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Agenda
Post Office Board Agenda
Date: I Tuesday 30 July 2019 Time 12.00-15.15 hrs I Location Hartwell House,
Aylesbury
Present Other Attendees
Tim Parker (Chairman) I ¢ Tim Franklin Veronica Branton © Laurence O'Neill {item 8.)
(Head of Secretariat) {Senior Legal Counsel) (by phone)
* Alisdair Cameron © Carla Stent © Ben Foat (items 6., 7.8. & 9.) = Owen Woodley (items 9. and 10.)
(Interim CEO) (General Counsel) {CEO -FST&l)
© Ken McCall * Tom Cooper © Alan Watts (item 7.) ‘© Chrysanthy Pispinis (item 10.)
(Herbert Smith Freehills) (by phone) (Director — PO Money)
© Amanda Jones (item 7.) ‘© Debbie Smith (item 11.)
(Retail Sales Director) {CEO - Retail)
© Julie Thomas {item 7.) * Andrew Goddard (item 11.)
{Operations Director) (by phone) (MD — Payzone Bills Payments Ltd)
* Kate Emmanuel (item 7.)
(Herbert Smith Freehills) (by phone)
Agenda Item Action Needed Lead Timings
1. I Welcome and Conflicts of Interest Noting Chairman
2. I Minutes of Previous Board meetings including I Approval Chairman/ Veronica
Status Report Branton 12.00 — 12.10 hrs
3. I Report back from Committees (verbal) Noting
- ARC Committee Carla Stent
- Remuneration Committee Ken McCall
4. I CEO Report Noting & Input Al Cameron 12.10 - 12.35 hrs
5. I Finance Al Cameron 12.35 = 13.00 hrs
5.1 Financial Performance Report
5.2 Quarterly Delivery Report and Funding
Request
Noting & Input
Approval for submission
to Shareholder
6. I Annual Report and Accounts 2018/19 AlCameron/ Carla I 13.00 13.15 hrs
Stent
Approval
Ben Foat/ Alan 13.15 — 13.35 hrs
Watts/ Kate
Emmanuel/
Amanda Jones/
Julie Thomas
7. I Group Litigation Update Noting & Input
Lunch 13.35 — 13.50 hrs
8. I Starling (Workers’ rights litigation) Noting & Input Ben Foat/ Laurence I 13.50- 14.10 hrs
O'Neill
9. I Legal Enterprise Optimisation Approval Ben Foat/ Owen 14.10 = 14.30 hrs
Woodley
10.I Bank of Ireland Approval Owen Woodley/ 14.30 = 14.45 hrs
Chrysanthy Pispinis
11.I Payzone Parent Company Guarantee Approval Debbie Smith/ 14.45 = 15.00 hrs
Andrew Goddard
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Agenda
Post Office Board Agenda
12.I Governance items Chairman
- Ratification of the appointment of the Ratification
Chief Executive Officer
- Resignation of Non-Executive Director Noting
- Credit Card contract with Capital One Noting
- Remuneration Committee terms of Approval
reference.
13.I Items for Noting Noting All
13.1 Sealings 15.00 — 15.15 hrs
13.2 Health and Safety Report
13.3 Future Meeting Dates
13.4 Forward Agendas
14.I Any Other Business Noting and Input Chairman
15.I Date of next meeting Noting Chairman
23 September 2019
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MINUTES OF A MEETING OF THE BOARD OF DIRECTORS OF POST OFFICE LIMITED HELD ON TUESDAY 28 MAY 2019 AT
20 FINSBURY STREET, LONDON EC2Y 9AQ AT 11.30 AM
Present: Tim Parker Chairman (TP)
Alisdair Cameron Interim Group Chief Executive Officer (AC)
Ken McCall Senior Independent Director (KM)
Tom Cooper Non-Executive Director (TC)
Tim Franklin Non-Executive Director (TF)
Shirine Khoury-Haq Non-Executive Director (SK-H)
Carla Stent Non-Executive Director (CS)
In attendance: Veronica Branton Head of Secretariat (VB)
Jonathan Lewis Head of Strategy and Corporate Development (JL) (items 5.3 & 5.4)
Ben Foat General Counsel (BF) (item 7.)
Alan Watts Herbert Smith Freehills (AW) (item 7.)
Debbie Smith Chief Executive - Retail (DS) (items 8. & 9.)
Owen Woodley Chief Executive — FST&I (OW) (items 8., 11. & 12.)
Cathy Mayor Finance Director - Retail (CM) (item 8.)
Colin Stuart Finance Director — FS&T (CS) (item 8.)
Emma Springham Chief Marketing Officer (ES) (item 8.)
Mark Siviter MD — Mails & Retail (MS) (item 9.)
Chrysanthy Pispinis Director - PO Money (CP) (item 11.)
Henk Van Hulle Business Innovation Director (HvH) (item 12.)
ACTION
1. Welcome and Conflicts of Interest
A quorum being present, the Chairman opened the meeting. The 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.
2 Appointments
The Board RATIFIED the appointment of Alisdair Cameron as Interim Group Chief Executive Officer with effect
from 5 April 2019.
3. Minutes of Previous Board meetings including Status Report
The Board APPROVED for signature the minutes of the Board meetings held on 19 November 2018, 23 January
2019, 18 March 2019, 20 March 2019, 25 March 2019 and 30 April 2019.
Progress with completion of the actions as shown on the action log was NOTED.
The PCI Compliance Update was NOTED. The paper would be discussed at the Audit, Risk and Compliance
Committee meeting on 29 May 2019.
The paper on the postponement of Belfast Exit Plan was NOTED.
Al Cameron reported that the team were confident that they could switch off one data centre as a test to see
that it would switch over to the second data centre. This test was due to take place over August Bank Holiday.
Failure of both data centres had not occurred at any point during their operation.
The following points were raised:
* it was difficult to correlate the original benefits and the revised position. It would be helpful to Executive
understand the costs associated with the work now needed and how much the refresh would cost. It was
reported that part of the conservations with Fujitsu was how we avoided significant costs during the
deferral period
* that we should check if every component would be shut down as part of August data centre shut down Todo:
test. Executive
4. CEO Report
AC introduced the report and highlighted a number of points:
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* the BEIS Select Committee Inquiry had been a helpful opportunity to present the important messages for
Post Office on issues such as the proposed review of Postmaster remuneration. However, the
environment was testing. There were a number of attacks on the PO brand through the group litigation
and with the Horizon trial about to resume; the Daily Mail campaign to “Save our Post Offices”; continued
opposition in some quarters to franchising DMBs; and, the case brought by 123 Postmasters on
employment rights. We needed to undertake a review of Postmaster remuneration which provided
sustainable solutions. Ideally, an announcement would be made in November 2019 for introduction in
April 2020, however, this might need to be fast-tracked depending on publicity and disquiet surrounding
the Horizon Trial. It was reported that the Minister would welcome us issuing an early a message on our
intentions on agent pay even if this were not for immediate implementation. We needed to maintain a
good relationship with the Minister and try to get more meeting time with her. It was noted that our
positioning needed to be clear. For example, we did not consult on whether or not to close a DMB but on
the service requirements for the new branch. The practical impact of the group litigation on the running
of the network was limited currently. More money would be going to Postmasters in October 2019. The
vast majority of Postmasters were self-employed but we still needed to consider employee status at living
wage level as an option for a small number
© Rob Houghton had accepted another role but would serve his six months’ notice. Mo Kang and Rob
Houghton would be reviewing the position of the team and seeking to build resilience. Shirine Khoury-Haq
would provide suggestions for search agencies. We had returned to the search for an interim Chief Finance
Officer.
A number of points were raised, including
* whether we had considered approaching one the big audit firms to second a CFO?
* whether the Board could provide any additional support to the GE given the degree of change within the
team and while the appointment process for a permanent CEO was in train? It was noted that the Interim
CEO would continue to have regular conversations with his GE colleagues to understand any flight risks.
There had been a fair degree of churn within the team but this was not untypical when compared with
private sector equivalents and the management team was strong. The difficulties in obtaining permission
to recruit and to agree pay arrangements was a constant background noise and we needed to consider
whether anything further could be done to simplify this situation. The Board would continue to signal its
complete support for Al Cameron. Keeping lines of communication open and making people feel part of
the team was always important but especially so currently.
Finance
5.1 Financial Performance Report
P1 had been broadly in line with budget, £1.2m adverse was reported but became £0.3m favourable when
budget timings were corrected.
The report was NOTED.
5.2 Change Funding Report
AC introduced the report and noted that seeking to achieve a further £3m of cost savings might not be the right
approach currently because of the accelerated drive to improve support for agents. A move back to a £74m
cost target was proposed.
Clarity on the benefits to be generated through the development of our digital strategy was requested. This
would be discussed in more depth under the digital update later in the agenda but it was reported that we had
built a digital platform rather than a set of products. We wanted to be sure that we were still on the right track
and prioritising the right investments. The current year investment had been scaled back, not least because we
needed the right data to be able to attract a significant customer base.
The Board:
NOTED the contents of the paper, including the FY19/20 Budget for Change Spend
APPROVED the request for £35m funding for Q1 to be submitted to UKGI; and,
DELEGATED authority to Al Cameron, Interim CEO, to finalise the report and supporting documents with UKGI
5.3 Costs and Structures
AC introduced the paper which set out the overarching approach to reducing organisational costs.
The cost base in 2018/19 was £593m, excluding Postmaster pay but including direct costs of sale. Over 5 years, a
total cost opportunity of £100-£150m across the business was estimated. £80-100m of this was viewed as
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achievable over the next three years, primarily in 2020-21 and 2021-22. Headcount should reduce to less than
2,000 in three years. Work was taking place to flatten structures through the work streams on spans and
controls. More could also be done to reduce IT costs but this would take place over a longer time frame. A
further paper would be presented to the Board in July 2019.
A number of points were raised, including
‘© whether the creation of a Cash Utility could provide the scope to reduce our costs significantly? It was
reported that the number of cash centres would reduce. We were in an active conversations with RBS on
this issue. The Bank of England would be creating a single cash platform over the next three years. A
strategy session on the creation of a Cash utility was on the Board agenda for July 2019
‘* whether 54 people in marketing was a high number? It was reported that this depended on the roles
included in this figure. In POL’s case, this incorporated management of the aggregator campaigns and
search engine optimisation (SEO). All activity in this area was being consolidated under Emma Springham,
the Chief Marketing Officer
© whether we had challenged McKinsey on the figures they had provided and whether they had applied
themselves to strategic organisational changes? It was reported that McKinsey’s remit had been focussed
on the future structural shape of the business
* the Chairman noted that his view coming into the business 4 years ago had been that DMBs were driving
costs; there were unbalanced IT contracts in place; the business was complicated and without critical mass
in some areas; it was generating small profits and had limited scope to increase revenue. To be
commercially sustainable the business needed to become a profitable franchise owner with reduced
infrastructure, a lean Headquarters and a strong field team which had data on what was happening in
branches, which are doing well and which required more support. We needed to leverage the advantages
of our distribution network, the scale of which was not available to other retailers. Nevertheless, we had
achieved positive results within the constraints faced
* that an important focus of the strategy day would be defining what a simplified franchise network looked
like (including whether we should run any branches ourselves) and reaching a conclusion on which parts of
the business we should or should not retain and grow, including Telecoms and Insurance
* being able to analyse branch data and understand what each branch delivered was vital. It was noted that
Postmasters and multiples were not obliged to provide us with their retail figures so not all information was
accessible but that regular visits to branches and better branch data would allow us to build a much better
picture and understand where there were problems
* that we needed to understand agent remuneration in its totality, including the profit margins for the
multiples and some larger POs. We needed to understand the characteristics of a successful Post Office
retailer and help to unlock entrepreneurial potential. We undervalued the franchise currently, except for
the smaller operators, and were not taking sufficient account of the footfall driven into retail outlets running
a Post Office.
The Board NOTED the paper and were supportive of the direction of travel.
5.4 Plan Update
AC introduced the paper and noted, as discussed under the Change Funding Report, that it no longer seemed
appropriate to seek to implement the £3m additional challenge that had been discussed at the Board meeting
‘on 30 April 2019 because of the focus on accelerating support for agents. The plan was in the UKGI/ BEIS review
and approval process. The parameters for the bonus threshold and stretch performance would need to be
discussed at the Remuneration Committee meeting later in the day.
A number of points were raised, including:
© whether the measures we were proposing to support agents addressed the issues that were of greatest
concern to them? It was reported that the changes would enable stock ordering on Horizon and we were
building further capability into Branch Hub. Coin ordering could already be done online. We wanted to
reduce errors in the system because this was beneficial to all parties. We would be gathering more branch
data and sharing that with the branches. We still did not know whether most of the errors were coming
from a small part of the network or not. We were not good enough at getting things right first time and we
not providing enough support for new branches currently. We needed to make it much simpler to run a PO
and Horizon operating on the Postmaster’s till would mark a significant step forward
«whether we were getting enough insight from other franchises? It was reported that we were employing
more people from franchises which was helpful as many networks faced similar challenges; however, we
were different to most franchises in that PO services we usually an adjunct to another service
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‘* it was noted that we needed to think about which services required an individual to go to a physical location
and where that would remain true in 5-10 years’ time as this would affect our acquisition and growth
strategy
* that we should consider reviving the idea of submitting a paper to Cabinet Office exploring the role POL
could play, included with the NHS and in digital identity.
The Board NOTED the paper.
Annual Report and Accounts
AC introduced the paper. PwC's audit was well progressed but determining how to account for the potential
outcomes of the group litigation was complicated. From an accounting perspective, it was difficult not to
include a provision but we had no numbers from the claimants on which to ground such a figure. We were
working closely with PwC and our lawyers to agree an appropriate form of wording.
Impairment tests meant that PO Insurance might not hit its EBITDA figure. The position with Bank of England
deferred income was also being discussed.
A number of points were raised, including:
‘© that PwC had been thorough in their work, including measures such as stock counting in branches, and
fewer adjustments were coming through
© ageneral consistency check was requested because the figures referenced for mails growth differed
the CEO and Chairman's statements needed to be refined.
Todo:
Executive
The Board APPROVED the Annual Report and Accounts 2018/19 and DELEGATED SIGNING AUTHORITY to the
Chairman and Interim CEO, subject to the completion of PwC's work and review by the ARC at its meeting on 29
May 2019.
Group Litigation Update (subject to legal privilege — do not forward)
Alan Watts introduced the paper and he and Ben Foat updated the Board on recent developments. We had 21
days to make an application to the Court of Appeal (CoA) for leave to appeal and would be instructing Helen
Davies, QC, to represent us. HD was highly regarded and experienced in this field. A call and a meeting had
taken place with HD and she had advised that we should not pursue a “recusal light” approach. It was
recommended that we concentrate on the matters of greatest importance to POL, namely, the relational
contract and good faith elements of the Judgment. The grounds for appeal were being revised this week and
would be shorter, pithier and more focussed.
The Managing Judge had decided to award costs on a trial by trial basis. He had reduced the amount POL had to
pay in respect of the claimants’ costs for the Common Issues Trial by 10% to reflect the points on which they
had lost and we would not be paying on an indemnity basis. POL now needed to transfer £5.5m to a solicitor’s
account, which would be payable once the Appeal had concluded. It was reported that the recusal costs were
around £300k'. The Board RESOLVED to authorise the payment of the legal costs associated with the claimants’
costs for the Common Issues Trial and the recusal application.
The Managing Judge had firm views on the case and it was likely to be difficult to move him from that position.
Lord Justice Coulson had deemed Lord Justice Fraser to have been fair minded in his Judgment of the Common
Issues Trial so the terms of the decision refusing permission to seek the Judge’s recusal were not a surprise.
However, the Judge would be able to see our new approach to the case with our new QC. We needed to pay
much more attention to strategy and to tone. It was also noted that implying duties of good faith in quasi
partnerships would cause problems for others as well as PO.
A number of points were raised, including:
‘© what was Helen Davies’ first view of the case? It was reported that her initial view was that we had good
grounds for success on relational and good faith points and on the terms which the Judge had found to be
implied by a duty of good faith. These were points on which the CoA was likely to be interested. HD was
not minded to appeal on all points as some grounds were weaker than others which could tarnish our
stronger points. It was also better to avoid making the grounds too long
© whether there was anything further we could do to influence the outcome of the Horizon trial? It was
reported that Fujitsu’s witnesses had not been strong, while POL’s had been satisfactory. Only the expert
witnesses had yet to provide evidence and it was important that they did not renege on their previous
1 The recusal costs would be circulated. It was noted that a 10% reduction in fee had been obtained from Lord
Grabiner and Lord Neuberger.
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position that Horizon was a robust system. It was critical that Horizon was seen as a robust system today. It
was likely that the expert witnesses would say that the system had bugs. This was not in dispute but the
issue was the degree to which it was a robust system that could be relied upon and that there was nothing
in the Judgment that suggested the system was unfit for purpose today. We had looked at the testing of the
system and what the issues had arisen over the period of time covered by the case
‘* whether there were any case precedents? There were no direct precedents but there were other cases
linked to system failures
* how would the fact that the vast majority of Postmasters had not experienced problems with the Horizon
system be factored into the Judgment? It was thought that this would make it harder for the Managing
Judge to say that there had systemic problems with the system but he could say that each case needed to
be looked at to test whether there had been a system error in that case
‘*aworkshop on the Horizon system was taking place. It was noted that there had been a useful call about
one of the cases and it was helpful to get under the skin of the facts and test what had happened and
whether we had any culpability.
The Board NOTED the paper.
8. Business Performance Reports
8.1 Retail Performance Report
Debbie Smith introduced the report and highlighted a number of points:
‘* the first field sales conference had been a success and there would have been visits made to every branch
by the end of June 2019. The delivery of the network plan was essential to managing the relationships with
PMs, multiples and customers
‘* a hothousing programme had been run in Q4 to test how to improve performance and build capability with
area managers and Postmasters. Coaching had been provided for the Postmaster from a business
perspective and data provided on their branch. The Postmasters were given the authority to take decisions
and make changes based their local knowledge. In addition, a rapid issues team had been set up internally.
A number of points were raised, including:
© whether the hothousing programme was being applied in accordance with a formula? It was reported that
this was the case so that interventions were repeatable and that we were upskilling our field managers
© what impact did the Royal Mail development setting up parcel boxes have on footfall in branch? It was
reported that we had analysed the impact of the RM parcel boxes and thus far it was minimal; however the
RM announcement that it would be moving to picking up parcels from people’s homes in the future was
much more significant. It was reported that RM had struggled to launch their on-line app but this only
emphasised the need for us to move quickly to launch our app and that we needed a broader strategic
conversation at a senior level in RM.
‘© that the companies did not appear to be profiting from offering a free returns service. We needed to be Ds/cm
alert to providers bringing in charges and/or changes to their approach. An update on the returns market
was requested for each Retail Performance Report.
‘© why had our performance in International piece dropped by 4.4%? It was reported that there were cheaper Todo:
options internationally than RM. The Board thought this needed to be reflected in our negotiations with Ds/ Ms
RM. If RM was not market competitive and this hit our volumes this was a significant concern. Our sales
should not be declining in the international market.
The Board NOTED the report.
8.2 FST& Performance Report
Owen Woodley introduced the report, which was the first consolidated report including Identity and Digital.
The Bank of Ireland financial products had performed reasonably well during the year but mortgage margins
were slight. We were likely to increase our lending to around half a billion pounds in the next few years. The
Travel Money business remained a concern in light of the overall position in the travel market. We were about
to sign a deal with Western Union on MoneyGram. The Telecoms business was facing a worsening set of
conditions that affected the whole market. We were about to appoint an advisor to value to Telecoms business,
which was now generating an annual profit of £25m rather than £30m, although Fujitsu was still benefiting from
a significant portion of the overall profit available. A number of strategic questions needed to be answered to
decide how to develop the Identity business and all of the strategic questions on Telecoms, Insurance and
Identity needed to be put into appropriate timeframes to maximise the opportunities.
The Board NOTED the report.
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8.3 Marketing Report
Emma Springham introduced the report which would be included with future quarterly business reports.
Accurrent focus was on brand and data. New brand material would be modern in look and feel but we also
needed to work backwards in some cases to refresh leaflets in branch. Discipline and control were required to
achieve consistency and ES had the right of veto and governance and guidelines were being put in place. We
needed to choose the right partners for our brand and take opportunities to use our partners’ data. We were
working to have a data strategy in place within the next six months. Social media had moved into ES’s team.
Postmasters need our support, guidance and tools to assist them when engaging with social media.
Brand strategy work continued. Everything had to link together and flow. Getting this positioning right was
fundamental as we moved from products to propositions, set out our brand values and established the pillars
behind our propositions, The theme we kept returning to was community.
We had split out the marketing and digital functions but ES and Henk Van Hulle worked closely together and had
aligned incentives.
A number of points were raised, including
‘© what shape was our data in and what were we doing to improve it? It was reported that we had a marketing
database but did not have any feeds coming in. We were working on getting the data into the right format
but needed to optimise it. We were not currently discussing use of partner data with our partners but were
considering recruiting a role to support this work. The best way of managing data and whether this should
be in-house or drawing on external expertise was discussed. We needed to work out what data was most
important to us and store that internally. At the moment we did not employ data scientists but it was noted
that if we were to we needed to be able manage and retain them and needed individuals who could
commercialise the data not just cleanse and manage it.
The Board NOTED the report.
Royal Mail Group Negotiations
Mark Siviter introduced the paper. We had received a commercial offer from Royal Mail and expected to receive
a draft Heads of Terms this week. We were aiming to finalise the agreement in October 2019. Anew long-term
agreement would lift exclusivity but it was unlikely that RM would seek to direct mail volumes elsewhere and
the commercial framework would afford us some degree of protection. Lifting exclusivity would give us
flexibility in areas such as online provision which would enable us to provide the right services for our
customers. We did not have commitments to RM in the Payzone network so could consider alternative
opportunities.
A number of points were raised, including:
© whether we could make a deal with another provider such as DHL to allow them to use our network,
including the Payzone network? It was reported that most of the volume in the UK mail market remained
letters and parcel providers had invested significantly in their infrastructure, where there were significant
cost pressures. It was noted that RM could also offer parcel drop offs to other places
© the sticking points for the contract negotiations were that we wanted to retain an element of fixed fee and
RM wished to pay less overall - how big was the gap? It was reported that RM wished to pay £40-50 m less
than they were today.
The Board NOTED the paper.
Strategic Development
The proposals for the Board Strategy sessions in July 2019 were NOTED.
Bank of Ireland Deal
Owen Woodley and Chrysanthy Pispinis introduced the paper. We anticipated the contract running longer than
5 years and were holding firm on removal of exclusivity in the areas where this had been negotiated. There was
pressure on Bank of Ireland to conclude the negotiations. We had hoped to have signed the credit card deal by
now but were working through the final details.
Our ability to run multiple Appointed Representative (AR) arrangements and the accountability and regulatory
implications associated with this was discussed. Three AR arrangements was seen as the maximum we should
contemplate but we were planning to set up a Financial Services subsidiary through the work on Legal
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Enterprise Optimisation (LEO). It should then be straight forward to novate the agreements with CapOne into a
new FS subsidiary and we had already indicated to CapOne that the AR position might change.
The Board:
NOTED the updates on the Bol negotiations and the new credit card partnership
APPROVED the total spend related to the Bol negotiations of £5.4m, which included the sunk costs detailed in
the paper
DELEGATED AUTHORITY to the Board sub-group for the approval of the signing of the amended FSJVA and FRES
contracts on the basis presented once finalised.
Digital Update
Henk Van Hulle introduced the paper and tabled a number of case studies of work in the digital area, including
the link between digital and branch.
There were currently 326,000 customers on Customer Travel and we were working on search engine
optimisation (SEO) and conversion rate optimisation (CRO), trying to drive the day-to-day digital efficiency of
our business. This included working on how our branches can be discovered via Google searches. “Post Offices
near me” was now the first search result on Google for “Post Office”. We were now working on how to
optimise searches for returns and then wanted to optimise searches for banking services. We would be adding
Payzone Bills Payments to our SEO work. We could see the data behind searches.
We would be working on a value map and putting numbers to this over a three year period. We were also
meeting with external experts to draw on their knowledge and would be bringing the Innovation Hub back to
Finsbury Dials; it would be helpful to have Non-Executive Director input to this from time to time.
