UKGI00002333 - Post Office Shareholder Team Update - sent from Peter Batten to Jenny Willott and Jo Swinson

Evidence on official site

UKGI00002333
UKGI00002333

OFFICIAL
To: Jenny Willott and Jo Swinson
From: Peter Batten (x0487)
Date: 28 May 2014
Subject: Post Office shareholder team update
Purpose:

An update on progress made against key objectives since December 2013.

Highlights:

Network, agents and staff
Progress continues to be made across the network, with POL meeting interim Network

Transformation targets at financial year end; to pilot a mechanism for removing unviable
subpostmasters (spms); and advancing plans to grow the network through new access points.
They have reached pay agreements with both CWU and Unite without compromising the strategy
to bring the Crown network to break-even.

Financial matters (performance and revenues)

The company missed its 2013/14 revenue targets, but met its operating profit target. The
company is sticking to its 2013 commercial strategy for its 2014/15 budget, forecasting revenues
(exc. subsidy) of £925m, but this remains very challenging, with £60m of risk but only £10m of
opportunities inherent in the figure.

Mutualisation

POL has developed a Public Purpose Statement and a Mutualisation Milestones Document, both
published on 2 May. Progress continues to be made with the underlying mutual ways of working,
although mutualisation itself is still someway off given its dependence on financial sustainability.

Business transformation and senior management matters

POL remains committed to reducing its central costs by 25% by 2020 (as agreed in November
2013) and has appointed David Ryan to lead on this work. An initial review is expected to be
completed by the end of 2014. POL has also moved to address identified weaknesses in its
senior management team, with key appointments in HR, NT and business transformation.

Key on-going risks:

Network, agents and staff
POL missed its 2013/14 financial targets for the Crown network and progress has been slower

than anticipated on developing the Community Branch Fund (opening in May).

Financial matters (performance and revenues)

Revenue growth in 2014/15 is highly dependent on mails, including the successful deployment of
new services (such as Local Collect (Click and Collect)). Uncertainty still remains on the future of
POCA, with discussions between DWP and POL continuing.

Exceptional items

The misalignment of views with the VOA continues, but must come to a decision point shortly.
The Working Group established to consider complaints raised by current and former spms with
respect of the Horizon accounting system has an independent Chair and is beginning to consider
cases, but progress has been slow and POL is seeking assurance on its position. Progress
towards State Aid approval is underway and on track.