RESTRICTED: COMMERCIAL AND MANAGEMENT
NOT TO BE CIRCULATED OUTSIDE OF INVESTMENT REVIEW
COMMITTEE
Post Office Quarterly Review
4:30pm, 13 August 2012
Attendees:
Anthony Odgers
Craig Lester
Will Gibson
Mark Russell
Roger Lowe
Tim Mcinnes
Emily Cloke
Lauren Spurr (minutes)
Issues discussed:
1.
Bank of Ireland contract: A joint venture was in place between Post
Office Limited (“POL”) and the Bank of Ireland, which was due to
terminate in 2020. Certain aspects have been renegotiated, with the
existing JV structure collapsed into a bilateral contractual relationship.
New terms include an extension of the contract life by 3 years and an
increase in commission rates accruing to POL. In addition, enhanced
termination rights were renegotiated allowing POL to terminate if Bank
of Ireland capital ratios fall below a certain percentage.
Approximately £5m of incremental income generated would be
invested by POL in staff training (e.g. compliance) and enhanced
selling capabilities.
ShEx is supporting POL to strengthen its engagement with HM
Treasury, the FSA and the Bank of Ireland in relation to financial
services activities, and a dialogue has commenced.
Government Services: It was explained that one of the biggest risks to
achieving POL’s business plan would be delivering the required growth
in Government Services revenue. It was intended that before
2014/2015, POL would generate £100m of new revenue from
government services. POL’s tender for the DVLA contract was
discussed, and the impact this could have on POL’s pipeline and
ability to successfully bid for future contracts. The successful bidder
would be notified in mid September (though the formal announcement
would not take place until October due to a 2-week “cooling-off
period”). If POL was not awarded the DVLA contract, POL
management were looking at other options to mitigate risk to the plan
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(for example, implementing a redundancy programme, and more
aggressive re-franchising)._
The ShEx team had regular meetings with management set up to
discuss the pipeline of potential opportunities in relation to government
services. The weighted pipeline of opportunities was c.£250m. The
business development function is managed by Richard Guttsall, the
sales director for Government Services, who is supported by a team of
newly appointed relationship managers and proposition developers.
It was noted that the board could develop its expertise in strategic
marketing to further develop opportunities in government services and
it was queried whether a new NED could be appointed with skills in
this area. A sub-group of the board to focus on government services
would also be beneficial.
. Board: The ShEx representative, Susannah Storey, has noted that she
is gaining traction with other directors and that the board is generally
running well. Capability in certain areas could be enhanced.
The senior management team was good at defending revenues and
managing costs. Delivery of future revenue milestones would indicate
the ability of the executive team.
. Crown strategy: POL has moved from a strategy of managing a
declining business to a growth strategy. By March 2015, the aim is to
eliminate £40m of losses across 5 key pillars. Savings are likely to
come from employee efficiencies and redundancies, a property
“bottom-up” review and from franchising. It was noted that out of 373
Crown properties, there might be 50-70 opportunities for franchising.
. Other commercial developments: A key element of POL’s network
transformation programme is extending opening hours. The prospect
of extending hours was a non-negotiable for branches as this was a
term of their contract. It was noted that opening hours in many
branches were not currently commercial, as some close at midday
during the week.
Mutualisation was discussed. POL will take the lead on coordination
and in assessing options, with ShEx closely involved. The work is at an
early stage, and the stakeholder engagement process will begin in
September, to define the “public benefit purpose” of the Post Office. It
was noted that the workstreams should include defining what the
stakeholders will be members of and who the stakeholders will be.
Further ShEx resource may be required to assist POL. Existing
legislation would allow POL to mutualise. It was agreed that
mutualisation would be discussed in greater depth at the next POL
review.
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Actions for the ShEx team:
6. At the next POL review, items for further discussion include the
financial figures, KPIs, the pipeline and remuneration. The ShEx team
will also provide:
e Figures around size of potential liability of Bank of Ireland
contract.
e Any further information arising in relation to potential
mutualisation.
An ExCo discussion on POL over the next two-three months would
also be beneficial.