A number of points were raised, including:
© that information about PO services and opening hours was not always reliable online - how were we going
to improve this? It was reported that the Branch Hub app would enable Postmasters to undertake tasks
such as re-setting their opening hours which should increase accuracy online
© were we talking to potential partners to enable us to broaden our travel services offer (e.g. airline and hotel
booking agencies)? It was reported that conversations had taken place with Expedia, Booking.com and
Airbnb
* did we understand how we were going to persuade customers to use our services? It was reported that we
were analysing customer trends and behaviours, We also had further work to do on customer
communications in the run up to our first summer season. We wanted more customers to use the app and
link this into travellers and the sites they used but needed the right partners grow our customer base.
The Board NOTED the paper.
Contracts/ approvals
13.1 Home Re-engineering capital deployment
The Board APPROVED the deployment of capital to complete the PO Insurance build of the home insurance
reengineering programme. The total costs of the project were £14.4m (Discovery- £0.9m, Investment-£12m,
BGL Exit costs-£1.5m).
13.2 DMB franchising and Network Development
The Board APPROVED funding of £27.7m in 2019/20 to deliver the DMB programme of 69 targeted exits.
13.3 New Network Location (NNL) activity over the coming year
The Board APPROVED a total investment is £7.56m for 2019/20 to support the delivery of 220 new branches.
Governance Report
The Board:
‘* APPROVED the following DELEGATED AUTHORITIES for financial spend:
Chief Executive Officer (up to £5 million);
Chief Finance Officer (up to £4 million);
Group Executive Members (up to £2 million); and,
Group Executive Members to have authority to sub-delegate up to the limit of their delegated authority.
* APPROVED the list of authorised signatories as set out in appendix 2 of the paper
© APPROVED the affixing of the Company Seal as set out in paragraph 4.5 of the paper
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15.
16.
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POST OFFICE LIMITED BOARD MEETING
Strictly Confidential and Subject to Legal Privilege - DO NOT FORWARD
‘* NOTED the Nominations and Remuneration Committees’ evaluation of performance against their terms of
reference. The ARC would be reviewing its evaluation at its meeting on 29 May 2019
* NOTED the information held on the register of interests
* APPROVED the Conflicts of Interest Policy.
Items for Noting
15.1 Sealings
The Board APPROVED the affixing of the Common Seal of the Company to the documents set out
against items number 1760 to 1781 inclusive in the seal register.
15.2 Health and Safety Report
The Board NOTED the Health and Safety Report.
15.3 Future Meeting Dates
The Board NOTED the future meeting dates.
15.4 Forward Agenda
The Board NOTED the forward agenda.
Date of next meeting
30/31 July 2019.
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anking Framework 2
To include the impact of a drop in banking
transactions in the next Banking Framework
report to Board,
Martin Kearsley
For inclusion in next
Banking Framework
‘report to Board.
guarantee in relation to this. There
is a Payzone Board Strategy session
in September and a Payzone paper
willbe provided for POL Board in
October 2019,
For inclusion in next Banking
Framework report to Board.
REFERENCE ‘ACTION ‘ACTION OWNER (GE) I DUE DATE ‘STATUS ‘OPEN/CLOSED
2. Future of Banking Framework I It would be useful to havea refresher on AIMS] Debbie Smith/ Martin Originally the ATM Strategy was ‘Open
and the history of POca before coming back to Kearsley oma going to form part of the paper on
the Board on our developing strategy on these October 2019 the Future of Cash at the July
Issues, Strategy day. That is no longer the
case but a paper will be brought to
Board in October 2019.
‘Board Strategy Sessions 26 & 27 June 2018
1, Retail Strategy The ATM Strategy should factor in our whole I Debbie Smith Joy2038 Originally the ATM Strategy was ‘Open
Cash Strategy. October 2019 joing to form part of the paper on
(We needed to analyse an Investment in cash the Future of Cash at the July
machines carefully looking at how far we would Strategy day. That is no longer the
‘move to being a cashless society in the next 3-4 case but a paper will be brought to
years). Board in October 2019.
Board Meeting 29 January 2019
6.1 Retail Report Report back on Payzone BP branch performance I Debbie Smith ‘May2039 Update on British Gas contract Open
and how we were driving this after the first 6 Joly 2019 included in CEO report and request
months of trading. October 2019 made for a parent company
Board Meeting 30 April 2019
4. Succession Planning
Strictly Confidential
To provide a grid showing the key roles in the
‘organisation (and which will fink to the future
organisation structure), the “top talent”,
“corporate pillars, who was ready fora bigger
‘Mo Kang
Page 1 of 2
ce
September 2019
To be included on the Board and/ or
NomCo agendas for September
2019.
‘Open
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REFERENCE ‘ACTION ‘ACTION OWNER (GE) I DUE DATE ‘STATUS ‘OPEN/CLOSED
Tole now, who would be ready in 1-3 year time
scale etc. once we had assessed the RAG status
and decided what we needed to do to develop
these individuals
Board Meeting 28 May 2019
3. Minutes of Previous Board I Belfast Exit Plan Update paper: Rob Houghton Juhy2019 “The team is waiting to receive some ‘Open
luding Status Report I - Provide information on the costs associated September 2019 I information on a key part of the
with the work needed now and how much estate (our Oracle database) and
the data centre refresh work would cost. will then be able to understand the
options and associated costs and
timelines for the data centre refresh
work
1 Retail Performance Report To include an update on the returns market in I Debbie Smith/Cathy I September 2019 I Update to be included in the Open
each Retail Performance Report. Mayor September Retail Performance
Report and subsequent reports.
Strictly Confidential
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Tab 4 CEO Report
POST OFFICE LIMITED
THE BOARD OF DIRECTORS DISCUSSION PAPER
LEGALLY PRIVILEGED
Interim CEO Report
Author: Al Cameron Meeting date: 30 July 2019
The wider political, legal and regulatory environment
We appear to be entering a brief period of relative calm with the Horizon verdict, the
right to appeal the first trial and the Select Committee report expected in September.
The case management conference this week has been helpful in making the third trial
potentially less difficult.
A BEIS/Treasury sub-committee is being formed to support the GLO work. We will be
submitting a proposal in August on how much delegated authority we should have for
the Mediation and how any settlement might be paid for.
We did agree to give a public update on the Postmaster Pay review and we are
debating a broader announcement on British Gas and the Banking Framework. We
have started the promised review of the Franchise Consultation process.
Ministerial changes and further Brexit focus are expected, so conversations on POCA
and Identity may stall.
The Board meeting includes sessions on GLO and the employment tribunal case.
Commercial Performance
2018-19
We are holding meetings of the ARC on 23 and 29" July to clear the audit and the
GLO disclosures respectively. Subject to any last minute changes, we made Trading
Profit of £60.3m in 2018-19 compared to a budget of £50m.
Our position on litigation is that we should disclose details of both the GLO and the
employment tribunal case without providing for any future outflows.
2019-20
We ended Q1 with trading profit of £13.9m, £0.4m ahead of plan. On an underlying
basis, we were £0.5m adverse. We have been concerned by a poor travel season with
Brexit and a weak pound undermining demand. This is a national trend.
We are therefore undertaking a formal 3+9 forecast. This is looking ugly, with the
Bank of Ireland calling out further weakness. We may be able to moderate some
downside but I am expecting an unmitigated gap of around £10m. We are
accelerating in year cost reductions in FRES synergies, Insurance, spans and layers,
functional costs and ceasing discretionary spend to bring us back to plan.
On change, the business initially sought additional change spend of £20m while we
agree we are trying to do too much and in fact underspent in Q1 by £7m. While some
of the additional requests are sensible - we need to deliver the British Gas win - it
proves that the new change infrastructure that was built on the back of last year’s
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PAGE 2 OF 6
reviews added process but not cut through. We have therefore recruited a more
senior, tougher Transformation Director in Dan Zinner, reporting to the CEO with the
remit to create a smaller team of stronger people, to challenge robustly at every level
and to revert with a change plan proposal that is less than budget. He has already
largely removed the overspend and we will keep pressing.
We will report to the Board on the outcomes in September. Redundancy processes will
be started as soon as the plans in an area are complete without waiting for a broader
programme. This work is and will remain tied into 3 year cost savings to ensure
smooth delivery.
Delivery
Network
Network numbers decreased by 17 in the month to 11,636. We have also been served
notice that as part of a wider branch closure programme, McColls will shut 17 shops
which have Post Offices. This follows their acquisition of 160 Coop branches last year.
We are already in discussion with 47 potential replacements. Nonetheless, this will
attract the usual criticism of franchising.
We remain on plan to exceed our year end target of 11,600 locations. 28 franchises
have been completed out of 69 expected this year. This is a strong team effort given
rising churn and the public noise about the litigation.
We have now successfully converted 3 small main branches to locals (1 Coop and 2
McColls) and received positive feedback with sales and customer satisfaction
increasing. Both partners have asked us to look at more locations. A further 3
conversions are scheduled during August in Blakemore branches.
Banking Framework 2
All of the banks have now formalised their response to the Banking Framework 2 rate
card. Barclays has said it will exit for withdrawals, would prefer to communicate this in
September and leave in October. We are confident that we will not be able to achieve
the early exit. A January exit will reduce trading profit by £1m this year, £8m in 2020-
21 and £15m in 2021-22 compared to our previous forecast. Overall income and profit
will still grow by c. £80m on historical volumes.
Barclays explain this as a commercial decision because they have the largest branch
framework (at least under one brand) and because withdrawal volumes drive both
direct charges and a higher framework fee. They have signalled that they would like
to maintain withdrawals in parts of the country where there is no Barclays branch. We
have said no: it is too complicated for customers, Postrnasters and us and it will
encourage others to follow suit.
The Minister has expressed her disappointment personally and, we believe, in writing
and we are hoping that John Glen, as City Minister, will do the same. We have warned
Barclays that the coalition of people who care about Post Offices and feel free to
criticise us — the Daily Mail, MPs, the CWU, the NFSP, individual Postmasters — will
attack this decision loudly and for some time. It is commercially important that this
route does not look attractive to others. This is likely to be the focus from September.
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RM Negotiations
Both parties have now completed the opening phase of negotiations. As expected
there is a significant gap on the overall numbers and the use of fixed fees.
Negotiations re-start on 1*t August, working on potential solutions and red lines. We
are optimistic about being able to discuss the shape of a deal in September.
Bank of Ireland
The new credit card deal with CapOne has been announced and is now in execution.
Customer criticism of the change has been small so far.
The new Bol deal is very close to signature with no material differences remaining.
The financial news, above, reinforces our view that what we have negotiated is a
smaller, exclusive arrangement, more money on FRES and swapping a bad exit in
2024 for a good exit in 2026.
Moneygram and Western Union
We have announced the digital relationship with Western Union, which as well as
being profitable, should encourage competition between the two providers.
Verify
As the Board is aware, the Government reduced Verify fees close to cost through to
March 2020. It is asking the 5 remaining members to extend for a further 6 or 18
months on the current arrangements. Our understanding is that no one is expressing
great enthusiasm and Experian has stated it will leave. Digidentity has agreed.
We have indicated to the Government Digital Service that we will not extend without
either a price increase or much greater support to enable us to commercialise the
opportunity. This has triggered a meeting with John Manzoni.
It may be that we wish to stay in and form a commercial partnership with both
Experian and Digidentity. There is a separate Identity session in the strategy section.
Bill Payments
Following the exclusive win of Scottish Power we are close to announcing that we
have won a 5 year exclusive contract with British Gas. Paypoint has already
announced their loss, triggering a share price decline of 12%, significant but within its
volatility range of the last year. We expect the contract to add an incremental 70m
transactions into both networks, creating direct, additional agents pay across both
networks of £4.8m per annum and increasing our Net Revenue by £2.7m a year.
This also creates opportunities to win other utility business and get major retail
groups from Paypoint. We have already been in detailed conversations with Coop and
SPAR to replace PayPoint across their respective estates.
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Pensions
We have agreed to pursue the buy-out of the defined benefit pension scheme,
removing ourselves from the member-insurer relationship. This should be
straightforward for the bulk of the scheme and the sooner we execute, the more
surplus is returned to members. It is more complex and potentially more controversial
for pre 2012 members whose earnings have risen more than inflation.
Fujitsu
We are concerned about the always tricky Fujitsu relationship. We have not yet seen
best and final offers but to date Fujitsu are being outbid on the Telco RFP. We may
therefore have to face a situation where Fujitsu is asked to exit Telco. They are raising
both process concerns and the threat of high exit costs.
In addition, in spite of warnings, their witnesses in the Horizon trail were very poor. If
the Judge sticks true to form, they may be criticised heavily. They are already worried
and will be made more anxious that we will seek to recover losses on the GLO from
them. Both are weighing on their minds regardless of the likelihood or speed of the
outcomes and this may well play into behaviours around Horizon.
Security and Resilience.
The recent security fines for BA and Marriott have shone a further light on security
controls within organisations. We don't believe we are vulnerable to the same threats
but have taken defensive actions which are part of an update to the ARC. We have
started the campaign on Information Security controls called "Careless Clicks". This is
well received with over 500 views of the video and high demand for the camera
covers. We have had no known recent, security incidents and our new CISO, Tony
Jowett has established a working relationship with the NCSC.
We have seen more Priority 1 and 2 IT performance incidents, returning us to the
levels of 2018 after a few months of better performance. The initial view of the IT
team is that there is some impact of the Back Office transformation activities but no
real correlation between failures. However, we have asked them to test this more
thoroughly, particularly focusing on change within third party systems and the
thoroughness of controls.
Operationally, we have not seen any major trends emerging. However, following the
decision to pay Postmasters within new periods of suspension, we are starting to
receive historical claims. There is a human logic to pay them but a legal logic not to
do so while we are appealing the decision. This needs to be brought to a conclusion.
The cash REMs issue has, however, been a major learning point for us. The issue was
brought about (as forecast by Ken) by Back Office Transformation at the end of
January. The issue was recognised as a priority 3 issue and the 4-5 daily instances
resolved without it ever being escalated as a systemic issue, recognised as such from
our analysis or resolved.
It was identified as a systemic issue by one of the GLO bloggers, Tim McCormack,
who I agreed to talk to (he has only been allowed to talk to lawyers for the last three
years). The issue was then resolved quickly.
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The learnings are:
- Our processes for identifying systemic issues are inadequate and our people do not
escalate.
- Postmasters do not trust us enough to raise issues with us as they fear that they
may get into trouble. This issue was widely discussed in a blog of 2k Postmasters
to which we have no access.
- Tackling these things openly - we published the issue and asked for people to
come forward - is absolutely necessary. When we didn’t, it was assumed to be a
conspiracy.
- Our critics criticise because they care about Post Offices. When we engage openly
with them, they are delighted. Tim’s last blog “There is more to be done but the
initial changes I see are promising” is a step on from “POL are completely out of
control and led by idiots.” We are engaging more and are looking to hire one of the
former Sub-Postmasters. There is a great deal to do and we share an agenda.
The other “lights on” moment is that while reducing the number of transaction
corrections is a good thing to do, it will not materially change the clarity and
transparency of branch accounting. The data shows that on a typical day some 4k
branches are reported as being out of balance. The amounts are not huge (average
balance of +-£50), they encompass both debits and credits and they typically do not
escalate into a bigger problem.
However, they create uncertainty, make it harder for our people to work out what is
going on and reduce Postmasters’ trust. Within our programme to transform the
relationship with Postmasters, removing balance differences as a result of back office
reconciliation processes must be paramount. One major known issue is managing
stamp values between the stock centre and branches.
Team
There is clearly significant uncertainty and change. The external CEO appointment
was forecast and prepared for. The speed of Nick’s arrival - a very good thing to
reduce uncertainty - was not and this is requiring flexibility.
We hired Kathryn Sherratt to be a replacement FD for FS&T and she started on 15
July. By that time, we had agreed, subject to Tim and Tom’s approval, that she would
stand in as Interim CFO. By the time she met Tim and Tom we no longer needed an
interim CFO. She will help oversee the Group Finance agenda over the next few weeks
(costs now, costs later, lower change plan) and then revert to the FD role. This is not
easy for her or colleagues.
We have hired Dan Zinner as Transformation Director, reporting to the CFO and the
early signs are encouraging.
We have found it hard to hire a Strategy and Corporate Development Director, with
candidates wanting to join but just being offered better roles for more money
elsewhere - Jonathan Lewis was appointed CFO of a £2b turnover business, for
example. We believe we have secured an effective candidate for the Autumn but
offered as a reporting line to the CFO. Adeola is taking the role for now on
secondment from KPMG and will attend the strategy awayday.
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We are in the process of appointing Shikra Hornsey as CDIO, encompassing IT, data
and digital build. Our belief is that while she has many strengths, she would also
benefit from a strong, technical CIO and are trying to retain Mark Fabes, the interim
No 2 to Rob.
We were working on a changed organisation structure following the earlier Board
conversations. The main purpose was to reduce bureaucracy, unclear accountability
and cost by creating a single structure for a smaller employed business, where each
activity is done in one place. In addition, we believe we must move away from strong
product silos which undermine customer focus, cross-team working and technology
development.
Aligned with that we were developing a major cultural programme to start tackling:
- The lack of focus on customers
- The persistent failure to understand Postmasters and work with them as partners
- The persistent desire to defend against challenge and questioning
- The focus on process and how-we-have-always-done-it versus a focus on
outcomes and continuous improvement.
Within culture, we were also working out how we seize the opportunity through being
more inclusive to win the war for talent and communicate better with customers and
Postmasters.
We will continue working over the summer on Postmaster issues and on taking cost
out. We will not do any more work on organisation design or culture until Nick is able
to make his own choices.
Decisions for today
The main Board decisions are:
- approve the ARA subject to final wording changes
- approve the Bol contract
- approve the framework agreement with BEIS
- approve delegated authority for the parent company guarantee for British Gas.
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Tab 5 Finance
POST OFFICE LIMITED
BOARD
June 2019 (P3) - Financial Performance
Author: Micheal Passmore
Sponsor: Alisdair Cameron
Executive Summary
Context
PAGE 1 OF 2
DISCUSSION PAPER
Meeting date: 30 July 2019
The purpose of this paper is to outline our financial performance in P3. A detailed
slide-deck is attached for further detail.
How did we do in P3?
Year to date
£m Actual Budget Variance YoY Actual Budget Variance YoY
Retail (incl. Payzone) 43.8 43.5 03 3% 140.5 139.9 06 2%
FS8&T (incl. Insurance) 29.1 29.7 (0.6) 18% 82.2 84.7 (2.5) 4%
Identity 3.3 3.2 0.0 -31% 11.5 11.4 0.1 -23%
‘Supply Chain/Other 1.3 11 0.2 29% 3.4 3.4 01 8%
Total Revenue 75 176 (0.2) 6% 237.7 239.3 (1.7) 1%
Cost Of Sales (10.1) (10.5) 0.4 3% (32.0) (33.5) 15 2%
Net Income 67.3 67.1 0.2 8% 205.7 205.9 (0.2) 1%
Agents Pay (28.9) (29.8) 09 4% (89.9) (92.6) 27 2%
Staff Cost (14.9) (14.1) (0.7) 0% (45.7) (43.8) (1.9) 1%
Non staff Cost (22.9) (24.0) 11 8% (68.3) (69.2) 1.0 8%
FRES 3.3 37 (0.4) 15% 85 9.8 (1.3) 2%
Other Income 44 441 0.0 9% 3.6 3.5 0.1 10%
Trading Profit 5.1 4.0 1.1 610% 13.9 13.5 0.4 109%
Network Subsidy Payment 3.8 3.8 0.0 -17% 12.5 12.5 0.0 17%
EBITDA 8.9 78 1.1 148% 26.4 26.0 0.4 22%
Depreciation (4.1) (10.7) (0.5) 130% (32.2) (31.4) (0.8) 88%
Interest (0.8) (0.7) (0.1) 51% (2.7) (2.1) (0.5) 4%
Change Spend (6.1) (5.8) (0.3) -4% (14.3) (13.8) (0.5) -16%
Investment Funding 3.2 3.2 (0.0) -72% 10.5 10.5 0.0 -70%
Profit On Asset Sales 14 0.0 1.1 165% 14 0.0 14 74%
Profit Before Tax (4.8) (6.4) 14 417% (10.9) (40.8) (0.4) -151%
Summary
Strong trading in mails and mortgage products have been offset by underperformance
in travel related products, which are experiencing continued poor market conditions.
The net impact of this, along with cost timing benefits, has created a YTD trading profit
of £0.4m. When removing these timing elements, the underlying YTD trading profit is
(£0.5m) adverse.
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Detail
P3 trading resulted in a profit of £8.9m, £1.1m favourable to budget. P3 revenue is
£77.5m, (£0.2m) adverse to budget in the month. Travel related products have
continued to struggle with difficult market conditions. This has been partially offset by
mails trading over performance, predominantly in 2" class labels for small and medium
parcels.
YTD trading profit stands £0.4m favourable to budget, but when taking into account the
timing related items on agents pay and operating expenses, underlying trading profit is
(£0.5m) adverse.
Telephony revenues are down on budget due to fewer customer numbers and lower
uptake of call plans than expected. This has partially flowed through to cost of sales,
making Telephony broadly in line at a net income level.
Agents pay is favourable to budget in period and YTD, but it is expected that around
£1.0m of the YTD variance will reverse during the year.
Staff costs have been impacted by a one-off severance provision in the period. YTD
overspend is predominantly caused by increased contractor spend in prior periods which
have levelled out from period 3. Contractor costs relating to CIO data excellence team
are to be monitored over the next quarter.
Non-staff costs were underspent in period, predominantly from Telephony regulatory
spend not yet required and network equipment costs purchased in previous period.
FRES profit share continues to be impacted by poor overall market conditions, with
FRES tasked to reduce costs in order to mitigate the profit shortfall.
Profit on asset sales relates to disposal of two properties, Stoke Newington and
Basildon, for proceeds of £1.1m.
Network numbers decreased by 17 in the month to 11,636 (P2: 11,653), but remain
136 above the minimum commitment and 36 above our target of 11,600. Looking
forward, however, forecast numbers drop further and will be closely monitored in the
coming months. Further detailed analysis has been included in the slide deck.
Qi Change spend (Capex and Exceptional) was £34.8m, representing a £7.7m
underspend to budget, with ongoing scope and delivery reviews causing delays on
Blueprint, PCI and HIH works. The 3+9 change spend forecast will outline our plan for
the remainder of the 19-20 change portfolio.
Cash levels broadly remained flat across the business, with a slight drop in Network
Cash levels, but remaining within tolerances. Increased Inward Rems from prior year is
not an indication of work building up, but represents work being readied for despatch
and items in transit. We need to ensure that the Inward Rems awaiting processing are
low as these are under our direct control, whereas in transit are on their way to sites.
YTD Inward Rems awaiting processing are currently £32.9M, against a target of £38.0M.
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Period 3 FY19/20
Financial Performance
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eoueulg § qe.
Yearto date
£m ‘Actual Budget Variance YoY Actual Budget Variance YoY
Retail (incl. Payzone) 43.8 43.5 03 3% 1405 139.9 06 2%
F587 (incl. Insurance) 29.1 29.7 (0.6) 18% 82.2 247 (25) 4%
Identity 3.3 32 0.0 -31% 1s 14 on 23%
Supply Chain/Other 13 1 0.2 29% 34 34 on 8%
Total Revenue 715 716 (0.2) 6% 237.7 239.3 (1.7) 1%
Cost OF Sales (10.1) (00.5) 0.4 -3% (32.0) (33.5) 1s 2%
Net Income 67.3 67.1 0.2 8% 205.7 205.9 (0.2) 1%
Agents Pay (28.9) (29.8) 09 4% (89.9) (92.6) 27 2%
Staff Cost (149) (14.2) (0.7) 0% (45.7) (43.8) (19) “1%
Non staff Cost (22.9) (24.0) 11 8% (68.3) (69.2) 10 8%
FRES 33 37 (0.4) 15% 85 9.8 (1.3) 2%
Other income aa 11 0.0 9% 3.6 35 o1 10%
Trading Profit Sa 40 1.1 610% 13.9 13.5 04 109%
Highlights:
increased contractor costs, which have largely levelled out from period 3.
