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POST OFFICE LIMITED BOARD MEETING
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MINUTES OF AN ADDITIONAL MEETING OF THE BOARD OF DIRECTORS OF POST OFFICE LIMITED HELD ON
THURSDAY 9 MARCH 2023 AT 20 FINSBURY STREET, LONDON EC2Y 9AQ AT 09:30 AM?
Present: Henry Staunton Chairman (Chairman)
Tom Cooper Non-Executive Director (TC)
Zarin Patel Senior Independent Director (ZP)
Lisa Harrington Non-Executive Director (LH)
Saf Ismail Non-Executive Director (SI)
Elliot Jacobs Non-Executive Director (EJ) (via Teams)
Nick Read Group Chief Executive Officer (NR)
Alisdair Cameron Group Chief Finance Officer (AC)
In attendance: Rachel Scarrabelotti Company Secretary (RS)
Lorna Gratton UKGI - Observer (LG)
Simon Jeffreys Observer (SJ)
Max Jacobi Finance Director - Commercial (MJ)
Tim Mcinnes Strategy and Transformation Director (TM)
Zdravko Mladenov Group Chief Digital and Information Officer (ZM)
Liam Carroll Procurement Director (LC)
Apologies: Ben Tidswell Non-Executive Director
Brian Gaunt Non-Executive Director
Action
1. Welcome and Conflicts of Interest, Inquiry Undertakings and Officer Changes
Welcome and Conflicts of Interest
A quorum being present, the Chairman opened the meeting. The Chairman called for the
Directors to disclose any conflicts of interest. ZP noted that she was appointed as a non-
executive director of the HM Treasury board. EJ reminded the Board of his conflict as a
Postmaster and referenced Postmaster remuneration matters that were contained in the
draft 3YP. SI noted this conflict also. The other 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.
The Board acknowledged the attendance of LG and SJ as observers at the meeting. As
observers, the Board was aware that all contributions made by LG and SJ to the meeting
were observations only, and did not constitute advice, recommendations, directions or
instructions. The Board confirmed that it would take due care not to be unduly influenced
solely by a contribution made by LG or SJ and that it would reach its conclusion based on a
balanced and diligent assessment of all the facts available to it.
Inquiry Undertakings
The Board noted that SJ, LG, MJ and LC did not have confidentiality undertakings to the
Inquiry in place, and that these individuals would need to be excused from the meeting
should the need to discuss information confidential to the Inquiry arise.
1 This meeting is in addition to the scheduled meetings so standard items such as minutes and matters arising
have been carried over to the meeting on 28 March 2023.
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Officer Changes
TABLED and NOTED was a report, ‘Appointments to the Board and Committees’.
The Board RESOLVED to APPROVE:
(i)
(ii)
(iii)
Subject to the conclusion of satisfactory due diligence, the appointment of
Simon Jeffreys as a Non-Executive Director of the Company's Board and Chair
of the Company’s Audit, Risk & Compliance Committee and that the Company
Secretary be instructed to file form AP1 with the Registrar of Companies at the
relevant time;
The appointment of Ben Tidswell as Senior Independent Director of the
Company’s Board, effective from 14 March 2023; and
The appointment of Brian Gaunt to the Company’s Historical Remediation
Committee, effective 14 March 2023.
FY 23/24 Budget and 3YP
TABLED and NOTED were the following papers:
(i)
(ii)
“FY 2023/24 Budget and 3 Year Plan’; and
“FY 2023/24 Budget and 3 Year Plan— Appendices’.
MJ and TM joined the meeting at 9:43.
AC spoke to the papers. Key discussion points were as follows:
AC noted that it was very difficult to forecast mails performance as demonstrated
over the past 3 years. The recent RMG industrial action and cyber incident were
contributing factors. NR advised that the deterioration in the mails business was
not going to be made up by the mails initiatives, and this could be accelerated
given RMG price increases;
AC shared his view that the deterioration in the mails business impacted in an
unacceptable way on Postmaster remuneration. AC queried the minimum amount
of Postmaster remuneration that could be paid in light of the current network
strategy and whether an additional /meaevnrI needed to be requested in the funding
application to the shareholder;
AC spoke to amounts for Postmaster losses, and whether the SLG could be
reduced;
NR detailed fully franchising the DMBs and supply chain. If funding was provided
for these activities they would be undertaken by a ring fenced group, however NR
was concerned as to whether there was capacity to do these activities at the same
time as everything else;
AC referenced moving costs in relation to the Inquiry and the potential savings
that could be achieved if a firm other than HSF were instructed in relation to later
phases;
AC spoke to security headroom and the anticipated breach, which had been
advised to the shareholder. AC detailed the drivers causing security headroom
volatility;
AC shared his view that the Board should recommend a plan to the shareholder
following the Board meeting on 28 March, even if this was subject to the NBIT
costs being concluded;
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ZP noted the issue raised in respect of Postmaster remuneration and requesting
additional funding for this. ZP advised that whilst she was inclined to agree
queried however whether the request would be framed as an increase in subsidy.
