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POL00448373
POL00448373
Minutes 8.03.2022 (approved on 07.08.2022)
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
MINUTES OF AN ADDITIONAL MEETING OF THE BOARD OF DIRECTORS OF POST OFFICE LIMITED HELD ON
WEDNESDAY 16 MARCH 2022 AT 20 FINSBURY STREET, LONDON EC2Y 9AQ AT 16:30 PM’?
Present: Tim Parker Chairman (TP)
Tom Cooper Non-Executive Director (TC)
Carla Stent Non-Executive Director (CS)
Zarin Patel Senior Independent Director (ZP)
Saf Ismail Non-Executive Director (SI)
Elliot Jacobs Non-Executive Director (EJ)
Ben Tidswell Non-Executive Director (BT)
Brian Gaunt Non-Executive Director (BG)
Nick Read Group Chief Executive Officer (NR)
Alisdair Cameron Group Chief Finance Officer (AC)
Lisa Harrington Non-Executive Director (LH)
In attendance: Rachel Scarrabelotti Group Company Secretary (RS)
Max Jacobi Strategic Financial Planning and Analysis Director (MJ)
Cathy Mayor Finance Director — Retail (CM)
Kathryn Sherratt Finance Director - Network, Support and Change Finance
(ks)
Tim McInnes Strategy & Transformation Director (TM)
Ben Foat Group General Counsel (BF)
Apologies: None
Action
Welcome and Conflicts of Interest”
A quorum being present, the Chairman opened the meeting.
The Chairman noted TC’s previously declared conflict of interest, as noted in the Company’s
Conflicts of Interest Register, in respect of TC holding office as a director of UKGI. In light of
the subject matter of the meeting, the Chairman proposed that unless there were any
specific queries for TC, that TC should not participate further in the meeting. As there were
no specific queries for TC, TC left the meeting at 16:32PM.
The remaining Directors declared that they had no conflicts of interest in the matters to be
considered at the meeting in accordance with the requirements of section 177 of the
Companies Act 2006 and the Company’s Articles of Association.
Funding Discussion
TABLED and NOTED were the following:
(i) Correspondence from BEIS dated 11 March 2022; and
(ii) A draft report from management titled, ‘POL Funding and Spending Review —
BEIS Updated Offer’ dated March 2022.
1 participation in the meeting was entirely via Microsoft Teams from participants’ personal addresses. In such
circumstances the Company's Articles of Association (Article 64) require that the location of the meeting be
deemed as the chairman’s location. However, it was not deemed appropriate to record personal addresses on
the Company record. As such, the Registered Office is recorded as the meeting location.
2 This meeting is an addition to the scheduled meetings so standard items such as minutes and matters arising
have been carried over to the meeting on 29 March 2022.
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Ad Minutes
8.03.2022 (approved on 07.08.2022)
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
NR advised that he wished to speak to these 2 documents and share with the Board an
update on how management had been working on the proposed funding offer, and how
accepting the offer would potentially affect the Company for the next 3 years.
The Chairman asked for clarification as to whether the Board would be asked to pass any
resolutions on the funding matters to be discussed at the meeting. NR advised that no
Board approvals were to be requested at the meeting and that the purpose of the meeting
was to bring the Board up to date with the latest work the executive had undertaken on the
funding offer.
NR advised that although the figure of £335M was all that was left on the table from a
financial perspective, that there were other items where the Company could look to
negotiate.
NR outlined 3 areas of concern with the funding offer:
1. The implications for access criteria. NR queried whether the proposed funding level
would result in more churn in the business which would make delivering against the
access criteria even more challenging;
2. Security headroom and the risk of default; and
3. The Company's relationship with BEIS on HMU and costs, and whether the Company
could be held accountable for HMU costs, as BEIS control was impacting the
Company's behaviour in this respect.
NR advised that these concerns had been discussed with BEIS and that there may be some
carve outs that the Company could look to achieve.
NR outlined the analysis management was undertaking, to understand what activities the
Company may no longer be able to complete as planned, advising that the funding offer was
simply not sufficient for the Company to complete all projects. NR passed to TM for his
input.
TM advised that the funding offer represented a 33% cut as against the original funding
request, and that some forecasts had increased, particularly HMU. The consequences of this
was that management was really just focusing on the things that the Company needed to
deliver, and not much else. In terms of what the proposed funding would cover — this was
operational costs and keeping the lights on. Discretionary spending would sit outside the
proposed funding. TM shared his view that IT cut backs could increase risk in certain areas,
and that the Company's ability to manage risks that crystallise would be significantly
reduced. Additionally, if an item increased in cost, BECS for example, the Company would
likely have to cut something that could feel very difficult.