Adjusting for the timing items, the YTD underlying trading profit is (£0.5m) adverse.
In period trading impacted by difficult travel market conditions, partially offset by over performance in mails.
Staff cost contains one-off severance provision posted in period. YTD overrun resulting predominantly from
Post Office®
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P3 Scorecard
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Post Office Balanced Scorecard - 19/20
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ot Sale & Rene Poly Vere Por I wi aio cS 8
Net Perse Sore vor I # E 4s 38
cosh Hescoor w I en Eo a5 ae -
Net =unng Position aw I em I em I cs02) qe) I ey I erry
Net orang [em I em I ooo, woo I oun I way -
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Post Office® ost Office Limited ~ Commercial in Confidence
eoueulg § qe.
901 30 ¥z
61/20/0¢-Bunaew pueos 10g
P3 Scorecard
UKG100024394
UKG100024394
eoueulg § qe.
Post Office Balanced Scorecard - 19/20
lauaties Custer Feedback Ease
\not Sev & sev2 coats
eo Sociny rs rm ASOC
[2 ot Hon impact Tecton Conta! Gaps
Ireree Reprosertaion In Senor oss)
[BAKE Reprosentaton in Senor Ros)
Ii Tne ey Freon) Rate
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sm I ae 2m
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woe I mee I 192%
orm I 9200} oz
Network Branch Chun coo 138
Trend Line
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Post Office®
Pout Ofice Limited ~ Commercial in Confidence
UKG100024394
UKG100024394
eoueulg § qe.
Branch Numbers P3
61/20/08-BunseW pie0s 10d
Network numbers Period 3 - BI
Start of Var to
11670 year Rolling rolling
11660 Month Actual Feast Feast fcast MoM var
18/19 outturn 11660
+4650 PL 11658 -2
11640 P2 dieses ties i165 2 5
11630 P3 11636 11651 11640 -4 -17
P4 11648 11636
11620 PS 11644 11622
11610 P6 11641 11604
movements Ps 11639
11590 Pg 11630
11560 =S=0pen —=#— Start of Year Forecast Revised rolling forecast P10 11627
11570 Pil 11631
PL p2 P3 PA PS PGOP7sPHOPS PAO Padspu2_—sI PAD 11640
In the period there have been 42 branches trading which did not in P2 (e.g. NNL and reopening branches), offset by 59
branches which did not report a customer session in P3. Activity during the month also had 13 suspensions, of which 2 were
replaced with a temporary operator and 19 resignations were received.
8 NNLs have opened within the period; meaning 42 have opened with Q1, 3 short of target. Other openings in the period
included 2 BAU reopenings and 6 NT branches.
Network numbers forecast showing marginal decline based on planned openings (NNLs planned openings down >100 YoY)
and current closure rates. New processes are now being implemented with agent application interview process relocated to
the Agent Onboarding team and stand alone agent classroom courses planned for go live in P4.
90110 sz
Post Office® Pout Ofice Limited ~ Commercial in Confidence
901 30.92
61/20/0¢-Bunaew pueos 10g
Retail Scorecard
UKGI00024394
UKG100024394
Post ofie Balanced Scorecard» FY19/20
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Post Office® ost Office Limited ~ Commercial in Confidence
eoueulg § qe.
61/20/08-BunseW pie0s 10d
901 30.42
UKGI00024394
UKG100024394
Retail (inc. Payzone) : YTD £3.3m vs budget of which £1.7m is underlying
« Melatochis © Mails trading - Increased 2” class labels
™ ‘Actual Budget Variance YoY ‘Actual Budget Variance YoY volumes from small and medium parcels,
Mais Trading ne os 0a) se cao 679~St«)sae__ Predominantly relating to e-retailers (e.g. Ebay).
Mallwork os 08 (2) 210% 4273) Volumes have increased 250k YTD YoY, c, 2%.
Mails Other 09 «00 «=O. -370% 09 © 00 (0.0) -68%
RM Anoual Fee 35-35 (0.0) -2% 114 115 0.1) -2% @ Payzone - Income lower than business case
Gift Caras 03 03 © 00) BK 10 10 @1) + &% + YTD, with potential contract opportunities
Lottery 2a 22 02 «7% 7 73 O46 2% ‘emerging later in the year to recover the
Poca 20° 19 01-13% 62 60 02 13% position,
Payment Services 16 1.6 (0.0) -3% 54 57 (0.3) 12%
Payzone 08 0.9 (0.2) -14% 25 28 — 0.3)(@)-6% G@) Agents Pay — expectation that £1m of YTD
ATMs 20 24 (0.1) -11% 67 67 01 -8% — Variance will reverse.
Barking Services 35 1 15% 278° WS 03. 15%
Other Retail oa (0.1) _-38% 04 06 (0.2) _-54%
Total Revenue Be aaa aos 1399 ~«B
Cost Of Sales (2.9) (0.1) -5% (4.9) (5.2) 0.2 -12%
Net income 419 oa 4% 135.6 134809 6%
‘Agents Pay (24.6) 0.6 5% (76.9) (78.7) 18
Staff Costs (5.4) 0.0 -17% (17.6) (17.7) O21
Staff & Agent Related Costs (0.3) (0.1) 0% (0.7) (0.8) oO.
Consultancy & Advisory Services (0.0) 0.0 -4% (0.2) (0.2) (0.0)
IT Infrastructure & IT Services (0.1) O.1 31% (0.2) (0.4) 0.2
‘Managed Services - Penalties (0.1) (0.0) -72% (0.3) (0.3) (0.0)
Finance & Losses (1.2) (0.1) 3% (3.5) (3.4) (0.2)
‘Change Opex 0.0 03 na 0.0 (0.3) 0.3
Postage & Other Opex (2.2) 0.1 131% (3.9) (3.9) 0.0
Other Income 1a 00 9% 3635 at
Trading Profit 102 11 19% 35932633 18%
Post Office® Post Office Limited ~ Commercial in Confidence
eoueulg § qe.
901 3082
61/20/0¢-Bunaew pueos 10g
FS&T, PO! & Identity Scorecard
UKGI00024394
UKG100024394
SRT, POE & tdentty Scorecard - 19/20
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Post Office®
Pout Ofice Limited ~ Commercial in Confidence
C
eoueulg § qe.
UKGI00024394
61/20/08-BunseW pie0s 10d
901 10.62
UKGI00024394
a
® a
FS&T: YTD (£0.4m) vs budget of which (£0.6m) is underlying Z
im @ PO Money- delay in new deal with
2 oe ee ao ee eee BOI hence still accounting under old
PO Money . method, whereas budget has been
(Savings, Loans, Mortgages, red Care) 74 68 06 @j22% M7 M205 38% prepared under new method. Also
Travel Money 250 26 7220 75 Doe Mortgages experienced good month
some oo Ma BS due to broker channel expansion,
Postal Orders 10 09 ol 4% 33 BA 02 1% marketing campaign and good rates.
Total Revense woe ose as
Con Ot er a 0a ea@) mia) as) 08% @) Telephony ~ fewer customer
feneror 2 __69_a__2 $283 aa numbers and lower uptake of call
Stat Cost 7 05) oa) 38% os) 6) 02) plans. Partially flowed through to cost
Staff & Agent Rated Costs 01 0a) 55% x02) 0a of sales, which also include fibre
Brand & Marking 0) 000) 105% @ = 0) 7H
Consuany &Atsory Services (07 03) oa @bea% a8) 3) a8 rebates,
Infrastructure 8 Services 09 (00) 0.0 104% @o) 0) a) ara
‘Managed Services 23 27 4G) 3% os) 07 02 7%» @) Consultancy - £0.2m relates to
Postage (0.3) (0.3) (0.0) 8% (0.9) (0.8) (0.0) 5% Telco strategy work, £0.1m relates to
Finance & Loses 02) oa as = os) 0a ‘
other Opex 01 na 747% 002) 035% top up of Eagle provision, and £0.05m
FRES 33 37 (0.4)(5) 15% 85 98 (1.3) 2% ‘or additional HMRC fees.
Trading Pro Ba 2706 am Hs _323 (0a) 38
@ Managed Services — timing of spend
on regulatory changes which have
been budgeted but are not yet
required.
© FRES - continued difficult market
conditions causing underperformance.
FRES have been challenged to reduce
costs in order to mitigate this.
Post Office” Poet Ofice Limited ~ Commercial in Confidence
901 3008
UKG100024394
UKG100024394
eoueulg § qe.
POI: YTD (£0.2m) vs budget of which (£0.2m) is underlying
61/20/08-BunseW pie0s 10d
em
‘Actual Budget Variance YoY Actual Budget Variance YoY
Travel Insurance 23-25 = (0.3)@ 15% 62 «6B (DS) «12%
Home Insurance 08 08 = (0.1) 9% 23-25 (0.2) 4%
Car insurance 08 08 — (0.0) -9% 25 26 (0.1) -11%
Van Insurance 02 © 02 0.0 8% 07 O07 0.0 I -4%
Life - Over 50s 09 09 = (0.1) 53% 21-25 (0.4) 9%
Life - SUI 0.2 03 (0.0) 30% 0.7 0.9 (0.1) 32%
Other Insurance o1 04 0.1 0.2 (0.0) -19%
Total Revenue CUnES I Te ee ia oe
Cost OF Sales (a2) (2.2) @5) (3.9) 0.4 30%
‘Net Income 40 44 m2 121 (09) 4%
Staff Costs (05) (0.5) (Qs) (a5) 0.0 -13%
Staff & Agent Related Costs (0.0) (0.0) (01) (0.1) O1 42%
Brand & Marketing (06) (0.8) (28) (2.3) 06 7%
Consultancy & Advisory Services (0.1) (0.1) (0.5) (02) (0.3) 128%
IT Infrastructure & IT Services (0.2) (0.2) (0.4) (0.6) 02 16%
Managed Services (08) (0.9) 2.4) (2.6) 02 0%
Finance & Losses (01) (0.1) (0.2) (0.2) 0.0 -13%
Other Opex (0.0) (0.0) (0.1) (0.1) (0.0) __ 10%
Trading Profit 1719 4a 46 (0.2) -13%
[o) Travel Insurance- (£0.3m) adverse in P3; overall sales volumes were 4%
down against plan, reflecting the continuing reduction in market demand for
Travel Insurance, compounded by a switch channel mix towards lower margin
aggregator sales, away from higher margin phone and web sales.
® Marketing Costs - £0.2m favourable, due to delayed timing of marketing
activity, mostly impacting Travel.
Post Office® Pout Ofice Limited ~ Commercial in Confidence
UKG100024394
UKG100024394
eoueulg § qe.
Identity: YTD £0.1m vs budget of which £0.1m is underlying
61/20/08-BunseW pie0s 10d
cm
‘Actual Budget Variance _ YoY ‘Actual Budget Variance YoY
Home Office 1416 (0.1) @)-40% 50 5.3 (0.3) -35%
DFT/DLA 07 06 0.1 @ 25% 29° 26 03 75%
Identity Services 06 605 0.0 22% 1600 «15 01 19%
verify 06 605 O1 56% 1807 01-53%
Enivronment Agency 00 01 (0.1) _ -68% o1 03 (0.1) -61%
Total Revenue 3a 32 0.0 82% lia aie 01 23%
Cost Of Sales (0.3) (0.3) (0.0) 31% (13) (2.2) (0.0) __-17%
Net Income 292.9 0.0 -32% 10.2 10.1 0.1 -24%
‘Agents Pay (03) (0.9) 00 -7% 0) (2.9) (0.0) -7%
Staff Costs (0.2) (0.2) 0.0 © 15% (0.6) (0.6) 01 16%
Managed Services - Penalties (0.1) (0.0) (0.0) nfa (0.2) (0.1) (0.0) nfa
Postage (0.2) (0.2) 0.0 23% (0.8) (0.7) (0.0) -10%
Other (0.4) (0.5) 0.0 181% (1.2) (2.3) 0.1 298%
Trading Profit 1110 0.1 -60% 45 44 01-47%
@® Home Office adverse variance is driven by Passports. HMPO have advised they are
seeing a 6% reduction in applications YoY. Post Office has maintained 24% market share
in line with budget assumptions.
@ DVLA strong performance is driven by International Driving Permits (IDP) and 10 Year
Renewals. IDP weekly volumes continue to decline post the Brexit spike, reducing from
an average of 9.3k transactions in P2 to 6.8k in P3.
90130 Le
Post Office® Pout Ofice Limited ~ Commercial in Confidence
901 30ze
61/20/0¢-Bunaew pueos 10g
COO Scorecard
UKGI00024394
UKG100024394
eoueulg § qe.
OO Scorecard 49/30
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Post Office®
61/20/0¢-Bunaew pueos 10g
gL so ee
COO Scorecard
UKGI00024394
UKG100024394
1600 Scorecard - 19/20
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Post Office®
Pout Ofice Limited ~ Commercial in Confidence
eoueulg § qe.
901 10 Fe
UKG100024394
UKG100024394
eoueulg § qe.
Supply Chain: YTD (0.6m) vs budget of which (£0.3m) is underlying
61/20/08-BunseW pie0s 10d
suns chain
‘Actual Budget Variance YoY ‘Actual Budget Variance YoY
Total Revenue O8 0.8 (0.0) 10% 2.3 25 (0.1) -1%
Net Income 08 08 {0.0) 10% 23 25 (0.4) -1%
Staff Costs (2.5) (2.5) 0.0 3% (75) (7.5) 0.04%
Staff & Agent Related Costs (0.0) (0.0) 0.0 -32% (0.1) (0.1) (0.0) -19%
Property & Facilities Management (0.2) (0.1) (0.1) 83% (0.5) (0.2) (0.3) _ 86%
Stationery (0.6) (0.4) (0.2) 47% (18) (13) @.s}@ea%
Finance & Losses 0.0 (0.0) 0.0 134% (0.0) (0.1) 0.1 -78%
Vehicles (0.2) (0.2) (0.0) 37% (0.7) (0.7) (0.1) 12%
Other (0.3)__ (0.4) 0.1@ -30% (0.8) (1.2) 0.4 -31%
Trading Profit (3.0) (2.8) (0.2) 5% (9.3) (8.7) —-(0.6)_—-11%
©® Stationery - Full £2m cost challenge flat phased, with recovery plans expected later in the year.
Other costs - £0.2m legal costs recovered following unsuccessful claim against withdrawal from
external market (IRIS), offset in the month against strategy work on the future of cash initiative.
Post Office® Pout Ofice Limited ~ Commercial in Confidence
61/20/08-BunseW pie0s 10d
901 10se
Network Operations: YTD in line with budget of which all is underlying
Finance: YTD (£1.0m) vs budget of which (£0.3m) is underlying
UKG100024394
UKG100024394
eoueulg § qe.
Network Ops
Staff Costs
Staff & Agent Related Costs
Property & Facilities Management
Brand & Marketing
Postage
Equipment Provn & Maintenance Services
Finance & Losses
Actual Budget Variance YoY
(1.0) (2.0) 0.0 © 21%
(0.1) (0.1) 0.0 331%
(19) (2.9) (0.1) -33%
(0.0) (0.0) 00 = (5%
(0.0) (0.0) (0.0) -86%
00 © 0.0 0.0 n/a
(0.4) (0.6)
03 -4%
0.6@)-113%
Yeartodaté
‘Actual Budget Variance YoY
8.1) (3.0) (0.1) 22%
(0.3) (0.4) 0.1 73%
(6.1) (5.9) (0.2) -34%
(0.0) (0.1) 0.0 -4%
(0.1) (0.2) (0.0) -85%
00 00 00 ja
(17) (18) 0.1 -10%
Other 0.0 (0.6) (08) (0.9) 0.1 _26%
Total Operating Expenses G4) (43) 09-28% (124) (124) 0.0 —-20%
sinonce
— ‘Actual Budget Variance YoY Actual Budget Variance YoY
Staff Costs
Consultancy & Advisory Services
(0.7) (0.6) (0.1) 20%
(0.3) (0.1) (0.2) 344%
(2.4) (18) (0.2) 42%
(0.6) (0.4) (0.2) 166%
Finance & Losses (0.3) (0.2) (0.2%) -1% (0.9) (0.5) (0.4) 50%
Staff & Agent Related Costs 0.0 (0.1) 0.1 -101% (0.0) (0.2) O.1 -82%
Property & Facilities Management 0.0 0.0 0.0 -100% (0.0) (0.0) 0.0 -98%
Other (0.0) 0.1 (0.1) __-80% (0.0) 0.3 (0.3) _-98%
Total Operating Expenses (1.4) (0.8) (0.5) 31% (3.5) (2.5) (2.063) 38%
© Other operating costs -
£0.4m equipment costs
purchased one month in
advance of budget as noted
in P2 (YTD nil impact);
£0.2m release of
dilapidations accrual
Finance & losses -
Centrica invoices in dispute
and have been provided for
accordingly. This debt has
since been paid,
YTD - Centrica debt
provision and GT audit fees
timing related.
Post Office®
Pout Ofice Limited ~ Commercial in Confidence
901 30.98
UKG100024394
UKG100024394
eoueulg § qe.
ClO: YTD £0.1m vs budget of which £0.1m is underlying
61/20/08-BunseW pie0s 10d
Period 03 Year to date
feite}
Actual Budget Variance YoY ‘Actual Budget Variance YoY
Staff Costs (0.8) (0.7) (0.1) 51% (2.4) (2.1) (0.3)@s0%
Staff & Agent Related Costs 0.0 © (0.0) 0.1 -159% (0.1) (0.1) 0.1 -57%
IT Infrastructure & IT Services (6.1) (6.4) 04 © -22% = (19.2) (19.3) 0.1 -14%
Managed Services (0.0) (0.1) 01 — -93% (0.4) (0.3) (0.1) -73%
Consultancy & Advisory Services (0.1) (0.1) (0.0) -16% 0.0 © (0.2) 0.2 -107%
Other (05) (0.1) (0.5) _-210% (0.2) (0.3) 0.1@ai%
Total Operating Expenses (75) (7.5) (0.0) -8% ©=©—_(22.3) (22.3) 0.1 -13%
© Staff Cost YTD £0.3m adverse ~ higher contractor costs from opex projects (particularly Arrow data excellence),
which are being monitored and an action plan is being worked on to reduce future cost. This is offset by vacancies not
filled across CIO
© Non staff YTD £0.4m favourable - lower licences costs and upside from Fujitsu application support & maintenance
credit recognised this year.
Post Office® Pout Ofice Limited ~ Commercial in Confidence
UKGI00024394
61/20/08-BunseW pie0s 10d
901 J0ze
UKGI00024394
a
° a
HR, LCG, Communications g
Re
eR ‘Actual Budget Variance YoY ‘Actual Budget Variance YoY
Staff Costs (0.6) (0.6) 0.0 5% (1.8) (1.9) 0.0 5%
Staff & Agent Related Costs (02) 2) (0.0) 3% (05) 5) (0.1) -14%
Finance & Losses (02) 2) (0.0) 49% (0.6) 06) (0.0) -19%
Other (0.1) (0.1) 0.0 0% (0.3) (0.3) 0.0 -8%
Total Operating Expenses (ua) (1) 0.0 “13% G3) (32) (0.0) _-5%
tes @® LCG Staff Costs - one-off
— ‘Actual Budget Variance YoY ‘Actual Budget Variance YoY severance provision posted in
Staff Costs (0.8) (0.3) (0.4) @ 50% (15) (2.0) (0.5) 7% P3.
Staff & Agent Related Costs (0.0) (0.0) 00 100% (0.1) @.a) 0.0 53%
Consultancy & Advisory Services (2.0) (0.0) 00 58% (0.2) a) 0.1 -19%
Legal Costs (0.1) 0.2) O14 6% (0.4) (0.3) (0.1) 51%
Other (0.0) (0.1) 0.0 -112% (0.2) (0.2) 0.0 4%
Total Operating Expenses (0.9) (0.6) (0.4) 210% (2.2) (1.8) (0.5) 13%
Somms Actual Budget Variance YoY ‘Actual Budget Variance YoY
Staff Costs (0.2) 0.2) (0.0) 173% (06) (0.6) 0.0 46%
Staff & Agent Related Costs (0.0) (0.0) (0.0) 44% (0.0) (0.0) (0.0) -s1%
Brand & Marketing (02) (03) 00 6% (03) (0.4) 01 -76%
Other (0.0) _ (0.0) 00 40% (0.0) (0.0) 00-76%
Total Operating Expenses (0.5) (0.5) 0.0 31% (0.9) (1.0) 0.1 -45%
Post Office” oat fice Limited ~ Commercial in Confidence
901 308
61/20/08-BunseW pie0s 10d
Group Change, Group Digital, Group Marketing and Central
UKG100024394
UKG100024394
eoueulg § qe.
Group Change
Group Change ‘Actual Budget Variance YoY ‘Actual Budget Variance YoY
Staff Costs (0.0) (0.0) 00-18% (0.2) (1) 0.1) 25%
Staff & Agent Related Costs (00) (00) (0.0) 95% (01) (00) 0.0) 79%
Other (0.0) 0.0 (0.0) 6% (0.1) 0.0 (0.1) 22%
Total Operating Expenses (0.4) (0.0) (0.0) 15% (0.3) (01) (0.2) 5%
Group Digital
‘Actual Budget Variance YoY Actual Budget Variance YoY
Staff Costs (0.2) (0.2) (0.0) -2% (06) (05) 0.2)@)_ 49%
Staff & Agent Related Costs (0.0) @.a) 0.1 106% (00) (0.1) 0.1 71038%
IT Infrastructure & IT Services (0.6) (03) (0.3) 83% (07) (06) 1) 26%
other (0.1) (0.1) __(0.0)_3% (0.2) (0.2) ___(0.0)_155%
Total Operating Expenses (0.9) (0.6) (0.3) 45% (1.6) (24) (0.2) 47%
Group Marketing
‘Actual Budget Variance YoY Actual Budget Variance YoY
Staff Costs (03) (0.4) 0.0 216% (9) (11) 01 149%
Brand & Marketing (13) Qa) 2) 1% G4) 8.6) 02 4%
Staff & Agent Related Costs (0.0) (0.0) 0.0 -89% (0.0) (0.2) 0.2 -79%
Other 0.0 (0.0) 0.0 na (0.1) (0.0) (0.1) __43380%
Total Operating Expenses (6) (15) (0.1) 15% 14.4) (49) oaG@) 58%
Central
a ‘Actual Budget Variance YoY Actual Budget Variance YoY
Staff Costs (10) a) 01-18% G4) BA) (0.0) -23%
Finance & Losses (06) (0.1) (05) 444% (04) 0S (2.0) -144%6
Growth Fund 00 = 00 0.0 -100% 00 © 00 0.0 -100%
Brand & Marketing. 0.0 0.0 0.0 nla (0.3) (0.3) 0.0 -7™%
Other (0.0) 0.0 (0.0) _-107% (0.1) (0.1) ___(0.0)_900%
Total Operating Expenses (1.6) (1.2) (0.4) -24% (4.2) (3.2) (1.0) 33%
© Relates to additional
contractor spend in P1 and
P2 which has levelled out
in P3.
® Timing related and
expected to be spent in
future periods.
© Increase of stock provision
in line with current.
methodology.