NR replied that this is how the request would be characterised;
The way in which the funding request would be considered by HM Treasury was
discussed;
AC noted that the shareholder had indicated that they may have some
underspend this year. LH queried if these additional funds were forthcoming
whether there was direction as to the allocation for these. AC advised that whilst
no direction had been given for these to be applied to anything specific, that it had
been asked that these additional funds not be provided direct to Postmasters. SI
raised the issue of Postmaster remuneration and the need for this to be sufficient.
AC took the point, however shared his view that the issue was partly about
redistributing remuneration to the more commercial branches however this would
mean closing rural branches and this was not likely to be well received politically.
In terms of requesting additional funding for Postmaster remuneration, the
government may point to the network numbers which appeared positive at
present. SI shared his view that an application should be made to the shareholder
in respect of additional Postmaster remuneration, and also in relation to funding
to fully franchise DMBs and supply chain. EJ agreed. TC advised that any request
for shareholder funding for Postmaster remuneration needed to demonstrate how
Postmaster remuneration was being managed in line with the network strategy;
ACTION SI requested further detail on staff cost and also non staff cost increases.
AC spoke to this query and advised that he could take S! through the detail.
ACTION SI queried the benefits from commercial initiatives and advised that
Postmasters were not feeling the impacts of these. MJ replied and advised that
the team could have a session with SI to go through these. In relation to
Postmaster remuneration, SI requested clarity on product set, and suggested that
increases to Postmaster remuneration be linked to products that could make a
significance difference in Postmaster remuneration. SI shared his view that a one
off payment could assist with improving Postmaster morale. AC replied that any
one off payments could be directed at branches that were strategically important,
however which were struggling;
In respect of the funding request to the shareholder, LH raised the importance of
including the alternative option if additional funding was not forthcoming, noting
that the alternative option was not likely to be palatable, particularly ahead of the
next election. NR shared his view that the network requirement number was not
going to be reduced in the next 2 - 3 years. LH replied that this was her point;
something needed to be altered in order for the network number to be viable. ZP
agreed with this approach, and that the downside plan needed to be set out in the
case that additional funding was not forthcoming;
TC noted the proposed increase in head count and queried whether this was
reasonable. AC replied, advising that the additional headcount was predominately
in relation to HMBU, the Inquiry and NBIT. In relation to NBIT, AC noted that the
running of this would be insourced, so we needed to start building up the
capability for this and we needed to do this now. TC took the point, however
referenced the table in the paper where almost every line was proposed to
increase. ACTION AC advised that he was happy to work through the detail with TC AC
ahead of the Board meeting scheduled for 28 March alongside setting out the
detail of how the additional in proposed cost savings identified by the GE
had been worked up;
AC
MJ
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e TC raised the issue of change spend and queried whether we were at risk of regret
spend, and also queried the risk around reductions in NBIT scope. AC replied that
for NBIT there was the risk that employees were recruited for now and we were
delayed. In relation to external partners for delivering NBIT, there would be
flexibility built in. NR contributed that ZM would be able to provide confidence
that there was no regret spend. That said, we would need to take a decision
shortly as to when rollout would commence. ACTION TC noted this, and noted
that the Board could be required to take decisions in relation to NBIT ahead of the
NBIT rollout plan being finalised. TC requested further detail in relation to this,
which AC agreed to provide;
¢ ACTION In relation to the proposed spend on the Inquiry TC advised that he would
like to see further detail. AC noted that this and advised that TC would be briefed
on this;
© ZP queried whether the operational design of HMBU needed to be reviewed again,
given the HMBU was moving into another phase. AC agreed with this, however
thought that the design was correct for what the HMBU had to deliver. AC noted
the possibility of deploying employees from HMBU to NBIT delivery in the future,
given their understanding and familiarity with Post Office.
