by the
Company to Royal Mail Group plc (“Mails”);
(i) the provision of Rural Network funding in the amount of
£150m per annum (subject to termination by
Government with effect from March, 2006);
(i) the funding of ongoing projected net cash outflows up
to March 2007 from the section 72 reserve maintained
in Mails’ balance sheet; and
(i) the provision of a long term working capital facility for
funding the cash in the network of outlets following the
withdrawal of pre-funding of benefit payments by the
DWP.
In addition there was produced to the Board a paper setting
out the latest cashflow projections of the company as at 19"
May 2003.
After some discussion the Board agreed that the amount of
funding contemplated under the Framework Agreement would
be sufficient, having regard to the Company’s current cashflow
projections, to enable it to conclude that the Company would
continue to be a going concern for the foreseeable future.
However, it was drawn to the attention of the Board that all of
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POB03/33
(h)
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such funding was conditional on state aids clearance being
given by the European Commission and such clearance had
not yet been given. It was therefore necessary for the Board
to consider not only the amount of the funding but also the
likelihood of that condition being fulfilled. In this regard there
was produced to the Board a copy of a letter dated 1st May
2003 to the directors from the DTI. In the letter, the DTI had:
(i) stated that the relevant members of the DTI were not
aware of any reason why state aids clearance should
not be received by the end of July 2003 (hopefully
sooner);
(i) agreed to extend until 31% July 2003 the arrangements
under which Mails was permitted to advance up to
£365m to the Company by way of temporary funding;
(i) agreed that if state aids clearance were not
forthcoming by 14'" July 2003 the Government would
immediately meet with the Directors to consider a
further extension of that temporary funding; and
(i) agreed that if state aids clearance were refused the
Government would immediately meet with the Directors
to take the most appropriate course of action having
regard to the Directors’ duty to minimise any loss to the
Company’s creditors.
It was reported to the meeting that since the date of that letter,
as a result of recent exchanges between UKRep and the
Commission, state aids clearance was understood likely to be
forthcoming shortly, perhaps as early as the end of the current
month.
Having regard to the letter from the DTI, both as to the
likelihood of state aids clearance being obtained and the
contingency arrangements in the unlikely event of it not being
obtained, the Directors considered that it was appropriate to
prepare the accounts of the Company on a going concern
basis.
It was noted that in relation to previous years’ accounts there
had been no legally binding agreement for the ongoing
funding of the Company. As a result the Directors had
needed to rely on a comfort letter from the Company’s parent
company. Now that the ongoing funding was set out in a
legally binding agreement (the Framework Agreement), it was
considered unnecessary and inappropriate to seek a comfort
letter over and above that legally binding commitment.
STATUTORY ACCOUNTS
Peter Corbett reported to the Board that a number of minor
amendments had been made to the Statutory Accounts since
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(c)
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they had been circulated for consideration in advance of the
Board meeting.
It was further reported to the Board that some minor
adjustments to the statutory accounts were anticipated, but no
material changes were expected.
On the basis of the information before them, and on the
understanding that only insubstantial changes would be made
to the accounts, the Board
(i) approved the accounts;
(i) authorised Mike Hodgkinson, David Mills and Peter
Corbett to make any further minor amendment, and to
sign the accounts on behalf of the Board;
(i) agreed that Peter Corbett would be authorised to sign
the Letter of Representation on behalf of the directors
to the auditors.
The Board further agreed to take legal and Royal Mail
Holdings plc secretarial advice regarding the disclosure and
remuneration of the Post Office Ltd directors within the
Statutory Accounts in subsequent years.
CLOSE
There being no further business, the meeting was closed.
In Strictest Confidence