Post Office®
Pout Ofice Limited ~ Commercial in Confidence
61/20/08-BunseW pie0s 10d
901 10.6¢
Change Spend
UKGI00024394
UKG100024394
Key Variances
Spend
* ” “ ve
Lael eater e Lecrupll ci Lala ens rue ehuaaead i gate haa ‘Variance comes from projects: Panther due chent inepration costs expected to
a eet Ee
= = ‘ramp up in Q2. Full year spend forecast to be on budget, i) AMEX SSK Channel
seat sso) uy tsa) 20 os) as 59 om) ats ‘Senson er je pan being repo in forecast sbmisson si)
syed tom aga
chine torn secs
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titrant moe ces eos tk Derwent Tiomcuu ton sateay Pet nia a he mero
dtomaton e262) 0a ak 1 ute ca of eaten 1/0 bs rade ote So bo,
ove a4 007, eso ED tk we) wt oo) aes Projet eng reseed to et poeted cos ved, a8 swoon
eee ee ee ee co gees Fayre aad rantings acs daar ete hs een
Aeon Derdepment 02 ° 00) on Eeyore eget, ta
neerk Weesfermeten oF oF on a oF aa oe ‘Variance due to phasing. Forecast was submitted as flat phasing to not impact
Saar nee) 28a aD a ‘euce feet
tal Seeney es 0s) ota) “ Vora tn rn pecs ach alah we ee ano
an o ae oo) a0 oo 00 a bert nove) Sister Suess Mod wae prt eso Toeshony
Ten oftsctng ier everspenda the ther caret ets Rte ates
Tnanlserveesttekeoms 422 @9) aS 6S) ats ws) koa) tte aes mae ff sengirr oveend Neate emesis
Gee 00 Cy (0.1) 00 os nbs. as oa ‘Main variances come from prajects Severn & Branch discoverabilty where spend
eesone os 10 aaa Gana cer oun hasten essued wih ented vow tab fied ine free
ee cs a4 en) 2 ak C802 os oe 13 om GEDas ea Vern png rete Gu drys perc on owes
ron oes mete cs os 0s, 22a) a os os 269 ernce ry ine fom projets Pers tao To BE
‘en x02 a) 0a” es oa) 920208 08 oe 00 a
Tange as a4) 509040) 07 08a) aa asa) 908
{uC branch Dslorrewt ca cle 02a) 0x04 0282 oz a7
Masck otice 030s (oa) 1924 sor 0s oy) 0s wa 2830 ‘ue to residual spend on aoe, relating to Network Operations Wansormation
aon bo rat oo stage a dantcer ot Fg
Obert c2 os es) 3238 anC@o2 02 ws ws wwe vost sien tomeetie
reject bret fea) 05s) 42S ay 02a)? eee een
nan eo 03 3) os de) 30 arthropod sng oreen fa dena ci po Bap ea
Feplcenent counter ners of gate pen shy fet amp downs in EO a
feplscaneot cos en on @) 00 ont oa 03 oo Irene of et
fen 8 Ope as 26 os) __ 40470) 08 0) 0000 fom) ok tv as rors uso de of se nga Re pea he a
fiance oo axa) 04 e802) 7
operations 1208 07 2s 19 07300) 00S oa) cd
oes oa PRES cry) teens in 0 ve PEA ecovby nde con change con
Sunoty hin co 0a 2) a? asi :
‘Human Resources 0219 (0a) os 18 2a)G2Jo0s 03 foo) 09 (oa
eg 8 oversee ais ea tga 3) oe
=e ne Mt poo A bee
Sat of ets ta —Ga—s) a3) was GY =
‘otal change F3038)30. joo ss Gs) (a as pai ss) ee
oe
fase. as 77a) _m05 m7)
Seer sr se or sas
Post Office” oat fice Limited ~ Commercial in Confidence
eoueulg § qe.
901 0 0F
61/20/08-BunseW pie0s 10d
Balance Sheet & Headroom
UKG100024394
UKG100024394
eoueulg § qe.
(566)I 31)
Pension Surplus 41 1 0 1 0 1 ()
Provisions (as) I 3 es) 38 7) 28
lother 7 8 I 2 5 10 ®)
Loan (25) 27) 2I (665) (60) (600)I 25)
iNet Assets / (Liabilities) 236 241 45) 249 (13)I 234 2
[Government Loan - Available Amount 950 950 950
[Government Loan - Drawn Amount (625)I (627)I 2 (565)I
Headroom 325 323 2 385,
[rarget Minimum Headroom 200 200 : 200
Headroom Above/(Below) Target 125 123 2 185
Security Headroom
em poe SPIZIENT se Budgei
Network Cash 480 516 0] 556 (101)
cash at Bank - POL 2 2 I 4 1
client Debtors 176 174 2 138 40
[trade & Other Debtors - Gusiness Debtors 226 233 Ii 28
Hrotal security 383 925 (a2) 22)
[Government Loan (625)I (627)I 2 (565)I (60)I (600)I (25)I
ISantander (87)I (93)I 5 (9) 7 (100)I 13
[Total Obligations 2) (20) 7I (660) sa) (700)I 2)
[Headroom am 205 (34)I 21s (44)) 216 445)
Post Office®
Pout Ofice Limited ~ Commercial in Confidence
61/20/08-BunseW pie0s 10d
90140 Le
Cash Holding Position
UKG100024394
UKG100024394
eoueulg § qe.
Network Cash Inventory (before Demonet)
ranch
Cath Hato sor ars ora. I a2 I wo) arn
xa Hela ms 2a I oo I asa ora
ag a7 00 I “SB I BOD)
casncones
‘Avalting Processing j
waning Processing 2s sr 32. I vos I esr a8 ory, @ Increased Inward Rems from prior year is not
Tovar Res Awan Pesessig 254 ais 0s I ae a7 aa) a an indication of work building up, but
nso Re soa? ass'I vara I aes@) asa on represents work being readied for despatch and
“Ova Res ant a esr I oar I ey 18) items in transit. We need to ensure that the
acre Roa -AvalrgProcessiog : Inward Rems awaiting processing are low as
= Leon wor 14 roy a4 -
= Big wr “I cs} “ey Geos these are under our direct control, whereas in
+ alee 7 : : 7) . transit are on their way to sites. YTD Inward
tet Coins 05 oot o2I or] aw on Rems awaiting processing are currently
Other = Cash Corte - - - - £32.9M, against a target of £38.0M.
“otal Awaling Processing (Cash Centres) jose ws eoa I 1000 I ova ara
“otal - Butler (Cash Centres) es me a I ao I 89 7h) 87)
Crecues, Debi Care, ez ws ew I tse I ae)
Ar ekdngs- Cok td wa atta I oz I ay at
nee 25 ty) es Ie) I 4) 20790)
Network Gash (before Demonet) 73 7406 7554 I 98 I as) aa (88)
Cashin BoE Bond ears uso mse I 3609 I 772) aoa) 005.2)
Total Cash Hollings 1425s 4016 A010 I 14004 I @zs7) anna) (003)
Funding Posiven
Cah vata Treasury 18 38 as 1s] @ en am
CCovermontLoen e880) ss) x7) I 250] a7 60-20
er Usope ua) 26s) ssa) I 500)I es) 24) 2)
WC Fung Nebr ash vestry ms aa rasa. I _taa7I 02 ona a
‘Net Funding Position es) ase) ssa) I cao I sz
Post Office® ost Office Limited ~ Commercial in Confidence
901 10zy
UKGI00024394
61/20/08-BunseW pie0s 10d
UKG100024394
z
° &
GLO Summary 8
mo OF
Oper
Agents Remuneration ~ reverse Mails simplification 35 - - 3.5 Descision still to be made
Agents Remuneration for suspended Postmasters 1s 03 15 - Agreed and actioned; costs coming through
Agents Remuneration - deep dive 05 - 05 ~ Agreed at GE; work has started and costs will start in P4
Legal work regarding policies and processes 20 : 20
G10 Communications os - a2 03
; Agreed at GE; rearutment has been started but nobody in
Simpler business ~ training and engagement 12 on _ heed ak GE: erie hasbeen a
Impact on Change plan reprortisation os ot os
BAU impact of process changes (placeholder) 23 - a2 aa
Opex total 10 os aa 73
change
Horizon changes (quick wins) 2s . 2s
Branch hl nitive 1s : 5 45
Simpler Business ~ HotHousing to accelerate field structure benefits 30 as 0.1 Business case signed off at I, actuals will start from Pa
Design of new processes (including loss prevention) 2.0 - O1 19
POL workforce changes (Restructures etc.) 10 - - 10
Change total 100 Ace 70
Total 22.0 04 71 149
*+FY Committed represents approval from GE
Post Office® ‘Post Office Limited — Commercial in Confidence
Tab 5 Finance
POST OFFICE PAGE 1 OF 6
Quarterly Delivery Report and Funding Request
Author: Max Jacobi Sponsors: Alisdair Cameron Date: 26 July 2019
Executive Summary
Context
As part of our funding agreement, the Board should approve a quarterly report on recent and projected change spend,
agreeing a request for investment funding from BEIS where appropriate.
Questions this paper addresses
1. What happened in Q1?
2. What Q2 spend are we proposing?
3. Whatis our expectation of full year spend and benefits?
4. Canwe afford the proposed spending?
5. What investment funding are we requesting from BEIS?
Summary
At a company level, in Q1 we spent £35m, £8m (18%) below budget, driven by underspend on the Solar/HIH platform
and software (£1m), delays on various FS&T works (including client driven works) (£3m), a delay in Blueprint related
project costs and Severance provisions (£1m), and delays in decisions on final PCI architecture and related cost
commitments (£2m).
Despite the Q1 underspend, the quarterly review of investments identified further funding needs not identified within
the scope of the initial budget. This initially increased the overall project spend outlook by £20m to £194m, however,
urgent prioritisation work has already been done to bring the full year spend forecast back to a current 3+9 forecast of
£178m, with further prioritisation work during the quarter being undertaken to bring full year spend to below or at the
very most in line with the budget £174m
The re-forecast for quarterly spend and benefits for the year therefore currently stands at:
ql Q2 Q3 a4
¢ Cumulative Cumulative Cumulative Cumulative
m
Change Plan Spend £42.5 £94.8 £ 132.8 £ 174.2
Change 3+9 Reforecast £ 34.8 £ 86.7 £ 131.6 £ 178.0
UKGI Funded Plan Spend £ 35.0 £ 90.0 £ 140.0 £ 168.0
UKGI Funding 3+9 Reforecast : £ 42.0 £ 42.0 £ 42.0
Benefits Plan £ 15.6 £ 34.0 £ 53.9 £ 75.6
Benefits 3+9 Reforecast £137 £ 30.8 £515) £ 76.0
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POST OFFICE PAGE 2 OF 12
In our Three Year Plan, we originally included a cash spend level on change of £445m. Including alongside this the non-
cash change spend element (£21m), GLO litigation spend (£28m currently estimated and does not qualify for funding)
and the brought forward spend from 2017/18 (£26m), the equivalent total change spend is £520m for the three year
period to March 2021. The current total company forecast change spend over the 3-year period (Apr-18 to Mar-21)
stands at £600m, however, as stated above: further prioritisation of both 19/20 and 20/21 funding years is ongoing, to
align back to our original position of the Three Year Plan. It should also be noted that the forecast, particularly for 20/21,
includes elements beyond the original Three Year Plan scope, including increased levels of GLO and GLO remediation
funding, and Blueprint, which although not formally agreed, are discussed in other papers alongside this one, and will
be prioritised accordingly post decisions on the current 5 Year Plan submissions.
In addition, our current forecasts suggest we will release additional amounts from net profit. None of this has been
made available for change spend, with some £47m set aside as contingency for the GLO (as noted in previous funding
report). This is also discussed further in the 5 Year Plan and longer-term strategy papers being submitted.
We are requesting a payment of £7m for Q2 against qualifying spend of £46m. Up to the end of June 2019 we have
received £203m, and this drawdown would represent the final payment of our agreed £210m funding from BEIS, as
agreed under our 3 Year Plan Funding Agreement.
To that end, we confirm that the funds requested will be spent on transformation, in accordance with the priority areas
set out in the Three Year Plan that underpins the Funding Agreement. For the avoidance of doubt none of the funds will
be spent on anything that is not related to transforming and improving our business as envisaged in the Three-Year
Plan. We also confirm that the expenditure is controlled by the Executive Investment Committee and is regularly
reported to the Board and UKGI as part of this request. The controls over change spend and the reporting of change in
our Annual Report and Accounts are within the remit of the Board’s Audit, Risk and Compliance Committee.
Input Sought
The Board is asked to note the contents of the paper, including the approach of FY19/20 Budget for Change Spend,
approve the request of £7m funding for Q2, giving delegated authority to Al Cameron to finalise the precise details and
supporting documents with UKGI.
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Tab 5 Finance
POST OFFICE PAGE 3 OF 6
The Report
1. What happened in Q1?
1.1. Summary View
In Q1, we spent £35m against £43m forecast, an underspend of £8m as follows:
Project Spend Project Benefits
Ql FY1920 I Qi FY1920 ie Q1 FY1920 Q1FY1920 es
Vi Vi
Strategic Priority ‘Actual Budget fariance Actual Budget fariance
Simplify the retailer proposition 13.6 12.0 16 49 5.0 (0.1)I
Modernise our products and services 85 12.2 (3.7) 55 63 (0.8)
Build innovative, flexible and secure IT 39 72 (3.3)] 19 2.0 {0.0)I
Digitise and optimise the business 2.6 49 (2.3)I 09 09 (0.0)I
Modernise our skills, polices and processes 18 22 (0.4) on os (0.4)
Non-UKG! Funded 44 4.0 0.4 04 1.0 {0.5)
Total Change Spend 348 425 {7.79} 137 15.6 (1.8)
A list by major projects showing detailed variances for spend and benefits is attached as Appendix 1.
1.2. Key variances within this underspend:
1.2.1. Simplify the retailer proposition: £1.6m
Further franchising DMBs: £2.6m
© Sale of assets: £1.9m delay in sale completions however there is no risk to the full year forecast.
© Onerous Contract & Vacant lease Provision: £0.6m Provision has been audited by PwC in light of the IFRS 16
new accounting standard implementation, an accurate forecast of utilisation for 19/20 has been provided in
the updated 3+9 forecast submission.
Solar Full (HNGT): (£1.4m) Project is being re-assessed to get projected cost base down, as a result, work on Payzone
integration, retailer integration, legal advice and smart meters has been delayed into Q2 from Q1.
Agents / Postmasters Portal: £0.4m Correction of YTD cross charges and ramp up of project delivery to meet targeted
branches live
1.2.2. Modernise our Products and Services: (£3.7m)
Telco Investments: (£1.1m)
© Telco - Project Nuance: (£0.6m) Phasing difference since original plan was submitted due to payment
reworks with suppliers.
© Telco - Tech Refresh: (£0.3m) Delay of payment increment, has now been moved to Q2.
© Telco — Telecoms Strategy — Business Model: (£0.3m) Part of this variance relates to Telephony routers,
offsetting minor overspend, and the other element relates to fibre routers which is currently below run rate.
Digital Developments: (£0.6m)
© Branch Discoverability: (£0.3m) Project has been re-scoped as part of reprioritisation process.
© Website Refresh: (£0.1) Project has been assessed as BAU opex spend and has been removed.
© Digital Trading Team (£0.1m) & Digital Remittances (£0.1m): Projects have been delivering slightly behind
plan, phasing has been reviewed as part of the 3+9 forecast submission.
Falcon Peregrine: (£0.6m) Project spend has been re-profiled now post further finalisation work being done, updated
forecast has been provided in the 3+9 forecast submission.
Vehicles: (£0.5m) due to delays in contracting for new vehicles.
Eagle: (£0.4m) Budget has been flat phased to not impact balance sheet.
Strictly Confidential
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POST OFFICE PAGE 4 OF 6
© Identity Services: (£0.3m) Delay in assess period of Digital Check & Send Hardware Modernisation project, business
case will be submitted in July.
1.2.3. Build Innovative, Flexible and Secure IT: (£3.3m)
© PCI/Payments Hub: (£2.0m) Delays to project due to supplier (Ingenico) being slow to begin the design phase of the
project
© IT Service Transformation Programme (Nelson): (£0.4m) Delays to project around transition timetable from ATOS,
some decisions have now been made, with timing now updated in 3+9 forecast.
* Risk and Resilience: (£0.3m): There are likely to be small variances on timing of this spend, as it is predominantly a
reactive fund to deal with IT service issues as they arise.
© Project Everest - Cloud Enablement: (£0.2) Project pausing; residual resource spend on project finished in P3.
1.2.4. Digitise and Optimise the Business: (£2.3m)
© HR programmes: (£1.4m) Further scoping and strategy agreement has delayed ramp up of Blueprint spend.
© Property: (£0.6m) Phasing difference due to delay in business case approvals.
1.2.5. Modernise our Skills, policies and processes: (£0.4m)
© Back Office Systems Transformation: (£0.4m) Variance is phasing related due to delayed spend on resources whilst
final system and process finessing is completed.
1.2.6. Non-UKGI Projects: £0.4m
© Group Litigation: £1m Higher levels of legal spend than originally forecasted.
© Other Smaller Projects Regulatory: (£0.3m) Slight underspend in projects Fit & Proper, Joiners, Movers & Leavers and
Records Retention
© Central: (£0.2m) Central VAT adjustments
1.3. Benefits
Benefits Delivered lower than forecast mainly due to:
© Falcon ~ Peregrine: (£0.7m) Delay in benefit delivery due to delay in Peregrine contact signing.
* Project Panther: (£0.5m) Differences in Post Office vs PayZone vat recoverability and other cost challenges vs acquisition
modelling. Also beginning to invest in infrastructure required to support British Gas exclusivity ahead of revenue and
create sustainable BAU team. Benefit gap in 19/20 will start reversing from Q4 when BG contract kicks in (70m
incremental transactions pa).
© Back Office Systems Transformation: (£0.4m) Delay in some project benefits due to cost impact of embedding and
‘optimising solution post go live.
Strictly Confidential
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POST OFFICE PAGE 5 OF 6
2. What Q2 spend are we proposing?
Change Spend for Q2 is expected to be £52m, delivering Q2 benefits of £17m and will mainly consist of deliveries of the
strategic projects which are already in execution phase.
Project Spend I I Project BenefitsI
Strategic Priority Q2 FY19 Q2FY19
Simplify the retailer proposition 16.1 55
Modernise our products and services 114 69
Build innovative, flexible and secure IT 4s 2.3
Digitise and optimise the business 113 13
Modernise our skills, polices and processes 1a 05
Non-UKGI Funded 74 0.6
Total Change Spend 51.9 17.0
Under our funding agreement we can claim up to £42m of investment funding for the 19/20 annual period. Within the
proposed £51.9m Q2 forecast spend, £44.5m will qualify for investment spending funding from UKGI, with a proposal to
request £7m of funding in this cycle, which represents the final payment in the cycle.
Key Q2 works include:
Group Litigation: £5.6m
DMB Strategy: £5.3m
HR Programmes: £4.6m
Supply Chain & Back Office Improvement: £3.9m
Post Office Insurance Investments: £3.6m
Paystation Completion: £3.4m
Network Expansion: £2.7m
Telco Investments: £2.6m
3. What is our expectation of full year spend and benefits?
We are expecting investement spend of at most £174m for FY19/20, with cumulative annual benefits of about £76m, and
incremental benefits of £39m.
coi FY19 In Year
Strategic Priority FY19 Spend FY19 Benefits aa
Simplify the retailer proposition 503 24.3 13.2
Modernise our products and services 41.0 31.0 15.1
Build innovative, flexible and secure IT 26.4 9.2 38
Digitise and optimise the business 317 47 12
Modernise our skills, polices and processes 3.6 2.0 19
Non-UKGI Funded 213 43 3.2
Total Change Spend 174.2 75.6 38.5
A list by major projects showing in-year spend and benefits across 19/20 period is attached as Appendix 3.
Strictly Confidential
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POST OFFICE PAGE 6 OF 6
4. Can we afford the proposed spending?
In our Three Year Plan we planned for a cash spend of £445m. Including non-cash spend (£21m), GLO spend (£28m) included
elsewhere and the brought forward spend from 2017/18 (£26m), the equivalent total change spend is £520m for the period
to March 2021. We are currently assuming change spend over the three years of £520m, plus an additional £20m for the
Payzone acquisition, including future earn-out payments.
£445m was predicated on the assumption that we would spend all our incoming cash (net profit plus investment funding) but
would not borrow significantly to fund investment. Whilst this logic is still being adhered to, further incoming cash
‘opportunities and investment opportunities, beyond the scope of the original Three Year plan are now being discussed and
presented through 5 Year strategy documents, which also discuss affordability.
We are currently planning 2019/20 change spend of £174m or less, post continued prioritisation, with 2020/21 currently
flagging investment options of £149m, however, a large portion of this is for initiatives beyond the scope of the Three Year
Plan, and so will be prioritised in line with decisions around the longer term 5 Year strategy currently being discussed. We will
therefore be re-evaluating our investment levels throughout 19/20 before finalising a 20/21 Change Plan in March 2020..
To ensure that this Plan is deliverable we will continue to monitor and optimise the capacity and capabilities of our teams and
suppliers. We are also using Critical Success Factors, that Platinum and Gold initiatives are evaluated against to increase the
likelihood of successful delivery, and we will continue to report against these on a monthly basis.
5. What investment funding are we requesting from BEIS?
Under our funding agreement we can claim up to £210m of investment funding. We have already received £203m up to the
end of June 2019, and we are requesting the remaining £7m for this coming quarter.
Strictly Confidential
POL Board Meeting-30/07/19
Tab 5 Finance
POST OFFICE
6. Appendices
PAGE 1 OF 6
APPENDICES
6.1. Appendix 1 — Q1 Project Spend & Benefits versus Budget
eter er Actual Budget
‘Simplify the retailer proposition 13.6 12.0 16 49 $.0 {0.)]
Further franchising DBs 36 30 26 25 25 (0.0)
Multiyear Crown Project 00 : oo 16 16 o.)