MJ left the meeting at 11:08. A 10 minute recess followed.
Revised NBIT Forecast
TABLED and NOTED were the following:
(i) ‘Revised NBIT Forecast SPMP/ NBIT financials update’;
(ii) “‘SPMP/ NBIT Board Update’.
ZM joined the meeting at 11:10 and spoke to the SPMP/ NBIT Board Update. Key items
covered included what Horizon was, when it was built, what the application provided and
the rationale for replacing Horizon.
LH queried the length of time to train a Postmaster and Postmaster’s staff on Horizon. SI
replied that it was 6 months. ZM advised that the training for Drop and Collect on NBIT
took 30 minutes; it was a much simpler product. SI contributed that the demonstrations
he had seen were positive. ZP commented that the benefits side of NBIT could be
emphasised further in the funding submission.
ZM spoke to the Revised NBIT Forecast SPMP/ NBIT financials update, detailing the main
drivers of the costs increase. AC noted that the level of assurance being requested from
end to end was such that, if agreed to, the project team would not be able to build at the
same pace as currently, and a conversation on this needed to be had with the shareholder.
ZP emphasised the need to have the right assurance strategy which should focus on
aspects of the project that were particularly risky. ZM noted that a paper on the NBIT
assurance programme was due to come to the 28 March Board. ZP advised that it would
be useful for the Board to understand testing. ZM replied, detailing the system testing and
business acceptance testing.
ZM detailed the cost increases associated with training and rollout, and referenced the
training deep dive presented previously to the Board. AC noted the shift in expectations in
respect of the NBIT training programme for Postmasters: the training needed to be
completed, and the training test undertaken and passed, in order for Postmasters to trade.
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AC
AC
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TC queried the expectations in respect of Postmaster training their staff. ZM replied that
access to the training would be available to all Postmasters and their staff.
ZM outlined the contingency costs currently identified, and advised which items were
included within the contingency and which were not. In terms of further cost increases,
the risk was limited on the technology side, however the team still needed to go through
the assurance exercise.
LH queried whether the Board would reach a point where completing NBIT approximated
an abyss. AC shared his view that the Board would not arrive at a point where they felt
Horizon was no longer going to be replaced, however the Board was reaching a point
where they needed to determine whether completion of the rollout by March 2025 was
viable, and if not, the re-programme then required. LH agreed with this, noting that it
could be the rollout that held up implementation, not the technology. TC and AC
discussed Belfast exit and the previous decisions made by the Board in relation to the
project. ZP cautioned the need to try to learn from the Belfast exit project, and suggested
that management identify a series of go/ no go points in relation to NBIT. LH agreed with
this.
ZP queried whether any of the technical issues identified with NBIT at present were
fundamental. ZM replied that none of the defects the team were experiencing at present
were fundamental to the operation of the system. ACTION ZP requested that NBIT defects
and their magnitude be reported to the Board periodically via dashboard reporting. zM
ZM detailed the business case for replacing Horizon, outlining the options identified and
the cost impact of a delay of 12 months. TC noted the cost impact of delay, and shared his
view that this would increase over time; in addition the business could change
fundamentally during this period as well. EJ contributed that in his view there was no
option to stay on Horizon; technology needed to be built to support the front line of the
business and more automation was required. The Chair noted that all competitors on the
High Street had high levels of automation.
The Chair noted that SI had had sessions in relation to NBIT and queried what his response
had been. SI replied that he and EJ had had a short demonstration of the development
version (pre-R2) of NBIT and that although not all functionality was operational, good
progress was being made and their experience was positive. SI spoke to the simplification
of the system and the ease of training. One of S!’s branches was due to receive NBIT in the
next few months and SI undertook to report back to the Board on his experience. HS
asked EJ to share his view. EJ advised that NBIT was more intuitive and more efficient.
What resonated with EJ particularly was the change to back office systems; EJ reflected on
his experience attending the Inquiry last week and the lack of training provided historically
for Postmasters on back offices processes, the NBIT training approach was very different.
EJ noted that Postmasters would need the helpline to be available outside business hours
to assist Postmasters with balancing on the new system. AC noted this, although thought
that support services would be reduced, as the data would be easier for Postmasters to
access, so it would be create a virtuous cycle. The Chair congratulated ZM on the
comments of SI and EJ.