On the FD exit AC advised that the Company had to leave FD by June 2023. The proposed
move would likely be to a short term serviced office, with a spend of circa £4-5M on fit out,
working on a minimum amount to effect the move.
SI requested further detail on the proposed asset sales. TM outlined the plan to exit 3 sites.
In relation to SPM, ZP queried whether the Company needed to continue the project at the
same speed as currently, or whether the project could be taken more slowly to achieve
some headroom? ZP also queried what was proposed in terms of pay increases, and
questioned whether the funding previously allocated for Starling could be released now. In
response to the latter question, TM advised that the Company had to consider the
possibility of an appeal, however if no appeal was brought, the previously allocated
components for Starling should be able to come out of the forecast. In respect of ZP’s query
on pay, TM advised that a 3% increase was proposed. On the question of SPM, TM
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responded that although in theory SPM could be spread over a period of time, we needed to
consider the position with Fujitsu, as , if we did need to extend, we could find ourselves in a
position where Fujitsu could have a negotiating advantage over us. NR advised that the GE
had discussed what a one plus one plus one extension would look like and had requested
this option be investigated. AC shared his view that the risk of taking longer on SPM far
outweighed the benefits of easing spend now, and that it would be unlikely that
management would recommend this.
. LH advised that a
slowdown in funding for could result in the need to parallel run 2 x IT stacks for a
longer period. This would be expensive and risky for data integrity.
LH queried whether management had considered the comment in the correspondence from
BEIS around the divestment of PO insurance. NR responded that the comment was in there
requesting the Company to look at the potential sale, and was not part of the settlement. EJ
shared his view that the Company would not likely look on this suggestion favourably, given
PO insurance was a profitable part of the business and the proceeds of the sale would be
repatriated to the shareholder and not kept by the Company.
Sl raised the Belfast exit and asked what needed to be done to stop costs spiralling on this
project. SI advised that personally he was very disappointed with the proposed settlement
and queried how the network could be maintained at this funding level; there simply
needed to be a compromise from somewhere else.
NR turned to look at how the proposed funding could affect initiatives aimed at driving
postmaster profitability, and advised that the commercial team had gone away to undertake
analysis on what could be worked on. The Company needed to make sure there was
sufficient funding allocated for driving the top line for postmasters.
SI asked where the government plans to embark on a review of some parts of the network
was up to. NR replied that the work had been initiated, however the Company had not been
consulted. This was an area NR was keeping a close eye on. SI shared his view that this was
one area that if we kept pushing we could prompt a sensible response. NR advised that
some consultation in the first year around network would be sought.
EJ observed that in looking at support for the network and postmasters, that the Board must
not loose sight of why the post office exists — to provide services on the front line for the
people we serve. EJ further advised that without investment, in things like automation, it
would be increasingly difficult for postmasters to operate.
SI queried whether any savings were anticipated. TM advised that the numbers still needed
to be worked through, however a £15M saving in SPM and a further £15M in HMU could be
possible, with some further savings due to the Starling result. TM further advised that the
numbers for the asset sales were forecast at the lower end — if we achieve the top side — this
would add an additional £5M — £10M. In relation to the asset sales EJ queried whether the
Company had additional surplus property. AC replied that additional property assets were
frequently divested, estimating approximately 2 transactions were completed every week,
however the proceeds of this divestment activity were not a significant part of the budget.
TM asked the Board if there were any further questions. There were no further questions.
TM concluded by advising that management would look to maximise leeway on some of the
various elements and achieve the best possible position on the funding offer.
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Ad Minutes
8.03.2022 (approved on 07.08.2022)
POST OFFICE LIMITED BOARD MEETING
Strictly Confidential
TM further advised that the current funding position would push consideration of the
Annual Report and Accounts out. CS queried the likely timing for having the Annual Report
and Accounts finalised. AC replied that the end of April was now looking likely, although
there was still quite a bit of work to undertake to get to that point including obtaining PwC’s
sign off.
NR advised that the funding offer would be brought to the Board for further consideration
at the Board meeting scheduled for 29" March 2022.
3. Any Other Business
There being no other business the Chairman declared the meeting closed at 17:09PM.
4. Date of next scheduled meeting:
29" March 2022.
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Voting Results for Additional Board Minutes from 16.03.2022 (approved on
07.06.2022)
The signature vote has been passed. 1 votes are required to pass the vote, of which 0 must be independent.
Vote Response Count (%)
For 1 (100%)
Against 0 (0%)
Abstained 0 (0%)
Not Cast 0 (0%)
Voter Status
Name Vote Voted On
Parker, Tim For 16/06/2022 09:39
POL-BSFF-WITN-012-0000009