Network Bxpansion 30 26 03 os 09 (on
Solar Full (HNGT) 29 43 (2.4)] = ~
SelfService Kiosk (S58) 03 oa 02 -
‘Agents /Postmasters Portal 17 13 o4 al 00
‘Automation Strategy : oa (oa - : :
Other Smaller Projects Simplify oa 03 (02) (00) 00
Modernise our products and services 85 12.2 (3.7) 5S 63 {0.8)I
Mails Projects 03 02 02 : - >
‘entity Services Investments 03 06 (ol 06 06 00
PO insurance investments 42 42 (0.9 os 08 :
Vehicles 0a 06 (os
Project Galaxy (oa) ‘oa (0.0) 34 34
Telco Investments 12 22 (2.1)] = ~ =
Falcon -Travel Hub 00 : 00 09 oa ox]
Falcon -Peregrine 19 2a (0. 06 13 (0.7
Digital Developments oa 10 (0. (oo 04 ox]
taele 00 05 (0) -
Youth Strategy on 03 (0.2)} ~
Other Smaller Projects Modernive 01 03 (02) zi
Build innovative, flexible and secure IT 39 72 (3.3) 19 2.0 {0.0)I
Project Everest -Cloud Enablement 13 15, (02) 07 07 oa
Riskand Resilience 06 10 (0.3) :
PePayments Hub 04 24 (20) -
FUC ranch Deployment oa 02 (out) 02 02
Endoflife Replacements 02 02 (00)
Branch rinter Replacement (oa) 00 (oa 03 03
TT Service Transformation Programme (elson) os 08 (oa) 03 03
CDP re-procurement 0.0 oO (0.1)] 0.2 02
Project Trafalgar o7 o4 03 -
Integration, Micovervices & Player oa (oa) :
TTsecunty stateay 00 02 (oa
Network Evolution and Enhancement : oa (02) : : :
Other Smaller Projects Build 0.1 on (0.0)] 03 03 {0.1)]
Digitise and optimise the business 26 49 (2.3) 0.9 29 {9.0)I
Supply Chain and Back Office improvement 07 03 03 oo{ (oo oa
Property 09 is (0.6)] - - -
ai strateay Arrow) 03 os (02)
HR Programmes 04 18 (ua 09 10 ‘on
LRG Programmes: 0.0 03 (0.3)] =
Other Smaller Projects Digtise 03 os (02) -
Modernise our skills, polices and processes: 18 22 40.4) OL os (0.4)]
BackOffice Systems Transformation 18 22 (oa) 01 0s (oa
Ten ukGI Funded a4 40 0a 04 Fry a
Central oa] - (02)
Group tigation 34 za 10 :
GDPR 0.0 O41 (0.0)]
Project Panther {integration costs only) 06 O7 (0.1)] 04 1.0 {0.5)I
Other Smaller Projects Regulatory 05 o (03) - - -
[Total Change Spend 34.8 42.5 {7.7) 413.7 15.6 (2.8)
IOf which qualifying for UKGI funding 30.4 38.5 (3.2) 13.3 14.6 (2.3)I
Strictly Confidential
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POST OFFICE
6.2. Appendix 2 — Q2 19/20 Funding Request
Q2 Spend I Q2 Benefits
Simplify the retailer proposition 16.1 55
Further franchising DMBs 5.3 3.0
‘Multi-year Crown Project : 16
Network Expansion 27 0.9
Solar Full (HNGT) 17 -
Self Service Kiosk (SSK) ot :
Agents /Postmasters Portal 1.6 -
Other Smaller Projects Simplify 46 -
Modernise our products and services 14 69
‘Mails Projects 05 :
Identity Services investments 1.2 06
PO Insurance Investments 3.6 12
Project Galaxy 0.3 3.4
Telco Investments 2.6 :
Falcon Travel Hub : 0.0
Falcon Peregrine 1.2 18
Digital Developments 0.8 (0.0)
Eagle 0.2 :
Other Smaller Projects Modernise 10 :
Build innovative, flexible and secure IT 4s 23
Project Everest -Cloud Enablement 0.7 06
Risk and Resilience 1.0
Pci/Payments Hub 1.0
EUC Branch Deployment 0.0 05
End-of Life Replacements on :
Branch Printer Replacement : 0.3
TTService Transformation Programme (Nelson) 13 0.3
COP re-procurement 02
Project Trafalgar 0.0 :
Security Strategy 03 :
EUC/Computacenter on :
‘Network Evolution and Enhancement on -
Other Smaller Projects Build 04
Digitise and optimise the business 11.3 13
Supply Chain and Back Office Improvement 3.9 03
Property 14
Bi Strategy (Arrow) 0.3 :
HR Programmes 46 10
LRG Programmes 08 :
Other Smaller Projects Digitise 05 -
Modernise our skills, polices and processes 14a 05
Back Office Systems Transformation 1a os
Non-UKGI Funded 74 0.6
Group Litigation 5.6 0.0
Project Panther (integration costs only) 12 06
Other Smaller Projects Regulatory 07 :
‘Total Change Spend 51.9 17.0
lof which qualifying for UKGI funding 445 165
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APPENDICES
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APPENDICES
6.3. Appendix 3 — FY19/20 Full year expectation on Spend and Benefits
Projed Spend 308 Submission Project Benefits 309 Submission
arrvis I azevis I asrvi9IaaevisI Fri arvis I azrvi9 I asri9 I aarvis I Fr9
Sino th tne rope was] tea] soa] ia] s3.0 oe es] 234
Turtherfanchising DBs 36 saI__aa[ _ssI__a96 2s[ 30 33 34 122
TMul-year Grown Project 00 : 00 16 16 16 16 63
Network Expansion 30 zzI__asI 30] aaa os] 09 10 2 39
Solar Ful NT 29 izI__20f a7] a2
SelfSenvice Koskt6SK) 03 oat oa] o7[ aa
Ages /Postmastes Porta 1 rs[_o7[ os] ag : oa) wal toa)
Paystation Completion
Other Smaller Projects Simoify oa as[ _23[ sala os] 06 rey
odermse our produetsand ences a5 nef 9a] aa ee ee
Mails Projects 03 aa[ 22] aa - :
entity Serdces investments 03 xo[ oa] __3s os] 06 05 15 22
PO surance investments 42 36] 22] 16] aaa 08 12 24 26 63
Vehicles 02 =I 2a] as : :
Project Galaxy ‘oy oa] o7I oof 9) 34 Fry 34 aa ass
Teo nvestments 12 zs] _19I _as{__7a - o2I 02 04
Falcon Travel ab 00 : : 00 oo] oo oof (00) ou
Talcon-Peregine 19 iz] __o7I ov] aa 06 18 18 Le 53
Digital Developments 04 os[ oa 12 oof oof 02 07 07
eae 00 o2{ oaI oa] os on on o1
Youth Svateay on : As : - :
Other Smaller Projects Moderne oa io] 30 40 [or oF
Build innovative, Renble and secure FT 33 ov] res Be es ial as I ies 92
Project Everest- loud Enablement 13 o7I is[ a8] 56 ar[ 06 os] 06 26
Riskand Resiience 06 xof a2] _aal_39 : :
PC/Payments Hub oa xo] 22] 2a] 59 - :
Tuc ranch Deployment 01 aoI 00 02 a2 os osI os 7
nd oft Replacements 02 cal 00 03 : : :
ranch Pinter Replacement (oa) : : -[ al oal oa eal oa a2
Tservice Transformation Programme Welson) 05 ial _o7[ oa] 29 aaa 03 oa 10
CoP e-procurement 00 : 00 02 02 o2I 02 09
Project Tala 07 00 -[ os - : :
Tr security Strategy 90 af oaI _oa[ oa : :
TU /Computacenter oa o2[ 02] __os
‘Network Evolution and Enhancement : oa 02] 02] __os : : 02 02 oa
Other Salar Projects Bld oa : : ~ [es oa a8 oal oa 4a
Dighce acd optimine the buses Ye ar ees 09 2 Bes 72
Supply Chain and Hack Ofc Imorovement 07 ao] as] sof aaa oo] 03 cal _o7 1
Property 09 aa[_ az] os aa : :
strategy row) ry oaI o6[ os] a8 : : : :
Wi Programmes 04 as] oa] 3a[_sa 09 10 18 22 59
RG Progrommes 00 os] os] cal ae
Other Salerroecs bigtve 03 os] al os[__as - ol of toa
Moderise ou sills plicesand processes ia aif os] oa] ao rl asI os] os 16
Backofice systems Transformation 18 aif osI oa] 40 on 05 os] os 15
Ton uxGiFunded aa riers) ee id es: 3 30
Group Utgaton 34 se] as] _a2]__a77 00 oo] 00 on
corn 00 00
Projet Panther nregrationcosts onl) 06 wz] _aa] 2a] 7a cal 06 07 13 30
ther SalorProects Repultory 05 ov] o7I_oaf_ a or) I
Fatal change Send jaa] sia] aaa] aes] _a7a0 eS eo
rveich quativing or URGIunaing weal ms] 36s] 396] 1509 Prien ee ee
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6.4. Appendix 4 - Key Delivering projects
Simplify the Retailer Proposition
Network Programmes
In the FY 19/20 we plan to franchise 69 DMBs of which 28 have already been delivered and 30 further franchises are at contract
stage or beyond. The balance are at earlier stages in the pipeline, for delivery in Q4. As part of Network Maintenance we also
plan to create 220 NNLs, convert 30 Mains to Locals and deploy Outreaches where necessary to support our target of 11,500
branches.
Solar Full (HNGT)
Solar is a critical part of developing our Retail and IT Strategies. It is a pre-requisite for delivering the new ‘PO Express’ format,
as well as building a new, device-agnostic transaction system that can be delivered through a range of devices. It will also help
us convert Mains branches to Locals through retailer point-of-sale (RPOS) integration.
Agents/Postmasters Portal (Branch Hub)
Branch hub is a self-serve portal that branch operators can use to access support. During the current year the project team will
build further functionalities into the portal, on a prioritised basis, to improve operator journeys and back office operations
generating cost savings from back office efficiencies.
Modernise our Products and Services
Post Office Insurance
Post Office Insurance key delivering projects for the next year are the following:
Travel Continuous improvements (Cronus II) — Focus is very much on the proposition to improve the customer experience and
conversion rates with the introduction of an improved contact centre journey and branch offering, proposition alignment and
additional services.
Home Insurance Reengineering (Nemesis) ~The Programme to transform the Home Insurance Proposition commenced in June
2018 and will continue design, development and testing ahead of a go live for new business in October 2019 with migration of
the existing customers occurring post go live at customer renewal.
Pricing Capability and Data Analytics - Following business case approval in December 18 the Programme have completed the
discovery phase in 2018/19 and will commence design, development, test and build in 2019/20. Delivery will be phased and
will include Travel and Home Insurance, Price Optimisation within the quote and buy, MTA and Renewal journeys with the
ability to respond and rapidly change and amend models in addition to a Data Warehouse with an Analytics platform for Pricing
and CVM modelling and visualisation.
Mails Programmes
Mails Programmes focus for the next year is around Mails Multi Channel Customer Journeys a project that will define and
deliver an optimal digitization of mails customer journeys (Mails component of customer hub) and Mails Strategy and the
development of a sustainable future with Royal Mail including a long-term agreement that will secure our mails income for
future years.
Identity Services Investments
Identity Services Investments spend for the next year is mainly focused around the following projects:
Digital Identity - a project that will evolve the existing Verify product into a broader digital identity solution that can be used
across a wide range of public and private sector applications, thereby building our user base and establishing new revenue
sources beyond government.
Digital Check and Send Hardware Modernisation — a project that will extend and potentially replace the AEI network, using
cheaper and smaller solutions such as tablets or Horizon peripherals, vital to defend our market share as paper passports are
phased out and to support a broader range of identity transactions in branch
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Telecoms
Telecoms projects included in this category are as follows:
Telco Nuance — a programme to leverage market leading solutions to enhance the customer contact management capability
of Telecoms through telephone & online channels, ultimately reducing call centre costs for Post Office and improving customer
experience.
Telco Strategy — a project to address options to build a solution to the Telecoms contract with FJ ending in August 2020.
Telco Routers - that includes cost for router replacement
Project Galaxy
The Project is mainly an umbrella of Telecoms projects in response to industry regulatory changes including: Galaxy ~ response
to the Ofcom regulation around Home Phone pricing, Proposition 2— response to notification from the ASA, Code of Practise —
a project to ensure we comply with Ofcom code of practice.
Eagle
Contractual agreement with Bank of Ireland for POL to invest on the product suite.
Falcon — Peregrine
Peregrine — Renegotiations with Bank of Ireland.
Vehicles
Capital spend for purchase and refit of vehicles to maintain required fleet numbers and standards.
Build Innovative, flexible and secure IT
Project Everest - Cloud Enablement
The project will be focused on the build of cloud solution to replace systems currently based in Fujitsu datacentres.
Risk & Resilience
The projects relate to maintenance of IT budget to deal with small pieces of work (predominantly reactive) that are required
to maintain service levels and make minor efficiency improvements where possible.
Payments Card Industry (PCI)/Payments Hub
Post Office is subject to Payment Card Industry (PCI) regulations and this project is driving increased levels of security and
encryption in our systems to remain compliant with these.
Project Trafalgar (Change excellence)
Continuation of project to further standardise and improve the delivery of change works throughout the Post Office.
Network Evolution and Enhancement
New Project with scope to deep dive on IT network infrastructure and commission small, medium and large-scale changes to
the infrastructure to make it more efficient. Verizon cost reductions from changes implemented.
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Digitise and Optimise the Business
Supply Chain and Back Office Improvement
Swindon Strategy - review and transition to the best long-term model for our Swindon Centre and the services we run out of
it
Process and Contact Centre Transformation - a series of works to transition and reshape the Process and Contact Centre teams
to better align them with the business and increase cost efficiency.
Network Operation Transformation - a series of works to transition and reshape the Network Operations to make them more
efficient and able to provide improved support to the Agent network.
Property
Capital spend for maintenance and improvements of wider property portfolio.
BI Strategy (Arrow)
The Data project, covering strategy, governance and delivery, has been paused pending the IT team agreeing the future of
Credence,
LRG Programmes
Legal Entity Optimization - Project to ensure that the organisation has the right legal structure to deliver its North Star strategy,
ensuring regulatory governance is only applied to the regulated activities and to support the wider strategic plans of the
business.
HR Programmes
Predominantly Blueprint related initiatives.
Modernise our skills, culture, HR policies and processes
Back Office Systems Transformation
Project for the replacement of core Back Office Systems including the decommissioning of POLSAP. Project has now been
delivered, however due to delays in the project's go live date cost related to closing activities slipped into the following financial
year.
Non UKGI Funded
Project Panther (integration costs)
Project spend is mainly focused on the integration of the Payzone acquisition and also funding on additional technology,
signage and transport earn out cost. The project is expected to generate net revenue, which is made up by current Payzone
revenue, new contracts & a number of new initiatives (smart ticketing, cross network sales). (Payzone £16m acquisition has
been completed in FY1819 with some elements still to be delivered in the following two years requiring additional £1.4m in
FY1920 and £2.0mil in FY2021
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Tab 6 Annual Report and Accounts 2018/19
POST OFFICE PAGE 1 OF 3]
BOARD PAPER ADVISORY PAPER
Annual Report and Accounts 2018/19
Author: Tom Lee Sponsors: Micheal Passmore, Al Cameron Date: 30 July 2019
Executive Summary
Context
The final 2018/19 Annual Report and Accounts (ARA) is presented to the Board for
review.
Questions addressed in this report
The following questions are addressed in this report:
1. In summary, what were POL’s financial results for the year ended 31 March 2019?
2. What is the status of the audit work on the ARA?
3. What matters are we drawing to the Board’s attention in their review?
Conclusions
Post Office reported a trading profit (EBITDAS) of £60 million (2018: £35 million), an
improvement of £25 million, comprising a small increase in commercial turnover and a
number of cost reductions. Net assets increased to £244 million (2018: £203m).
During the ARC meeting on 23 July, PwC confirmed their agreement of the numbers
presented in the ARA. It was noted there were no material findings identified during the
audit and an audit committee report was presented to the ARC to confirm the
procedures performed and conclusions drawn.
PwC will provide a verbal update during the ARC meeting on 29 July regarding the status
of the final audit procedures, and look to conclude on the Group Litigation disclosure,
in order to confirm that signing of the ARA can proceed as expected, with a target date
of 2 August.
The GLO disclosure is a separate paper presented by Ben Foat, for discussion at the
Board and ARC. The ARA makes reference to this paper, but does not include detail until
the paper is reviewed and agreed.
Input Sought
The Board is requested to review and comment on the ARA for the year ended 31 March
2019 and, subject to the outcome of PwC’s verbal update, approve and delegate the
ARA for signing.
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POST OFFICE Page 2 of 3
The Report
In summary, what were POL’s financial results for the year ended
March 2019?
1. Post Office made an underlying operating profit of £6 million (2018: £47 million) and
reported a trading profit (EBITDAS) of £60 million (2018: £35 million). This
represents a trading profit improvement of £25 million on the prior year. Trading
revenue increased year on year by £16 million to £972 million principally as a result
of growth in Identity and Insurance business areas, with continued growth also noted
within Banking Services. This was partly offset by the anticipated decline in our Post
Office Card Account income stream. The focus on controlling and reducing the cost
base generated a reduction in direct costs of £1 million to £959 million (2018: £960
million).
2. On the Post Office Group balance sheet, net assets have increased from £203 million
to £244 million. Notable changes driving this increase include an increase in tangible
and intangible assets of £55 million, a decrease of £83 million in cash and a decrease
in the government loan of £58 million.
What is the status of the audit work on the ARA?
3. During the ARC meeting on 23 July, PwC confirmed they were satisfied that the
numbers presented in the ARA were materially correct.
4. Asmall number of uncorrected misstatements were identified and presented to
ARC on 23 July, none of which impacted Trading Profit. Adjustments focused
around balance sheet reclassifications and discount rate used within the onerous
lease and dilapidation provisions.
5. PwC raised four management letter comments, all of which were presented to ARC
on 23 July and management responses have been provided. These will be acted on
during 2019/20 where needed.
6. As at 23 July PwC had a small number of outstanding audit procedures to
complete, which were focused around file documentation and agreement of the
Group Litigation disclosure. PwC will present a verbal update on status during the
ARC meeting on 29 July.
What matters are we drawing to the Boards attention?
Payzone Acquisition
7. On 24 October 2018 Post Office Limited acquired Payzone Bill Payments Limited for
total consideration of £19 million, which comprises £16m fixed fee and £3m
contingent fee (of which £1m has been settled to date). The acquisition has been
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POST OFFICE Page 3 of 3
accounted for under IFRS 3 Business Combinations and has resulted in additions to
intangible assets of £7 million and Goodwill of £8 million. From the date of acquisition
to 31 March 2019, the Payzone business has contributed £4 million of revenue and
£1 million to trading profit.
Note Circulation Scheme
8. In the 2018/19 Annual Report and Accounts we have included an explanation of the
Note Circulation Scheme (NCS), in line with 2017/18, to provide greater
transparency to users. A reference is included in the Finance and Business Review
and note 22 includes a description of the scheme.
9. At the year-end £227 million (2018: £238m) was funded via the NCS. As in previous
years we do not disclose anything on the Balance Sheet but have taken a decision
to include narrative on the scheme in the notes to the accounts to allow the users
of the accounts to better understand our funding. In 2017/18 we agreed the
narrative included with the Bank of England and do not propose to amend it in the
2018/19 ARA. We have asked PwC to confirm that they agree with the off balance
sheet treatment and associated disclosure.
Group Litigation Order
10. The High Court claim is expected to remain ongoing beyond the signing date of the
ARA. The current disclosure in the ARA remains unchanged from 2017/18, being the
disclosure of the litigation as an unvalued contingent liability with no provision made.
A separate paper is being presented to ARC during the meeting on 29 July which
contains the proposed disclosure to be included within the ARA. Subject to the ARC’s
agreement, the disclosure will be updated in the ARA in line with the proposal
presented.
11. We have separated out the costs incurred in 2018/19 of £20m as an exceptional
item, which corresponds with the 2017/18 treatment. This classification has been
selected because the expenditure is not in the ordinary course of business and
anticipated total costs are material. Further spend is expected in 2019/20 but the
value cannot yet be estimated and no provision has been recognised.
12. PwC have been consulted on the disclosures and will present a verbal update on
their conclusions during the ARC meeting on 29 July.
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Group Litigation Update
Authors: Ben Foat, Julie Thomas, Amanda Jones Sponsor: Ben Foat Meeting date: July 2019
Context
The Common Issues Trial Judgment (CITJ) was handed down on 15 March 2019. It
reinterpreted our contracts with branch operators and was critical of our past practices
and culture. The Horizon Issues Trial (HIT) has now concluded and we are preparing
for an adverse Judgment, which could be as soon as mid-September.
Questions addressed in this report
1.
2.
How are we handling the trials and appeal; what is our potential path to settlement?
Since the CITJ, what changes have been made to provide better support to our
postmasters?
. How are we preparing for the HIT Judgment?
. What further work are we doing to improve our operational processes and our
relationships with postmasters?
. What have we budgeted and how much do we anticipate spending?
Conclusion
1.
By mid-September, the Court of Appeal is expected to give its decision as to whether
Post Office has permission to appeal the CITJ and Justice Fraser is expected to hand
down his decision in respect of the HIT. We are proposing to mediate with the
Claimants in October and this would be the first step towards a potential settlement.
. Since the CITJ, we have enhanced the support provided to postmasters with
improvements to initial training, loss recovery, suspension and termination
processes.
. We are working to ensure our business is resilient and well prepared for an adverse
Judgment from the HIT. Preparations include our readiness to deliver technology
and process changes, as well as communications planning.
. We are delivering activities to improve our relationship with postmasters and
improve the day to day operational support we provide to them. Postmasters have
been at the heart of this design process. We are moving to a support model with a
much-reduced reliance on call centres. Low-value tasks and basic enquiries will be
handled online in real time, with higher value-adding relationship management
handled face to face via field teams. A number of these changes are already in
place, with further changes being rolled out in stages this financial year and next.
. £22m of incremental Capex and Opex spend was budgeted at the May Board. £7.1m
has been committed so far, with an anticipated £14.9m yet to commit over FY19/20.
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Input Sought Input Received
The Board is asked to note this paper Our Legal, Operations and Retail teams
and endorse the approach set out. have contributed to this paper.
How are we handling the trials and appeal; what is our potential path to
settlement?
1. The Board Sub-Committee has been updated and provided instructions on material
developments in the Group Litigation since the CITJ was received in March of this
year.
2. On 23 May 2019 the Managing Judge refused permission for us to appeal the CITJ.
On 13 June 2019 Post Office applied to the Court of Appeal (CoA) for permission
to appeal the CITJ. This application was refiled in shorter form on 28 June 2019 as
ordered by the CoA on 18 June 2019.
3. The CoA’s decision on whether to grant permission to appeal could be delivered at
any time. The Court has however indicated that the decision is unlikely to be 7
received before mid-September 2019. If permission is granted, the CoA will then
set a hearing date. The appeal may not be heard for up to 12 months.
4, The HIT resumed on 4 June 2019 and concluded on 2 July 2019. The Managing
Judge has now retired to write his Judgment. He has indicated that this will not be
completed before mid-September 2019,
5. At the conclusion of the HIT, the Managing Judge moved the Further Issues Trial
(FIT) to commence on 2 March 2020, with a time estimate of four weeks. On 23
July 2019, the Managing Judge ordered that the FIT will focus solely on the legal
basis for the Claimants’ claims for financial compensation, which it will determine
on assumed facts rather than the specific facts of any individual Claimant's cases.
6. On 23 July 2019 the Managing Judge also gave directions for determining by early
December 2019 criteria for selecting “Test Claimants” in later (as yet unscheduled)
trials to determine issues of breach (i.e. whether Post Office acted wrongly),
causation (i.e. did that breach caused the harm for which the Claimant seeks
compensation), and limitation (i.e. is a Claimant’s claim time-barred).
7. The parties have been ordered by the Court to use reasonable endeavours to attend
mediation after the delivery of the CITJ. The parties have agreed that a mediation
should be held, and that Charles Flint QC of Blackstone Chambers act as mediator.
The Claimants have indicated to the Court that a mediation could be held in
October/November 2019, after the Horizon Issues Trial Judgment and the Court of
Appeal’s Judgment on the permission to appeal the CITJ have been handed down.
The Claimants are not however committing to a specific date pending those
judgments.
8. Work is being carried out ahead of mediation and any settlement discussions to
quantify areas of loss which the Claimants could reasonably expect to recover if
successful, as this will be central to the prospects of settling the Group Litigation
(whether through mediation or otherwise). Other factors being considered are how
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POST OFFICE BOARD PAGE 3 OF 8
9.
to approach claims made by Claimants who have already settled claims, are time
barred or have convictions, how settlement could interact with the Common Issues
appeal, and the impact settlement could have on historic claims brought by
postmasters who are not part of the current Group Litigation. External counsel are
leading on this piece of work, and our recommended approach and negotiation
strategy for mediation will be taken to the Board sub-committee in September.
A consolidated project plan in located in the reading room which sets out the
relevant milestones for the litigation, operational and agent relationship
workstreams.
Since the Common Issues Trial Judgement, what changes have been made to
provide better support to our postmasters?
10.The CITJ deals primarily with the contractual relationship between Post Office and
its network of branch operators. The Judgment reinterprets these contracts in a
number of ways, restricting some of Post Office's legal rights, striking down others
and imposing a wide-ranging general duty of good faith on both Post Office and
Branch Operators. The Judgment is also critical of Post Office's past practices and
culture; for example it refers to Post office being "oppressive" and operating a
“culture of secrecy".
11.Extensive work has been undertaken to assess the impacts of the Judgment across
all operational processes, with the most detailed reviews deliberately focussed on
the following areas: (i) onboarding of Branch Operators (ii) loss recovery processes
(including loss prevention, audit, investigations, loss recovery and transaction
queries); (iii) suspension; and (iv) termination.
12.Immediate changes have already been made to the areas outlined above to ensure
Post Office acts in good faith, i.e. transparently, fairly and reasonably, with integrity
and taking Branch Operators' interests into account. A detailed view of all the
process changes that have been made so far is contained in a Table of Operational
Changes which is available in the Reading Room. A summary of the most pertinent
points is set out below.
Onboarding of Branch Operators
13. Postmaster interviews are now delivered ‘in house’ to achieve a more seamless
journey for our Postmasters and maintain our relationship with them at every touch
point of their onboarding journey. There is also now a single point of contact for
each applicant who ‘hand holds’ prospective new postmasters from the initial
contact stage, through to the point of a contract being issued. We have also
introduced the Business Support Manager role to support the new postmasters for
up to 6 months and help embed their training; ensuring the postmasters and their
teams are set up for success.
Loss recovery processes
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14.The Judgment imposes numerous additional duties and requirements which impact
Post Office's loss recovery processes. Specific changes we have implemented to
address these requirements include:
a) Loss Prevention: creation of a new Branch Insights Tool to provide a basis for
discussion for Area Managers with branches, giving an early warning of possible
issues to enable support to be provided.
b) Audit: creation of an Audit Rationale Document so that the reason for an audit
can be shared with the Branch Operator; as well as various changes to improve
the quality and transparency of the audit process.
c) Investigation: creation of checklists to assist the Branch Support team in
investigating discrepancies in cash balancing; a Tier 2 escalation team now
provide further support to Branch Operators; and a Branch Review Tool is in
development to speed up the investigation time.
d) Loss recovery: the loss recovery function has been moved to sit within the new
loss prevention organisation structure to improve efficiency and transparency
across functions; letters sent to Branch Operators now use language which better 7
reflects the spirit of the Judgment; legal debt recovery action has paused pending
a full review and alignment to the Appeal process; call recording has been put in
place for outbound calls; and, deductions from remuneration are currently on
hold unless with agreement.
e) Transaction queries: narratives sent to the Branch Operator have been re-
written to improve clarity; and a new team has been set up to handle disputes
relating to Transaction Corrections.