SI! advised that he was still heavily in favour of customer facing screens being included as
part of NBIT and queried whether there was a way to be more targeted with customer
facing screens, for example, by supplying a restricted number. LH replied that Postmasters
self-funding customer facing screens was another option. AC noted that one of the
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advantages of NBIT was that it was much quicker and cheaper to make changes in the
future; we did not wish to invite delay and change the scope now. SI queried whether
funding for customer facing screens could be applied for as part of our next funding
submission. AC advised that his view was no; funds were being sought for costs over the
next 2 years. NR noted that given the mails strategy there would be multiple choices that
a customer could make, so we could need the customer facing screen at this point. ZP
shared her view that the priority needed to remain to move off Horizon and onto NBIT and
to make the build as risk free as possible; NBIT was a flexible system and in the next few
years the correct network scale might be achieved with accompanying further investment
at the right scale. LH agreed with this.
ZM provided an update on technical delivery, advising that there was significant evidence
that what was being built was fit for purpose. Outside of technology the retail team were
standing up the Retail Transformation Programme. NR detailed the work that had been
undertaken on the rollout plan; it was very technical and complicated. LG queried
whether there was any work that could be undertaken for Postmasters identified as being
potentially difficult, such as training them early. NR advised that this analysis was being
undertaken at present. AC detailed other ‘housekeeping’ activities that were planned
ahead of the NBIT rollout, for example counting cash. TC queried how usable the Horizon
data that existed at the day of transfer to NBIT would be. AC replied that this remained to
be worked through, however in principle we would freeze the Horizon balance, then if
Horizon provided that the Postmaster had a credit with the Company we would repay this,
if there was a significant debt we would notify the police, and if there was a minor debt we
would investigate this. NR noted LG’s question in terms of what we were going to do
about Postmaster losses over the next 12 months, and cautioned that we would need to
be clear on what our rules were at the time of change over.
ACTION SI queried whether, on the day of transitioning to NBIT, if Postmasters could be
delivered fresh stock and cash. ZM advised that this could be considered. AC emphasised
the need to build Postmaster trust in NBIT, and that it was fundamental to commence ona
clean slate with NBIT. SI shared his view, that if NBIT was commenced this way, it would
build Postmaster trust.
Shareholder Funding Request
TABLED and NOTED was a report, ‘DBT Funding Submission Paper’.
NBIT Procurement
TABLED and NOTED was a report, ‘NBIT Engineering Deployment’.
TM left the meeting at 12:43. LC joined the meeting at 12:43 and proceeded to outline the
paper, noting the proposed change to the sourcing strategy. LH noted that two very
different skill sets were proposed in the original sourcing strategy and queried whether by
decoupling these would we end up paying double. AC replied to this. NR noted that there
could be better options to secure an engineering supplier by launching procurement now.
TC queried how the engineering supplier would carry out the service in practice. LC
replied, and detailed the way in which branches had been categorised. TC raised
procurement and delay risks. LC advised that the supplier selected would be incentivised
to work flexibility to minimise any delay costs. SI queried the consequences if the supplier
was late. LC detailed the maximum delay costs that could be imposed, as per the
framework.
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The Board RESOLVED to APPROVE:
(i) the revised sourcing strategy as set out in the paper for selecting a provider to
become the main external engineering partner in the rollout of NBIT with a
contract value up tofi
(ii) the delegation of authority to GE do determine the contract award and to
finalising the terms of contract; and
(iii) any 2 Directors or any Director and the Company Secretary be authorised to
execute the resulting contract and any ancillary documents.
LC and ZM left the meeting at 12:52.
Noting item with no presentation
Peak Trading 2022
TABLED and NOTED were the following papers:
(i) ‘Christmas Peak Trading Report 2022 — Cover Paper’; and
(ii) ‘Christmas Peak Trading Report 2022’.
Any Other Business
The Chair noted that it was ZP’s last Board meeting ahead of stepping down and thanked
ZP for her contribution. ZP replied, and acknowledged the executive leadership of of NR
and AC.
There being no other business the Chairman declared the meeting closed at 12:54.
Date of next scheduled meeting
28 March 2023 13:00 — 17:30.
Chairman
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Voting Results for Board Minutes from 09.03.2023 (approved on 28.03.2023)
The signature vote has been passed. 1 votes are required to pass the vote, of which 0 must be independent.
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Vote Response Count (%)
For 1 (100%)
Against 0 (0%)
Abstained 0 (0%)
Not Cast 0 (0%)
Voter Status
Name Vote Voted On
Staunton, Henry For (04/04/2023 20:54