Suspensions
Changes have been made to address the contractual requirements Post Office must
satisfy before it is able to suspend a Branch Operator and to reflect the fact that
Post Office is no longer contractually entitled to withhold remuneration during
suspensions. We are now continuing to make payment to Branch Operators who
have been suspended following the Judgment. Payment is based on average
remuneration during the 6 months prior to suspension. In aggregate this costs Post
Office £125k per month. We are currently reviewing our suspensions policy,
including replacing this with closer monitoring and limiting access to cash except in
the most serious cases.
Terminations
15.Changes have been made to address the new contractual requirements Post Office
must satisfy before it may terminate a Branch Operator. These include updates to
the Conduct Case Decision Document and changes to the language used in
termination correspondence with Branch Operators. These changes are designed
to bring transparency to the evidential process followed to support the termination
decision.
What preparations have we made for the upcoming Horizon Issues Trial
Judgment?
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16.Our planning assumption is that the day when the Judgment lands will be circa 16
September 2019 (“Day 1”). We now have a robust response plan in place, with
technical and organisational mitigations, owners, and timelines for delivery. Our
response can be framed as follows:
Activities prior to “Day 1”
We have translated the worst-case legal outcome into operational, commercial
and reputational impacts / risks - putting in place mitigations to, insofar as is
possible, prevent these impacts / risks from crystallising. Examples include
greater transparency in how we deal with and communicate issues and bugs;
improved processes to better test changes being made in the live environment;
and proactively scanning for issues and or bugs. Additionally, surge resourcing
for our support centres; enhanced branch controls for cash orders; monitoring
compliance issues including refusals to open branches / operate Horizon will help
to protect Post Office whilst settling branches.
Day 1 and beyond
a) We are standing up a parallel team of lawyers in readiness for Day 1 to
translate (at pace) the Judgment into what, in lay terms, it means for our
current operations, customers, agents, retail partners, corporate clients and
suppliers. This will allow our response to developed, actioned and
communicated swiftly.
b) We have established a user group of branch operators, who we have actively
involved in designing and prioritising a backlog of Horizon changes. These
changes are being made to make their lives simpler by reducing operational
and financial risks for both sides due to poor journey design. We have
established a Horizon ‘quick wins’ delivery capability with Fujitsu both to
deliver these changes and to be ready to make other Horizon changes at short
notice. We already have a series of initial Horizon changes that are in design
and development for release to the network in October. Following this initial
release, we have scheduled further Horizon software release windows for
every 6 weeks thereafter. This gives us the delivery capacity we may need to
work through any other software changes that we might not have already
considered.
17.Our response plan (which is available in the reading room) includes a comprehensive
communications plan and the briefing of all relevant teams and relationships
owners. However, we are clear that in circumstances of an adverse Judgment, we
need to act and cannot simply ‘talk our way’ through this. Our immediate focus will
be the discrepancy support team. We have been trialling a new approach to identify
the causes of discrepancies for operators and we have seen a 95% success rate
across 311 cases with the remainder being unknown causes. This process gives
operators an answer within a few days and is winning their confidence where they
may have otherwise blamed Horizon. We are ready to scale up this support in
Chesterfield as needed once the next judgment is made public. Recognising that
we need to serve our branches better, we have also put in train a series of more
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fundamental changes to improve our operational processes and our relationships
with postmasters as detailed below.
What further work are we doing to improve our operational processes and our
relationships with postmasters?
18.Since we updated the Board in May, a wide range of longer-term change activities
have been scoped, planned, resourced and mobilised. These changes are the right
thing to do for our business and our postmasters, irrespective of how critical or
favourable any HITJ might be. Delivery of these is well under way.
19.We have listened to postmasters and are reshaping our support offer to them in
response, We are creating a new support model, moving from telephone support to
online support for day to day processes, but supplementing this with increased face-
to-face time with relationship managers in the field.
20.As we roll this model out, postmasters will benefit from “always on” real time online
support. This support will reduce the need for long call times to resolve simple 7
queries and issues, reducing hand offs between teams and removing inconsistencies
in processes. The new model will also reduce risks both to postmasters and to Post
Office through earlier identification of said risks, as well as providing greater
traceability and transparency in everything we do. Concurrently we are improving
our onboarding processes, improving postmaster training, increasing face to face
support for postmasters, and reviewing agent remuneration. Our primary change
activities are summarised below:
21.Improving Branch self service and support. We have a plan of work which will
digitise support services in stages over the next 12 months. In 18/19 we received
around 389,000 calls and 120,000 emails in to the NBSC. We aim to reduce these
by circa 70% by 2020/21. Our changes include: online cash and stock ordering;
moving basic process enquiries online; revising “how to” guides and introducing
more video tutorials; onboarding and vetting of branch staff online; and online IT
support for our branches. The primary platform for this is the mew Branch Hub
portal. The initial platform has been built, a pilot is underway, and we are now
accelerating the rollout and development of services that will be delivered on this
platform, with cash and stock being prioritised for transparent tracking. Digitisation
of the services we provide will improve branch operator experience. Functionality
and information will be available instantly in an easy to digest format versus current
processes which require phone calls or trawling through numerous Horizon screens.
22.Improving Horizon and designing out transaction corrections: By the end of
July we will have analysed the causes of the c125k transaction corrections (TCs) we
had to make over the last year. These are a cause of risk for Post Office, our branch
operators and our third-party clients such as banks. We will identify the suite of
process, data and system changes we need to make to eliminate the root causes of
each type of TC. Our ambition is for a reduction of over 70% of TC volumes in stages
between now and December 2020, with a commensurate reduction in the
approximately 50 FTE who are currently employed to process them.
23.Transforming contracts and loss prevention: We wrote off £6m of losses in the
last 12 months and due to changes driven by GLO our rate of write-off of losses is
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POST OFFICE BOARD PAGE 7 OF 8
increasing. We aim to arrest the rate of increase in FY19/20 and reduce the value
of losses written off to £4m in FY20/21. Approximately 10% of branches do not
follow the recommended process for cash declaration and remittance each day or
week - a key ‘red flag’ for a branch building up losses. We will reduce this to 1%
by the end of 2020/21 by bringing in more controls. We have formed a new Loss
Prevention function with new leadership and are moving our Loss Prevention
capability from a reactive and largely manual function to one that uses more root
cause analysis and data analytics to look ahead and make interventions that prevent
losses from happening in the first place. This provides benefits for branch operators
as well as Post Office, with interventions such as troubleshooting guides through to
targeted training and support to improve compliance and performance. Where
suspected losses do occur, we will provide tools for the branch operator via Branch
Hub to better analyse their own position and how it has occurred, making getting
to a resolution a faster process. On our side, we will use a redesigned set of KPIs,
processes, risk assessment tools and case management software to ensure a clear,
robust and transparent end to end processes with a single version of the truth
throughout.
24.Redesigning the operations organisation: Based on the reduced workload
driven by moving branch support processes online and reducing transaction
corrections we will reduce headcount in Operations by the end of 2020/21 by up to
a third (from approx. 350 to 230 FTE). Further potential savings are likely to be
identified as our design work progresses. This reduction in staff would provide
savings of around £3.9m p.a. Our target model for Operations will continue to
require a Branch Support Centre in Chesterfield as a first point of contact when
things go wrong, but with fewer resources and different skills. Roles that currently
sit across NBSC, FSC and the IT service desk in Chesterfield and those in Bristol
cash centre will move into this transformed Branch Support Centre, creating a one-
stop shop for branch operator support. We will design the future organisational
structure for the Operations function from a zero-base, based on the future services
that it will provide to branch operators.
Improving operator onboarding: We will reduce the time for applicants to
complete a business plan from 60-90 days to less than 30 by the end of 2019/20.
We will also reduce the number of unsuitable applicants who enter the process
through better pre-screening questions and reduce the drop-out rate by 50%.
Critically, the ‘Run a Post Office’ website (RAPO) is being overhauled to make it more
user-friendly and to work better on mobile platforms and the Electronic Business
Plan which postmasters find complex and personally and financially intrusive is being
significantly streamlined;
25.Redesigning operator training: We have designed an improved training offer
for new and existing postmasters which will reduce the likelihood of operational
errors and improve overall customer experience. By 25 August, we will have
increased classroom trainers by 6 FTEs, onsite trainers by 10 FTEs and field support
by 8 FTEs. We are increasing our classroom capacity and reach from 12 to 18
locations nationally and improving the classroom environments. New training
modules are being developed and will be running from August 2019. These modules
will address some of our biggest drivers of risk e.g. back office and balancing
training.
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26.Reviewing agent remuneration: We have commenced the review of Agent
Remuneration adopting a qualitative and quantitative approach to determine our
recommendations. This is covered in more detail in a separate paper at July’s Board.
27.Improving field support: We updated the Board in May that we had changed the
field team structure to provide a nominated point of contact, an Area Manager, to
support every Post Office, regardless of size and location. This change has been well
received by the c6,000 postmasters who have since received a visit, some of whom
are seeing someone from the Post Office for the first time in over a decade.
Improved Management Information is enabling our field teams to help postmasters
identify opportunities to improve their sales and remuneration, with a common play
book of solutions such as developing local marketing, improving the retail offer and
investing in store design.
28.Investing to improve our operational processes and our relationships with
postmasters will also improve the wider financial health of our business. Reducing
risks and reducing costs are compatible in this instance. In summary we anticipate
achieving a £5.9m (annualised) reduction in our Operations cost base by the end of
FY20/21, comprising a £3.9m reduction in staff costs and a £2m reduction in losses.
What have we budgeted and how much do we anticipate spending?
29.At May’s Board meeting we set out £22m of anticipated incremental spend on items
which would not otherwise have been delivered during FY19/20. Against this spend
£7.1m has been committed so far, with an anticipated £14.9m to be spent over the
remainder of this financial year.
19/20 FY
£m Committed
Opex spend
‘Agents Remuneration — reverse Mails simplification 35 : 35
Agents Remuneration for suspended Postmasters 15 15 -
Agents Remuneration — deep dive 05 05 -
Legal work regarding policies and processes 2.0 02 18
GLO Communications 05 - 05
‘Simpler business ~ training and engagement 12 1.2 :
Impact on Change plan reprioritisation 05 05 -
BAU impact of process changes (placeholder) 2.3 0.2 24
Opex total 12.0 41 79
‘Change spend
Horizon changes (quick wins) 25 : 25
Branch hub initiatives 15 : 15
Simpler Business — HotHousing to accelerate field structure 3.0
benefits 29 0.1
Design of new processes (including loss prevention) 2.0 O21 19
POL workforce changes (Restructures etc.) 1.0 - 1.0
Change total 10.0 3 7.0
Total 22.0 71 14.9
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POST OFFICE BOARD Update Paper
ally Priv
Author: Laurence O'Neill and Ben Foat Sponsor: Ben Foat Date: 30 July 2019
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Project LEO Update
Authors: Ben Foat Sponsor: Ben Foat and Owen Woodley Meeting date: 30 July 2019
Context
The retail FS strategy seeks to build long-term customer relationships, through Post
Office partnering with ‘best of breed’ product providers. Depending on the customer
proposition, PO will have different levels of involvement in the value chain with each
product provider. To facilitate that strategy, the Board previously approved in principle
anew group legal structure (through the legal entity optimisation project ‘LEO’)
which involved the establishment of a new holding company (‘HoldCo’) above Post
Office Limited (‘POL’), the transfer of the shares in each of Post Office Management
Services Limited (‘POMS’ or ‘POI’) and Payzone Bill Payments Limited (‘PZBPL’) to
HoldCo, and the establishment of a new financial services entity (‘FSCo’) and,
potentially, a services company (‘ServCo’). Management would now prefer to adopt a
simplified and potentially quicker approach to LEO to ensure that Peregrine timetables
can be achieved requesting that POL continue as the parent company and for the
existing POI entity to be utilised as the vehicle for the POL FS business.
Questions addressed in this report
1. What is the new proposed structure and why has the proposal changed?
. What are the implications of this proposed new approach?
. What progress has been made since the last Board update?
. What are the next steps and timeline?
. What will the impact be on the approved budget?
ubRWN
Conclusion
1. POL will remain the parent company and the POL FS banking products business will
be transferred to POI once the FCA has provided the necessary approvals and
regulatory permissions. This approach is simpler and potentially a quicker route to
provide the vehicle through which POL FS can execute its strategy including Project
Peregrine. Given the volume of other programmes and strategic initiatives across
POL, the need for a more simplified and potentially quicker approach has increased.
This approach still gives POL the option to later set up a HoldCo and separate FS
entity should there be a commercial or strategic imperative to do so.
2. The main implications arising from this approach is that as a result of POL remaining
as the parent company, the existing governance conflict arising from the inverted
parent/ AR structure will remain.
3. Significant negotiation and progress has been undertaken in relation to finalising
the Articles of Association and a Framework Agreement. In addition, KPMG has
provided a ‘Route to Dividend’ and tax assurance work, which was requested by
UKGI but further re-examination is required in light of the new approach.
4. There are number of next steps:
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a. POI Board needs to notified and necessary approvals obtained including the
request for a variation of its permissions (VoP) from the FCA. The POI Board
will need to ensure that there are appropriate operational processes, controls,
governance and resources in place to manage the FS intermediary business
in addition to its existing insurance business.
b. Once the new articles of association and framework agreement are finalised
(within the next 4 -6 weeks), the FS team, together with POI can prepare the
application (including comprehensive transition project plan) and submit a
VoP to the FCA to become authorised to undertake the new types of regulated
(banking intermediary) activity. This can process can take between 6 and 12
months, from the point at which the application is made but given that it is
an existing currently regulated company it may be quicker to obtain the
necessary approvals. The Board will be asked to approve the FCA VoP before
it is submitted along with the authorisation of the CEO and CFO to determine
the appropriate time for the application to be submitted.
c. Once the necessary corporate and regulatory approvals are in place, the
transfer of the financial services business from POL into POI will include an
asset sale by POL to POI. In return for the assets of the financial services
business, consideration for such assets will need to be determined by the
parties and payable by POI. Such consideration may be determined at book
value and the asset sale can be carried out in exchange for a loan provided
by POL to POI.
5. Project LEO has an approved business case for £3.3m. Spend to date is £1.1m. Its
allocation for 19/20 is £1.8m against which c450k has been incurred. We will provide
an update at the next Board on the expected costs for 19/20, once we have
determined where the deliverables should sit, the KPMG assurance work has
completed and Steps Plan for moving the FS business into POI has been received
and built out into a revised project plan.
Input Sought Input Received
The Board is asked to consider approve in principle: Advice from Linklaters LLP
(i) The revised Project LEO structure; and
(ii) The draft Articles of Association and Framework
Agreement and authorise the CEO or CFO and
General Counsel to agree the final versions
subject to no further material change, noting the
level of control and oversight being sought by
UKGI being deemed acceptable by the Board,
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Report
What is the new proposed structure and why has the proposal changed?
1.1 Management seeks to take a simplified approach to Project LEO, which may not
1.2
What
2.1
2.2
2.3 It
be the most ‘optimal’ structure but enables the Board’s stated FS strategy to be
realised, delivered quickly and does not prevent the business from optimising its
structure in the future. Given the volume of other programmes and strategic
initiatives, the need for a more simplified and potentially quicker approach has
become more important.
External legal advice has been obtained which confirms that there is no legal
are the implications of the simplified approach?
Although moving the financial services business from POL into POI (which will
remain directly authorised by the FCA, but with an expanded remit and extended
regulatory approvals) will remove the need for multiple (and an increasing
number of) Principals to enter into an MPA (i.e. POL will be the AR to POI, with
the likes of BOI, Capital One and various underwriters having Bilateral
agreements with POI) - it will not, as HoldCo would have, remove the potential
conflicts of interests that may arise from POI (an FCA regulated Principal)
reporting into its parent (an AR of POI).
Further, the new proposal will have implications for POI including:
e evidencing to the FCA how it will continue to meet all of its regulatory
requirements for both new and existing business, with no customer
detriment;
e Integrating resources and systems including the transfer of POL FS
employees and contracts into the new POI subsidiary;
e Changes / additions to its governance structure, including its executive to
ensure they have the required levels of experience within the expanded
suite of services being provided; and,
e Complexity, should the end strategy for POI (or indeed the new FSCo) be
a sale.
should however be noted that the above, save the structure for a sale, would all
need to be undertaken even if a new FS entity was utilised.
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What progress has been made since the last Board update?
3.3
Since the last Board meeting, progress slowed owing to the level of third party
financial assurance which was requested prior to the Secretary of State (SoS)
providing approval. KPMG were jointly engaged to perform this work; the scope
of which included:
Assurance that the target group structure optimised the eventual payment of
dividends to the Shareholder in due course;
Confirmation regarding the tax impacts of the restructure; and Confirmation
that the valuation methodology used for the transfer of POI and PZBPL was
appropriate.
3.4 This assurance report will need to be updated in light of the new proposed
3.5
approach.
In parallel to KPMG working on this piece of additional assurance:
We have also explored whether we could accelerate the detailed design work,
TOM and implementation plans for ServCo. Immediate business requirements
were distilled into being able to engage new employees on more commercial
terms. As, having taken legal advice, we believe this may be possible within
the current corporate structure, this is being taken forward separately.
Discussions on the scope of a proposed framework agreement and the
proposed POL parent and subsidiary Articles of Association.
Though significant progress has been made, some of the amendments UKGI
are seeking to make would result in additional reporting, oversight and control
with SoS approval being required more frequently and for decisions that the
Board has previously had authority to make without shareholder consent.
Examples include:
New Reserved Matters / matters requiring Special Shareholder
Consent which were not Reserved Matters for POL under the Articles
of Association
e The making of any loan, granting of any credit or indemnity or guarantees
by any group company other than in the ordinary course of business.
e The appointment of a director to the Board of any group company. A new
right has also been included whereby the Shareholder would be able to
appoint a new director and Chairman by notice to the Board.
« The remuneration of: (a) executive directors of any group company; and
(b) non-executive directors of any unregulated group company.
e The appointment of non-executive directors to the Boards of any
unregulated group company.
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Reporting and overview include:
e One annual review of the Board, committees and directors by the Chair and
a board effectiveness review by the Senior Independent Director
* Quarterly Reporting on Post Office's performance against annual budgets
and targets as set out in the strategic plan
e¢ Quarterly reporting on Post Office’s (i) draw down on government funding
(ii) progress on delivery against its planned investments as provided for in
the funding agreement (iii) branch network performance to enable UKGI to
assess compliance against the objectives set out in the funding agreement
and entrustment letter relating to the branch network and SGEIs (iv)
litigation report including any threatened or reasonably anticipated
litigation.
Management are broadly comfortable with these reporting requirements
given that most are already performed. Processes will be put in place to
ensure that we comply with any new obligations e.g., litigation report.
A copy of the draft Articles of Association and Framework Agreement are in
the reading room. We expect these to be finalised within the next 4-6 weeks.
4. What are the next steps and timeline?
4.1
4.2
4.3
It is expected that the new Articles of Association for POL and POI, together
with the Framework Agreement will be agreed in principle with our
Shareholder representative within the next 4 to 6 weeks.
However, the amount of work required to get an already authorised firm (i.e.
POI) ready to undertake new types of regulated activity is significant and will
involve POI having to apply to the FCA for a Variation of Permission (VOP).
In order for permission to be granted, POI will need to be able to demonstrate
and evidence to the FCA that it has fully considered and understood the
implications of expanding the business. This process, for which the statutory
time limits for processing an application are 6 months from when the FCA
determines that an application is complete or 12 months from when it receives
what it believes to be an incomplete application, will involve:
e Full mapping of all regulatory requirements for the new products and
services identifying all rules including those relating to financial
promotions, pre contractual disclosure, contractual document, formalities
for contract formation, rules relating to relevant post contractual activities,
regulatory reporting, capital requirements, certification of staff,
governance (systems and controls and risk management) etc.
Gap analysis against existing processes, procedures and governance etc.
to identify where the existing business model is sufficient to support the
new business, where it requires enlargement to support the new business,
what platforms are required to support the new business and how those
interface with existing platforms.
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4.4
e Identification of suitable candidates with the appropriate experience and
expertise to manage the process and the business going forwards,
including addition approved persons or, in due course, senior managers.
e Business continuity and disaster planning for the new business to be
undertaken and implemented.
e Increased AML, CTF and cyber security requirements to be identified and
implemented.
e Negotiation of contracts with product manufacturers and any third party
platforms, outsourced providers etc. required for the new business to
operate.
e Full review of all IT to ensure the systems currently used for the insurance
mediation interface with others to ensure correct data flows and any new
systems are fully tested before launch.
e Building out compliance and risk and customer services functions to deal
with the increase in products and services and the scale of the business.
e Designing the build out to ensure that there is not impact on continuing to
service existing clients.
e Training of staff on the new products and services and hiring suitably
experienced staff, as required.
A ‘Steps Plan’ setting out exactly what needs to be done and in what sequence
is a deliverable of KPMG and forms part of the assurance work they are now
finalising. Assuming the new proposal does not inhibit the SoS from, in the
future, realising a dividend, nor reduce its size, this will be received by the
end of August. Nevertheless, given the amount of work required for the VOP
application and that until now, the programmes’ focus has been the original
scope of LEO, we do not expect the newly proposed structure to be in place
before June 2020.
5. What will the impact be on the approved budget?
5.1
Project LEO has an approved business case for £3.3m. Spend to date is £1.1m.
Its allocation for 19/20 is £1.8m against which c400k has been incurred. We
will provide an update at the next Board on the expected costs for 19/20, once
we have determined where the deliverables should sit, the KPMG assurance
work has completed and Steps Plan for moving the FS business into POI
received and built out into a detailed project plan.
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POST OFFICE LIMITED PAGE 1 OF 4
BOARD DECISION PAPER
British Gas - Parent Company
Guarantee
Author: Andrew Goddard Sponsor: Debbie Smith Meeting date: 30 July 2019
Executive summary
Context
This paper seeks approval in principle for one specific parent guarantee of the
obligations of Payzone Bill Payments Limited (‘PZBP’) currently sought by British Gas
(‘BG’), in relation to the exclusive contract referred to in the CEO’s report. The
negotiations with British Gas are ongoing but we anticipate their conclusion during the
second week in August 2019. Therefore, we are asking the Board to delegate approval
of the parent guarantee to the Interim CEO and General Counsel subject to the terms
being in line with the appendix to this paper. Should any material variances to this be
proposed we would revert to the Board for approval.
Questions addressed in this report
1. Why does PZBP need a parent company guarantee for BG?
2. In what other circumstances would Post Office Limited be required to give a parent
company guarantee?
3. What is the scope of the BG parent company guarantee?
Conclusions
1. Post Office Limited has received a request from PZBP to provide a parent company
guarantee in respect of a new contract with BG for provision of bill payment services.
2. The Board is requested to approve the granting of that guarantee by Post Office
Limited in principle.
Input sought
The Board is requested to approve the delegation of authority to the CEO and the
General Counsel to finalise and approve the terms of the parent guarantee in relation
to the British Gas contract as set out in this paper. Should any material variances to
this be proposed we would revert to the Board for approval.
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The report
Why does Payzone need a parent company guarantee for BG?
3. Post Office Limited has received a request from PZBP to provide a parent company
guarantee in respect of a new contract with BG.
4. Discussions as to the final terms of the guarantee are ongoing with BG. The liabilities
for which the guarantee is sought are broadly equivalent to the operational liabilities
which Post Office Limited itself incurs under similar contracts, but see further details
in the Appendix. PZBP is going to become the sole provider of the bill payment
services for BG (providing access to BG to both PZBP and POL networks in the
provision of those services).
5. BG wants to ensure that an award to PZBP of an exclusive arrangement complies
with its risk/credit requirements. BG has advised that it wants an assurance of a
parent company guarantee from POL, given that: (a) PZBP has been trading for less
than a year and does not have a suitable credit rating/trading history; and (b) BG
will also be given access to the POL network under the contract.
6. We can confirm that PZBP is operationally able to perform the obligations under the
BG contract. It should also be noted that BG currently has a contract with POL that
will cease and be replaced by the single exclusive contract with PZBP for the
provision of the PZBP and POL networks.
In what other circumstances would Post Office Limited be
required to give a parent company guarantee?
7. Post Office has been previously asked to guarantee the obligations of PZBP for
contracts with Anglian Water, Thames Water and Scottish Power, which are similar
in nature to the guarantee requested in this paper.
8. PZBP is aware that POL Board prefers not to provide further parent company
guarantees, but the proposed BG contract provides a unique transformational
opportunity for both PZBP and POL to double the transaction volume of the bill
payment and secure c14% market share growth. Accordingly, it is requested that
POL agrees to grant a parent company guarantee to BG.
9. It is possible that POL could be requested to give further guarantees of PZBP’s
obligations to other clients of PZBP in the future. It is recommended that POL agree
to grant guarantees of PZBP’s liabilities where those terms are substantially similar
to those on which Post Office itself would contract.
What is the scope of the BG parent company guarantee?
10.The Appendix summarises the main terms of the guarantee in the form currently
sought by BG in respect of the contract.
11.It should be noted that the form of guarantee is still subject to discussion and
negotiation with BG, with the objective to sign agreements week commencing 12"
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August, and full go live on 1% January, 2020. The comments in the Appendix set
out the main points PZBP will seek to negotiate with BG regarding the current form
of the guarantee.
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Appendix
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Key terms of the parent guarantee currently sought by BG
Liability Caps of underlying
‘agreement
Unlimited ability
Nature of PCG
Comment
Overall liability, per year:
greater of £7.5m or 150% of
the yearly charges payable
(NB average gross charges
estimated to be in the region
of £8m per contract year &
therefore £12m max liability
per year)
£10m in aggregate for damage
to tangible property.
Unlimited liability in respect of:
breach of confidentiality
tellectual property
infringement
breach of data protection and
company data
wilful default or gross
negligence
+ indemnity for breaches of 3°
party IPR
‘indemnity for default of PZBP
resulting in regulatory fines
indemnity for loss of
data/breaches of data
protection laws
indemnity for any TUPE
liabilities
s other liabilities which cannot
be limited/excluded by law
Payment of sums and performance of
‘obligations by PZBP under the contract.
Provision of indemnities for failure of
PZBP to perform or the contract being
invalid/unenforceable
Liability to be limited to the liability of
PZBP under the contract and subject to
the same defences as would be
available to PZBP under the contract.
As the form of parent company guarantee is subject to
further discussion/negotiation, we intend to seek the
following changes to secure additional protection for POL:
‘©a removal of the indemnities (on the basis that there is no
underlying general performance indemnity given by PZBP
under the contract itself)
‘a removal of the clause relating to the contract being
invalid/unenforceable (an the basis that BG would not have
this protection had it contracted with POL directly)
‘a requirement for BG to first seek performance from PZBP
within the timescales permitted under the contract and only
to pursue the guarantee in the event of failure of PZBP to so
perform
‘limiting the costs which can be recovered by BG for
enforcing the guarantee to the liability caps under the.
contract and qualifying the costs as ‘reasonable’
‘* amendments to the subrogation and contribution provisionsI
‘* amendments to limit the duration of the guarantee, to
ensure POL does not acquire evergreen obligations but only
during the period that there could be claims under the
contract,
‘removal of or amendment to warranties relating to the
existence of any litigation which might impact on POL’
ability to perform the guarantee
Strietly Confidential
payin swuewheg sig euozkeg O} GL,
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Bol Negotiations - Final Positions
Author: Chrysanthy Pispinis Sponsor: Owen Woodley Meeting date: 30th July 2019
Executive Summary
Context
* Our negotiations with BoI Group picked up pace in late August 2018 and in November 2018,
Bol put forward a new proposal for our future partnership.
* We signed non-binding Heads of Terms in March 2019 and are close to finalised agreements.
« We updated the Board in January, March and May 2019; this paper presents the agreed
positions on the material issues. Other, smaller points, are also being discussed.
Questions addressed in this report
What is the finally agreed position on Incentivisation?
What is the finally agreed position on Exclusivity?
What is the finally agreed position on Term and the Review Mechanisms?
What is the finally agreed position on Termination and Exit?
What are the latest financial projections?
PWN
Conclusions
1. We have now agreed all material issues with Bol about the future structure and approach to
our partnership.
2. The terms of the new agreement - with a three year extension, a more protective exit process
for Post Office, a fairer and more aligned incentivisation mechanism and significantly reduced
levels of exclusivity - are all in line with the last update to the Board in May.
3. The latest financial projections reflect the continuing macro-economic challenges and, in
particular, the lower likelihood of base rate rises in the foreseeable future. Nevertheless, we
continue to believe that this proposal represents a significant enhancement for Post Office to
the alternative of a “no deal” outcome which would see our core FS franchise be eroded away
over the next four years.
4. We expect to be in a position to sign by mid-August once the extensive legal drafting process
is concluded and we seek the Board's authority to proceed on the basis set out here.
Input Sought
The Board is asked to consider and agree the final construct of our refreshed relationship with
Bol and delegate authority to proceed to signature on the basis presented once the contractual
legal drafting is concluded. The Board is also asked to approve the total spend related to these
negotiations.
The Report
What is the finally agreed position on Incentivisation?
1. As previously outlined, there has been a change to Post Office’s commission payment
structure
« In the current agreement, Post Office is remunerated based on a bps charge on the
stock of Post Office-branded deposits and the flow of Post Office-branded mortgages
and loans originated
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2. Under the new structure, Post Office is remunerated based on the financial performance of
the Post Office-branded mortgages, loans and deposits, which are constructed to replicate
a standalone financial services business.
The new mechanism has been constructed to align incentives by ensuring Post Office is
remunerated on a similar basis to Bank i.e. based on the profitability of the Post Office
segment assets and liabilities,
While the new remuneration structure has been constructed to replicate that of a bank,
Post Office has been immunised from various parameters that could affect the profitability
of a typical financial institution (e.g. operating expenses, impairments and capital charges).
Bol previously proposed the inclusion of ‘cost tramlines,’ which were effectively increases
in the operating expense bps charge in the event the perimeter was to shrink.
« Post Office negotiated away the ‘cost tramlines’.
The core principles of incentivisation agreed as part of the HoTs discussions largely remain
unchanged and have been reflected in the ‘Commissions’ schedule.
One additional change that Post Office has successfully included relates to ensuring that
we have recourse in the event there are errors in the Post Office Segment Monthly Accounts
used to calculate Post Office’s commission payments.
* In this scenario, Bank is compelled to discuss the issue with us and either comply with
our proposed changes or the issue is escalated as part of the governance process.
On FRES, Post Office has negotiated an additional fixed commission flow of £8.3m p.a.to
2022 (representing £4.9m net p.a.), and £9m p.a. from 2023.
What is the finally agreed position on Exclusivity?
9.
10.
il.
12.
13.
14.
15,
One of the ambitions for Post Office in entering into the negotiations with Bank was to be
released from exclusivity on products that did not form a core part of the partnership.
It has been agreed that Bank is now only exclusive on Residential Mortgages, Personal
Loans and Personal Savings products.
While Bank is exclusive on Residential Mortgages, both parties have agreed to put in place
a referral mechanism to ensure that Post Office is still able to fulfil its social purpose of
providing financial products to underserved individuals.
Buy to Let Mortgages (‘BTL’) were not discussed at the HoTs stage but became a
contentious topic at the legal drafting stage.
« Bank believed that they retain exclusivity on BTL mortgages as they are loans secured
on residential property.
« However, Post Office believe that BTL customers should be classified as a ‘business’
customer as they are conducting a ‘trade’.
* The agreed position is that BOI is the provider for non-corporate customers that have
up to four BTL properties (this aligns with their current lending practices); any other
customers are not within the scope of the arrangement.
During the HoTs phase, the parties agreed to discuss the exclusivity provisions surrounding
Equity Release at the contracting phase. This was to ensure Post Office was not restricted
in its ability to provide financial advice as part of a broader investment or retirement
planning service.
It has been agreed that Post Office will have the freedom to appoint a Financial Advice
provider to deliver whole of market advice on Equity Release products.
« Unlike with Residential Mortgages, Personal Loans and Savings, Post Office’s Financial
Advice provider is not restricted to only offering Bank products.
One of the more contentious areas has been the implications of Post Office having
unfettered access to business customers, especially in relation to sole traders who can
enter into agreements in personal and/or business capacities
« It has been agreed that sole traders are a business customer.
* Given that sole traders can act in both a personal and business capacity, Post Office will
conduct certain checks on individuals to ensure that they can only obtain a business
product when acting as a business (in other words, for a business purpose).
« Post Office has committed to only sell business products to bona fide business
customers.
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16,
* Post Office has also obtained the corresponding commitment from Bank to only market
Post Office-branded personal products to personal customers.
As agreed as part of the HoTs discussions, Bank will maintain exclusivity on Motor Finance
and Point of Sale Finance. However, if Post Office were to bring forward a credible proposal
and the parties working together are not able to launch the proposition, Post Office will be
released from exclusivity on the given product.
What is the finally agreed position on Term and the Review Mechanisms?
17.
18.
19.
20.
21.
The term of the agreement has been extended from September 2023 to December 2026
(now the earliest termination date of the partnership).
« This is a material move from Bank’s November proposal of an extension of “10+ years”.
« The agreement has been structured such that Post Office is able to exit the
arrangement, i.e. serve notice, periodically (every five years)
While the term of the agreement has been extended, Post Office and Bank have agreed to
interim review mechanisms, which allow both parties to make changes to the partnership
if performance is below expectations.
The Performance Review is in line with what was previously presented.
« The purpose of this review is to compel both parties to develop an action plan that will
address any potential underperformance early on.
« As previously outlined, Post Office is only able to exit the relationship following this
review, by mutual agreement with Bank.
* As part of the HoTs discussion, it was agreed that if certain underperformance
triggers were met, both parties would be allowed to conduct informal market soundings
to identify if there were credible superior alternatives.
«Post Office and Bank have now agreed a specific list of information that will be disclosed
to interested parties as part of the market sounding process.
The Key Variable Review has been agreed in line with the general principles previously
presented.
« The purpose of the Key Variable Review is to adjust the key inputs to the perimeter to
account for any significant divergence from the ‘real world’ environment as a result of
the passage of time
« As previously presented, the new input levels for each of the variables will apply from
2023 onwards.
The Full Review has now been agreed.
* The purpose of this review is for both parties to assess all elements of the partnership
and, if desired, make the necessary changes that will incentivise both parties to want
to continue the relationship.
« If either party is not satisfied, they are entitled to serve notice within the Full Review
Window.
* The Full Review can be triggered by either party between 30 June 2024 and 30 June
2025 and does not require a trigger event.
What is the finally agreed position on Termination and Exit?
22.
23.
24.
25.
A significant amount of time has been spent on refining the termination mechanism to
ensure that both parties are incentivised to continue to grow the partnership right up until
a potential Exit.
Both parties have now agreed to a “Matched Book” principle on Exit.
The implication of this is that, Post Office has agreed to allow Bank to ‘rent’ the excess
deposits for a three-year period post Exit (for which Post Office will receive commissions;
Bol’s existing contractual obligations in relation to customer servicing, etc. will remain).
While the “Matched Book” concept has been agreed, as noted in the HoTs, the parties have
agreed that in the event there is economic merit in selling an unmatched portfolio of assets
and liabilities, both parties will discuss, in good faith, the possibility of selling an unmatched
book of assets and liabilities.
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26. Narrowing the gap (between assets and liabilities): Bank has shared a statement of intent,
27.
28.
29.
which details their intent to reduce the mismatch, primarily through making Post Office the
primary brand for broker-originated mortgages in the UK.
The termination valuation mechanics are broadly as agreed in the HoTs, with Bank being
paid the higher of the Compensation Amount (DCF run-off valuation) or 50% of the
Franchise Value; this is to ensure both parties are incentivised to grow the business to the
point of exit.
There has been significant debate over the concept of Franchise Value, particularly with
regard to the circumstances in which Bank can claim the Franchise Value they have
received has been ‘understated’.
It has been agreed that Bank can request the appointment of an independent expert f it
reasonably believes the Franchise Value has been understated.
Securitisation
30. As part of the HoTs discussions, BoI had requested that the existing securitisation protocol
for broker mortgages continues to apply; it was agreed that the parties will need to have
further discussions on securitisation in the contracting phase as Post Office had expressed
concerns around its ability to exit the agreement should Bol securitise, recognising that,
like any Bank, Bol needs the ability to securitise to manage its balance sheet.
31. Following further discussions, Post Office has managed to negotiate several material
changes to the go-forward securitisation protocol.
32. Ina BAU scenario - i.e. in the event Bank undertakes a securitisation prior to notice being
served by either party, Bank has committed that this will not have any impact on the
perimeter so our commission will be calculated as if there had been no securitisation.
33. We have also sought to agree more detailed securitisation protections for Post Office in an
Exit scenario.
« From the commencement of the notice period, no market securitisation of Post Office
assets will be undertaken by Bank.
* Following the commencement of the notice period, Bank will only be able to undertake
central bank or bi-lateral securitisations which can be fully unwound prior to the
termination date.
« In the event that there are securitised assets at the exit date, Bol has committed to
calling any market securitisation by the first call date and any central bank and bilateral
securitisations by no later than the termination date.
« In scenarios where Bank has undertaken a material securitisation of Post Office’s assets,
our New Partner has the freedom to make an election to leave the securitised assets with
Bank or purchase them at the relevant call date.
« Additionally, Post Office’s New Partner now also has the flexibility to decide whether to
take the unmatched liabilities at the Exit Date, wait until the asset call date, or simply
leave the liabilities behind with Bank.
* It has also been agreed that Post Office will be remunerated based on the current
‘synthetic bank’ commission mechanism for the period in which Bank has securitised
Post Office assets, post exit date.
« With regards to valuation, the general principle agreed is that Post Office’s New Partner
will only pay for assets and liabilities as and when they transfer.
* So at Exit Date, Post Office’s New Partner will not pay for securitised assets and
corresponding liabilities that remain with Bank.
* However, at the call date, Post Office’s New Partner will be expected to remunerate
Bank for the assets and liabilities to be transferred, based on a Par Value and
Compensation Amount calculation.
Customers
34, We have been mindful throughout this process to ensure we protect our customer franchise
and be clear with and fair to customers
35. On exit, there are two main phases during which customers can transfer to our new FS
provider
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« The main exit date, where the customers of the ‘matched portfolio’ transfer to our new
FS provider(s). As per the current arrangements, this is done by way of a Part VII
transfer. These customers will hold PO-branded products that will sit on the new FS
provider's balance sheet.
« For up to three years post the main exit date, Bol will be ‘renting’ excess PO deposits;
the customers linked to these deposits will be randomly selected against certain criteria
to ensure they are a representative sample of the whole customer base. These
customers will hold PO branded products that sit on Bol’s balance sheet, and will attrite
over time. Should BoI not be interested in retaining them, PO will have the right to
target them with savings products from its new FS provider
o Although Bol will not be acquiring new customers under the PO brand, it has
undertaken to change any product names/ features to avoid customer confusion
« At the end of the ‘rental’ period, and depending on the balances left, PO’s new FS
provider can choose to take on these customers
« A similar process will apply in the scenario where there are securitised assets and
liabilities post exit
What are the latest financial projections?
36.
37.
38.
39.
40.
41.
42.
43.
44.
The macro-economic outlook has continued to shift since we presented our projections to
the Board in January, with uncertainty around the political landscape, Brexit and base rates
as strong as ever - a very challenging environment for long-term forecasting. In parallel,
retail FS margins have continued to come under pressure.
As part of the negotiations, we were clear on wanting to agree a three-year business plan
with Bol - not least to help document a shared mid-term ambition. Through this process,
and give the broader context, we modelled numerous scenarios, and have taken a more
conservative view of macro factors for the next 18 months, reflecting the broader
uncertainty.
The table overleaf illustrates: a) not doing a deal, i.e. letting the FSJVA run its course; b)
doing a deal - as presented in January; c) doing a deal - given our latest negotiated position
and the change in the broader macro assumptions.
Specifically, and compared to January, the main differences in our latest estimate (July)
are as follows:
« A move to a flat base rate environment for 2019; Bol’s estimates in early 2019 had
assumed two base rate changes.
« Projected mortgage margins are lower than the January assumption of 1.7% (reduction
of cl2bps).
« We have achieved an improved position on the FRES fixed commissions.
« Negotiating away the ‘cost tramlines’ improves our position in the outer years.
Critically, our share of earnings of the total FSJVA PBT remains largely unchanged,
illustrating the alignment of interests through the new model.
The table below presents the ‘outputs’ of the incentivisation mechanism, based on calendar
years.
« Our 19/20 income forecast against the Post Office remuneration line is £33.5m; this is
mainly due to calendar adjustments (the new incentivisation mechanism would only be
effective in Q2 19/20)
« The years from 2020 onwards include some mitigating actions (e.g. reduction in
marketing spend) to make up for the lower returns
We have removed the impact of the new credit card deal with Capital One, as this has been
captured through a separate business case.
We have also removed the impact of on-boarding new product providers, as we take stock
of where we wish to grow next.
The market has deteriorated, reflected in the subdued numbers in the earlier years; the
broader outlook post Brexit is of course unknown. Our strong view though is that
completing a deal is, in aggregate, still significantly better than not completing this
transaction - which would leave a large gap in our income and a hugely depleted FS
customer franchise in 2023.
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20196 20206 2021 2022E
» Commissions (gross) E28m £225 #153 £8.3m
FSIVA cost benefit 8.0m «9.5m £25m 9.5m
No change in agreement
Vaggressive run-off FRES cost syneroies - 225m 2.5m 25m
Total = £40.8m = 34,5m_=—£27.3m_——£20.3m
PO remuneration 835.6 345m 279m 23.0
PO % oF
hoe 46% 40% 2% 28%
FSIVA cost benefit 1.0m 1.5m £1.5m 1.5m
Additional FRES in 7 a
te Payment (pet) 3.0% 3.04 3.0m 3.04
UA) FReS cost synergies - 225m 225m 225m
Total =—«£39.6m = EAL.Sm = £34.9m —£30.0m
PO remuneration 239m 25.9m 227.5 27.7
PO % oF
oe 44% 38% 2% 31%
New incentveston eae’ £0.8m, 1.0m £1.0m 1.0m
Additional FRES
Pant (ne) 3.7m £4.9m 4.9m 4.9m.
FRES cost synergies - 225m 25m 225m
Total = 284m 343m 36.Im_— £36.
Project funding
45. Our broader FS strategy work and negotiations with Bol started in mid- 2016, with varying
degrees and phases of activity over the last three years.
o Our initial strategy work and negotiating position was supported by KPMG as our
consultant and Macquarie as our financial advisor, with further support from McKinsey
on validating the FS strategy (as requested by the Board) - totalling c.£2.7m in 2016/17
and 2017/18.
o Since negotiations picked up again in mid-2018, we have been supported by Fenchurch
as our advisors and Linklaters as our external counsel - spend has totalled £1.6m in
2018/19, with a further £780K in approved funding to end May 2019.
co In May 2019, the Board approved a total spend of £5.4m, which includes the sunk costs.
detailed above.
o We now expect the total spend to completion to be £5.6m reflecting the project going
into August, and seek the Board’s approval of this (Investment Committee approval will
be sought on 29" July).
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Governance Items
Author: Veronica Branton, Head of Secretariat + Meeting date: 30 July 2019
Ratification of appointment of Group Chief Executive Officer
The Board is asked to RATIFY the appointment of Nick Read as Group Chief
Executive Officer, subject to regulatory clearances*.
Non-Executive Directors (NEDs) were asked to approve the appointment by
written resolution on 17 July 2019 on the recommendation of the Nominations
Committee. Responses were received from each NED on 17 and 18 July 2019.
Resignation of Non-Executive Director
The Board? discussed the potential conflicts of interest arising from Shirine
Khoury-Haq’s appointment as Chief Financial Officer of Co-op Group Limited
while serving as a Non-Executive Director of Post Office Limited on 15 July 2019.
Shirine tendered her resignation on 18 July 2019 and the Board is asked to
NOTE the resignation.
Credit Card Contract with Capital One
At its meeting on 29 January 2019, the Board delegated authority to a sub-group
of the Chairman, Chief Executive, Tom Cooper and the CFOO to take the decision
on Post Office Limited entering a contract with Capital One for the provision of a
credit card service for its front book customers. The Board is asked to NOTE
that the Sub-group approved Post Office Limited entering that contract on 25
June 2019 based on the information provided.
Remuneration Committee Terms of Reference
The Remuneration Committee approved changes to its Terms of Reference
at its meeting on 28 May 2019 for recommendation to the Board. The
changes proposed are to reflect developments in corporate governance,
including revisions to the UK Corporate Governance Code? published on 16
July 2018 which applies to reporting periods from 1 January 2019. This
expanded the scope of Remuneration Committees to oversee senior
manager pay and wider workforce remuneration policies and to check that
1 HMRC’s Fit and Proper check; SIA licence; Vehicle and Operator Services Agency (VOSA)
Licence; Appointment as the Appointed Person for Post Office Limited; appointment as the
Accounting Officer for Post Office Limited.
2 Shirine Khoury-Haq was not part of the discussion.
3 The UK Corporate Governance Code applies to listed companies but Post Office Limited
reviews changes to the Code and considers whether or not it is appropriate for them to be
adopted.
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Tab 12 Govemance items
incentives are aligned with company culture.
In addition, wording has been amended to show that the oversight and approvals
of the Group Remuneration Committee in relation to PO Insurance will apply to
all subsidiaries*.
The Terms of Reference with track changes are at Appendix 1.
The Board is asked to APPROVE the revised Terms of Reference for the
Remuneration Committee.
4 PO Limited acquired the Payzone Bills Payment business in October 2018 and this has been
set up as a subsidiary.
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Appendix 1
Terms of Reference of the Remuneration Committee
The Remuneration Committee (the “Committee”) is a Committee of
the Post Office Limited Board (the “Board”), from which it derives its
authority and to which it reports after each meeting.
1. Role
The Committee’s main role is to:
i) make sure that appropriate group remuneration strategies are in place
for PO Limited and its subsidiaries to be able to attract, retain and
motivate the executive management and workforce required to run the
Company successfully! without paying more than is necessary_and
linking incentives to the company’s vision, mission and values
ii) approve and recommend for approval, where required, the remuneration
packages of senior executives and fees for Non-Executive Directors for
Post Office Limited and its subsidiaries
iii) recommend for the approval of the Shareholder, the criteria for, and
outturn of performance related pay arrangements for Executive
I Directors and the criteria for executives who report directly to the Chief
Executive (STIP)
iv) recommend for the approval of the Shareholder, performance related
incentive schemes and changes to these for Executive Directors,
executives who report directly to the Chief Executive and any other
eligible employees (LTIP)
v)_have oversight of the group remuneration and related policiesstrategy
for the wider organisation.
vi) have oversight of group workforce engagement strategies and outputs
ws) + ~ [ Formatted: Normal, Indent: Left: 039", No bullets or
numbering
2. Responsibilities of the Committee
I Remuneration PolicyStrategy for PO Limited: Executive
I 2.1 a) To recommend to the Board for approval the remuneration policystrategy
for
the Chief Executive, executive directors and those executives who report
directly to the Chief Executive, taking into account the remuneration policy
set for other employees_and linking incentives to the company’s vision,
ion and values.
* In doing so, regard will be paid to the views of the Shareholder and other
stakeholders; all relevant legal, regulatory and corporate governance requirements; the
risk appetite of the Company and alignment to its long-term strategic goals, structuring
of a significant proportion of remuneration to link rewards to corporate and individual
performance and designed to promote the long-term success of the company
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2.2
2.3
24
2.5
2.6
27
Appendix 1
b) To review the group remuneration policystrategy annually and recommend
any
changes to the Board for approval.
To approve the remuneration package in respect of new hires proposed by
the Nominations Committee. This shall align with the group remuneration
policstrategy approved by the Board. In the case of the Chief Executive and
other executive directors, the remuneration package shall, as set out in the
paragraph below, be recommended for approval by the Shareholder.
To recommend to The Secretary of State for Business, Energy and Industrial
Strategy for approval, each element of the total individual remuneration
package of the Chief Executive and other executive directors, both existing
and for new hires, including any increases in salary (whether or not resulting
from company-wide pay increases), pension provision and the outturn of
performance related pay arrangements and incentive schemes. The
recommendations shall align with the group remuneration policystrategy
approved by the Board.
To approve the elements which will form the remuneration package for an
individual in the above group, which may include, but shall not be restricted
to:
base salary
short term incentive (annual bonus)
Long Term Incentive Plan
pension provision
benefits such as car or car allowance, private health, holidays
contractual terms such as notice periods.
The recommendations shall align with the group remuneration policstrategy
approved by the Board.
To keep under review the contractual terms applicable to executive directors
such that payments adhere to the group remuneration policystrategy approved
by the Board.
To receive information on each element of the remuneration package and
total remuneration for new hires and any internal promotions and
appointments which are proposed to carry a salary in excess of the lowest
salary of any executive who reports directly to the Chief Executive.
To review annually the overall total remuneration of the Senior Group
(defined as the Chief Executive, executive directors and those executives who
report directly to the Chief Executive) compared both with external market
comparators and with the remuneration of other employees in the Group.
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Appendix 1
2.8 a) To recommend for approval by the Shareholder the implementation of, or
changes to, performance related incentive schemes for the Executive
Directors, executives who report directly to the Chief Executive and senior
managers eligible to be invited to participate in the Post Office Long Term
Incentive Plan (LTIP).
b) To review annually the performance related incentive schemes for the
executive directors, executives who report directly to the Chief Executive
and senior managers eligible to be invited to participate in the Post Office
Long Term Incentive Plan (LTIP).
2.9 a) To recommend for approval by the Shareholder, the criteria for, and the
outturn of, performance related pay arrangements (STIP) for executive
directors and the criteria for executives who report directly to the Chief
__Executive, subject
to authorisation from the Shareholder.
b) To review annually the criteria for, and outturn of, performance related pay
arrangements (STIP) for executive directors and executives who report
directly to the Chief Executive.
2.10 To receive information on the total outturn of performance related pay
arrangements across the business.
2.11 To approve the exit package for any individual with a salary above the lowest
salary of those executives who report directly to the Chief Executive, where
the exit package would be in excess of contractual obligations.
2.12 To undertake any other function delegated to the Committee by the full
Board.
Remuneration for Non-Executive Directors
2.13 To recommend to the Board for approval by the Shareholder fees for
Non-Executive Directors of PO Limited.
PO SubsidiaryInswrance Boards?
Remuneration Policy, Subsidiary BoardsStrategy PO insurance:
Executive
2.14 a) To approve the remuneration policystratesy for subsidiariesP@ Insurance on
the
recommendation of the subsidiary PO-Insurance-Bboard
- -Currently, Post Office
Insurance (registered name, Post Office Management Services Limited) and Payzone Bills
Payments Limited.
3
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2.15
2.16
2.17
2.18
2.19
2.20
Appendix 1
b) To review annually the remuneration policystrategy for shO-tasurance
following subsidiaries following its
review by the subsididaryPO-Insurance bBoard.
To approve the remuneration package for executive appointments to the PO
subsidiary boards Insurance Beard on the recommendation of the Nominations
Committee. The recommendations shall align with the group remuneration
policy: 7
To approve the elements which will form the remuneration package for an
individual in the above group, which may include, but shall not be restricted
to:
base salary
short term incentive (annual bonus)
Long Term Incentive Plan
pension provision
benefits such as car or car allowance, private health, holidays
contractual terms such as notice periods.
To keep under review the contractual terms applicable to executive directors
of PO subsidiaries insurance such that they adhere to the group remuneration
policystrategy for PO-Insuranee.
To review annually the overall total remuneration of the Senior Group
(defined as any members of the subsidiary board PO-Insurance Beard)
compared both with external market comparators and with the remuneration
of other employees in the Group.
To review annually the criteria for, and the outturn of, performance
related pay arrangements for executive directors of the subsidiary PO
Hnsuranee bBoard. These should align with the group remuneration
policystrategy for PO Insurance.
Remuneration Strategy Subsidiary BoardsPO-Ensurence: Non-Executive
a) To approve the remuneration framework within which the fees for
Non-Executive Directors of a Subsidiary Board the-Pest-Office Insurance
Beard may be paid
where an appointment is recommended by the Nominations Committee.
b) To review annually the remuneration framework for Non-Executive fees for
the subsidiary boardsPost-Office Insurance Board.
I 2 Excluding subsidiary board appointments which are in addition to an executive's
primary role and where no additional remuneration applies.
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Tab 12 Govemance items
94 of 106
Appendix 1
3. Engagement
3.1 To receive information on workforce engagement measures, such as
3.2 To receive feedback from the Senior Independent Director on employee
views.
3-4, Annual Review
3:44.1The Committee will undertake an annual review of its own performance and
the Terms of Reference and recommend to the Board any necessary changes.
4-5, Composition and Governance
4-$5.1The Remuneration Committee is constituted as a sub-committee of the Board
and its Chairman shall be appointed by the Board‘. If considered independent
at the time of appointment, the Chairman of the Company may be a member
of the Committee, but shall not chair it.
4-25.2Members of the Committee shall be appointed by the Board, acting on the
recommendation of the Nominations Committee and in consultation with the
Chairman of the Remuneration Committee.
4:35.3The Committee shall be made up of at least two independent Non-Executive
directors. Only Non-Executive directors shall be eligible to be members of the
Committee such that no individual shall be involved in determining their own
remuneration.
4.45.4In the absence of the Chairman of the Committee at any meeting, the
Committee members present shall determine who shall chair the meeting.
4-55.5Members of the Committee will normally serve for a period of three years.
Their appointment may be renewed for a further three year period but no
director shall serve as a member of the Remuneration Committee for a period
of more than six years.
-4.6 Only members of the Committee have the right to attend Committee meetings.
‘The Chief Executive and the Group HR Director (or the holder of any equivalent
position) shall be informed of the date of each meeting and may be invited by
the Committee Chairman to attend all or part of any meeting, as and when
appropriate.
4 The UK Corporate Governance Code (16.07.2018), stipulates that Remuneration
Committee Chairs should have at least 12 months’ experience on a remuneration
committee prior to appointment.
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Tab 12 Govemance items
47
4.8
49
4.10
411
4.12
4.14
Appendix 1
The Company Secretary shall not be a member of the Committee but shall act
as Secretary to the Committee and shall keep minutes and records of each
meeting and ensure regular reporting by the Committee to the full Board
Minutes of each meeting will be circulated to all members of the Committee
and, once agreed, to those members of the Board who have no personal
interest in the matters discussed. Where a conflict of interest exists, the
Company Secretary will provide sufficient information to the full Board to
provide an understanding of the matter(s) considered.
If so requested by the Board or by the Shareholder, the Committee shall
provide an annual report on its activities.
The Committee shall have access to sufficient executive time and resources in
order to carry on its duties, including access to the Company Secretary and
members of the HR team.
The Committee shall be authorised to seek any information it requires from
any employee of the Company in order to perform its duties
The Committee shall be exclusively responsible for establishing the selection
criteria, selecting, appointing and setting terms of reference of remuneration
consultants and have authority to appoint remuneration consultants and to
obtain, at the Company's expense, legal or other professional advice on
matters within its terms of reference as required, up to a financial limit
determined by the Board.
If there should be disagreement between the Remuneration Committee and
the full Board, the Chairman of the Board shall make time available for
discussion of the issue so that the matter may be resolved. Where any such
disagreement cannot be resolved, the Remuneration Committee shall report
the issue as part of any annual report on its activities required by the
Shareholder.
Training will be provided by the Company for members of the Committee, as
required. Such training may take the form of internal briefings, attendance at
formal courses and conferences and/or sessions with external advisers.
Members of the Committee shall conduct an annual review of the Committee's
performance.
5:6._Meetings
5-46.1The Committee shall meet as often as required but not less than three times
each year. The Committee may meet in person, by telephone or by other
electronic means, so long as each member can contribute to the business of
the meeting simultaneously.
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Tab 12 Govemance items
Appendix 1
5-26.2The quorum necessary for the transaction of business shall be 2 members.
5.36.3Meetings may be convened by the Secretary to the Committee, at the request
of the Committee Chairman, or by any member of the Committee, at any time.
5-46.4Notice of each meeting shall be given to all members of the Committee and
any other person required to attend, at least 3 working days before each
meeting.
96 of 106
Recommended by: ‘Approved bi Version: I Effective froi
Remuneration Committee PO Limited Board I Vi
Remuneration Committee PO Limited Board I V2 25 March 2015
Remuneration Committee PO Limited Board I V3 25 November 2015
Remuneration Committee PO Limited Board I V4 30 October 2018
Remuneration Committee PO Limited Board [WS 30 July 2019
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Tab 13.1 Sealings
POST OFFICE LIMITED PAGE 1 OF 3
BOARD
Post Office Limited Sealings
Author: Rebecca Whibley, Company Secretarial Administrator Sponsor: Veronica Branton, Head of Secretariat
Meeting date: 30 July 2019
Executive Summary
Context
The Directors are invited to consider the seal register and to approve the affixing of
the Common Seal of the Company to the documents set out against items number
1782 to 1801 inclusive in the seal register.
Input Sought
For the Directors to resolve that the affixing of the Common Seal of the Company to the
documents set out against items numbered 1782 to 1801 inclusive in the seal register
is hereby confirmed.
Strictly Confidential
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901 3086
G1/Z0/0¢-Bunaew pico 10d
UKGI00024394
UKG100024394
a
Q
POST OFFICE LIMITED FY
Date Register of Sealings Company Number q
19.07.2019 21854540
‘Seal Number Date of Date of Persons attesting Destination oF
‘File Ref. Sean ‘Authority __I Description of Document To Document Document
7782 / Contract I 30/05/2019 "28/05/2019 I Contract forthe surrender of Ground Floor 25 East Square Basildon SS14 I Davi Pam, Senior Assistant Karima Karma
for surrender ‘TAA between the Royal Mail Group Limited (landlord) and the Post Office I Company Secretary
Limited (tenant
1783 / TRI 0105/2019 2910512019 I TRIin respect of 25 East Square, Basikion, SS14 THT. Tile number I David Pam, Senior Assistant Karima Karma
Ex891922 Company Secretary
17e4) ‘4/06/2019 16105/2012 I Settlement Agreement between James Wiliam Favill Tuke and Post Veronica Branton, Head of Karima Karmar
‘Settement Office Limited with regards to the lease of 853 Lea Bridge Road, Leyton. I Secretariat
‘Agreement Execution under signature.
1785 Licence to I 05/08/2019 (04/06/2019 I Licence to occupy relating to Post Office, Northumberland Street, David Pany, Senior Assistant Karima Karmar
Occupy Huddersfield HD1_1AA between Post Office Limited and 2CO Limited.__I Company Secretary
1788 [Licence To I — OS/06/20TS ‘AIDBZOTS I Licence to Occupy relating to Numbers 102/104 New Street Huddersfiel,I David Parry, Senior Assistant Karima Karmar
Occupy between Post Office Limited and ZCO Limited. ‘Company Secretary
1787) ‘05/06/2018 ‘4ID6I2019 I Retrospective Licence for Alterations for premises at Muswell Hil DO/CO, I David Parry, Senior Assistant Karima Karmar
Retrospective 420 Muswell Hil Broadway, London N10 100 between Royal Mal Group, I Company Secretary
Licence Post Office Limited and Universal Oice Equipment (UK) Limited,
1788 Licence I 0510672078 ‘HINEZOTS I Licence to install two hanging baskets on the exterior of Liskeard Delivery I Veronica Branton, Head of Karima Karma
Office and Post Office. Executed under signature. Secretariat
T7897 TRI 1370872018 F3OB2019 I TRY in relation to 13a Boston Street, Holyhead, LL65 18P between Post I David Parry, Senior Assistant Karima Karmar
Office (Transferor and Vilage Views Lid (Trensferee) ‘Company Secretary
1790 / Capital I 13/06/2019 131082019 I Captal Alowances Election Form in relation to 13a Boston Street, David Parry, Senior Assistant Karima Karma
‘Alowances, Holyhead, LLBS 1BP between Post Oce Limited (seller) and Vilage I Company Secretary
Election Views Lid (buyer
1781 [Now T3IO82018 TaIOBI2OTS I Non-crystalisation letier in respect of premises at 13A Boston Street, I Veronica Branton, Head of Karima Karma
exystalisation Holyhead, LL65 18P debenture over the propery. Executed under Secretariat
letter ‘signature, by the Head of Secretariat on behalf of the Company
Secretary.
1792 Licence I 18/06/2019 1710612019 I Licence to Occupy property relating tothe Post Office at 16 Broad Street, I David Pany, Senior Assistant Karima Karma
‘Wokingham, RG40 1AA between Post Office Limited (Licensor) and Company Secretary
Potent Solutions Limited (Licensee)
T7as7 Licence I TOBE TBOBROTT I Licence to Assign & Deed of Variation relating fo lease of part ofthe David Panty, Senior Assistant Karima Karma
Ground foor at 68 Stamford New Road, Altncham, Cheshire, WA14 1EE I Company Secretary
between Santander UK Pic (Landlord), Post Ofice Limited (Tenant) and
‘Thomas Shilito, Wayne Thomas Shilifo, Deborah Ann Shilto and
Organon Pension Trustees Limited as Trustees of TIC Group Limited
SSAS (Assignee).
TTRATTRT TOBIAS TBIOGOT I TRI relating to Tile Number MANSE4T, properly Ground Floor Premises I David Pay, Senior Assistant Karima Karma
68 Stamford New Road, Altrincham, WAt4 1EE ‘Company Secretary
17957 2010672018 9106/2019 I Agreement for lease relating to Suite A, 1st Floor, Queen's House, 10-12 I David Pay, Senior Assistant Karima Karma
Agreement for Queen Street, Belfast, between Countrycastie Associates Limited ‘Company Secretary
lease (andlor) and Post Ofice Limited (Tenant).
7796 / Lease I 21/06/2019 ‘2OID6I2019 I Lease in respect of the ground floor and fst floor premises Known as 38, I David Pay, Senior Assistant Karima Karma
38A The Broadway, Southall, Middlesex, UB1 PT between Big Marketing I Company Secretary
Limited (Landlord) and Post Office Limited (Tenant
Strictly Confidential Page 2 of 3
Veb
G1/Z0/0¢-Bunaew pico 10d
901 10.66
UKGI00024394
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POST OFFICE LIMITED
Date Register of Sealings Company Number
19.07.2019 21854540
‘Seal Number Date of Date of Persons attesting Destination oF
{File Ref. Sean ‘Authority __I Description of Document To Document Document
17877 2706/2018 75/06/2018 I A licence germitng scaffolding o be erected on an Adjoining Property I David Pary. Senior Assistant Karima Karmar
Scaffolding known as 28 Wallgate, Wigan, WN1 1AD between Post Ofice (Adjoning I Company Secretary
Licence Owner) and Wallgate Property Limited (Adjoining Tenant,
1798 ‘2T06/2019 25/06/2019 I Deed of Amendment io the Financial Services Joint Venture Agreement — I Sarah Koniarski, Senior Assistant I FS&T
between Post Office Limited, THE GOVERNOR AND COMPANY OF THE I Gompany Secretary
BANK OF IRELAND, BANK OF IRELAND (UK) PLC, BANK OF
IRELAND PERSONAL FINANCE LIMITED and MIDASGRANGE
LIMITED. Approved by eCAF 164, Contracts register 310.12, 5 copies
‘sealed
1799 (OaOTI2018 ‘OA/07I2019 I Amendment No.14 to POLO4O33 - Supply of Managed Data and Brands — I Veronica Branton, Head OF FSeT
RM Services dated 15/05/2008, contract no, 579.06, eCAF 204 x2 ‘Secretariat
Te007 Lease I T1O7/20TS ‘08/07I20TS I Lease relating o premises on Ground Floor and Basement of 25 Spring I David Pay. Senior Assistant Karima Karma
Gardens, Manchester between Bet365 Group Limited (Landlord) and Post I Company Secretary
Office Limited (Tenant).
TeOT Licence to I 1710772018 T7TOTI2OT9 I Licence to occupy relating tothe Post Ofice at 16 Broad STreet, David Party, Senior Assistant Karima Karma
Occupy Wokingham, RG40 1AA between the Post Office Limited (Licensor) and I Company Secretary
the Royal Mail Group Limited (Licensee)
Strictly Confidential Page 3 of 3
Veb
sBujeeg Let gen
Tab 13.2 Health and Safety Report
100 of 106
POST OFFICE PAGE 1 OF 2
POST OFFICE BOARD
Performance Review — Health & Safety
Author: Martin Hopcroft Sponsor: Mo Kang Meeting date: 30" July 2019
Executive Summary
Context
Keeping our employees healthy and safe is fundamental to our success. This is reflected
in the Post Office Board’s legal responsibilities: members of the board have both
collective and individual responsibility for health and safety.
We have a rolling 3-year plan to drive compliance, targeting a reduction in safety
metrics including accidents; lost time accidents (LTIFR); days lost; and personal injury
claims. Our H&S reporting and safety management system has been externally audited
and we also recognise the importance that wellbeing can play in creating engaged and
motivated employees.
Questions addressed in this report
1. What are the trends on accidents and on violence across the Post Office?
2. Are there any significant risks emerging and what are we doing to mitigate?
Conclusion
The prevention of accidents has improved materially year on year, with a 28% reduction
reported in 18/19 compared to 17/18 (81 v 112). At Period 3 (June) we are forecast to
meet our lost time incident target of 0.180 LTIFR (see Appendix A).
Post Office Network robberies show a 16% year on year increase (12 month rolling,
146 v 126). Injuries remain comparable to last year (3 vs 2), with approx. 1 injury per
10. Injuries include cleaning fluid being sprayed, a small cut to shoulder, and a minor
puncture wound from a blade. Weapons are seen in approx. 57% (16) of incidents, 63%
(10) of these being blades. We continue to see positive results in the ‘High Risk’ robbery
programme where we are installing fogging and IP cameras. Criminal activity in known
hotspot areas has seen recent increases in Greater Manchester & West Yorkshire,
ATM gas attacks are showing signs of slowing, partly due to recent successful gas
suppression activations and lower cash holdings. On average, Oct 18 to Feb 19, there
were 6 attacks per month, and an average monthly loss of £181k. Mar 19 to May 19
saw an average of 3 attacks per month and average monthly losses of £30k. ATM gas
attack crime is very dynamic. The future of ATM crime is already evolving on the
continent with significant trends in the use of solid explosives to attack ATMs. It is likely
that this type of crime will increase in the UK and therefore our proposed cash
destruction solution should be upgraded (using ink and glue) to ensure criminals will
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Tab 13.2 Health and Safety Report
POST OFFICE PAGE 2 OF 2
not be successful in obtaining useable cash. It was agreed at Safety Board to accelerate
a pilot as soon as possible.
CViT robberies continue to reduce from the highs of last year, 43% down YTD (4 v 7).
We have rolled out 122 body cameras, 65 CCTV vehicle streaming and 20 tracked I-
boxes. We will have completed the introduction of cash destruction into 50 I-boxes in
12 weeks’ time. This protection will go into Birmingham and Chester depots where
incidents have been recorded. We are also undertaking a review of the Supply Chain
risk assessments eg. case across counter’ in rural or low risk branches and body armour.
Safety performance continues to improve. Total accidents are level with last year
during Q1 at 19 (9 in DMBs, 3 Support, 7 Supply Chain). Whilst lost time accidents
remain relatively low, an accident involving an employee who slipped in a hotel bath
(61days) and two physical injuries (bruising) in Supply Chain following assault (15days)
have led to an increase in lost days (75 v 38). There were no lost time incidents in June.
We met with HSL in May to agree the specification for an audit of POLs Property
Compliance Framework to assess and identify improvement opportunities across our
processes. This will include the use of a safety culture tool. The audit will commence
in August and a report shared with Safety Board in October.
The Supply Chain Safety Plan is progressing well with safety champions sharing best
practice and improvement opportunities at their safety forums, including signage. Local
risk assessments and safe systems of work continue to be strengthened and depot shift
managers are receiving ongoing coaching. BSIA and Mitie have visited Midway Cash
Centre and shared their ‘hearts and minds’ approach and will work with us over the
next few months to develop a campaign to share with their wider membership.
Property Statutory Compliance remains high at 95% with 98.45% recommended
actions completed. The latest external fabric surveys (Low Risk) still suggest a
satisfactory outcome with the principal areas still being water ingress through slipped
roof tiles, failed flat roofs and rotten windows. This will however improve as the estate
is invested in. There is still some concern regarding documentation missing from site
log books and CBRE are taking action to audit books and close this gap.
Lone working guidance has been incorporated into general H&S training modules
issued in April and July. The annual H&S module content has been reviewed for Supply
Chain and face to face training reintroduced for manual handling and use of equipment.
We are beginning to see further improvement and reduction of road risk through
analysis of telemetry data and driving behaviour in Supply Chain. We are improving
driver safety training, looking to pilot Alcolock (breathalyser integration with key
management), capture maintenance records and providing advice to combat fatigue.
Input Sought
The Board are requested to note and comment on the current safety performance.
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Tab 13.2 Health and Safety Report
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POST OFFICE PAGE 1 OF 2
Report
Following an increase in violent robberies, the presence of firearms and a number of
ATM rip-outs earlier last year, funding was approved to install additional fogging kits
and CCTV. A further review of robberies and violence has subsequently been undertaken
to help us understand current trends, whether our approach to profiling risk and the
current level of intervention is sufficient, and whether our plan for upgrading branch
security and equipment is robust. Conclusions were shared with Safety Board in July.
The British Retail Consortium (BRC) and Association of Convenience Stores (ACS)
continue to highlight the increasing threat from violence and abuse in robbery incidents.
In addition to the general crime risk increase, we believe POL will become a more
attractive target as we continue to increase our banking framework due to us
concentrating cash in a number of POL locations on high streets.
POL utilises mathematical and statistical modelling techniques to determine strategic
probability to better focus crime mitigating equipment in the right branches.
There is a minimum security equipment standard for every branch outlined in the
various policy and process documents for each branch format. Ordinarily, these will
include safes, safe time locks, monitored alarms and cash funding units (if open plan)
in all branches, with 3G cameras and fogging units as standard in high risk branches.
Anti-robbery fogging (where activated) and gas suppression, continue to be 100%
successful. Guidance for Postmasters informs them they should activate the panic alarm
and fogging ‘if they feel safe to do so’. Whilst evidence so far confirms where activated,
criminals will flee, there is always an extremely low chance they will not.
Following the successes of the fogging and IP camera installations so far (c. 776 total
branches upgraded at 21/6/19, consisting of 743 robbery fogging systems & 738 IP
cameras), this will steadily improve as we finish the roll-out programme around October
2019. Beyond the programme we will continue to target those 200 to 300 new high risk
score changes. BAU installs will also continue as part of post-robbery events. Alongside
this project, we are at the very early stages of developing a number of cash storage
solutions to secure banking deposits simply, quickly and safely potentially from Nov 19.
If CViT crime is displaced we would install more cash destruction systems in the affected
depots. For robbery and burglary we have a continual installation programme for the
next four years for all identified high risk branches. In addition we are also looking at
cash destruction systems for branches. We continue to engage within the industry, and
recent membership of Safercash will provide greater access to both CViT and ATM crime
data. Grapevine continue to scan media and social media.
In response to abusive and aggressive behaviour, temporary IP cameras with automatic
aggression detection will be made on a case by case basis. We are also working closely
with the British Security Industry Association (BSIA) and will be meeting their training
partner who are supporting a Met Police programme to share best practice and guidance
across the industry. Basic training is currently provided to DMB staff and to all
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Tab 13.2 Health and Safety Report
POST OFFICE PAGE 2 OF 2
colleagues who may come across violence in the workplace. The BSIA also sharing best
practice and introducing members to partners who are supporting initiatives.
w iorities for 2019/20
1. To progress the Safety Plan for Supply Chain with the development of Safety
Champions and a Safety Forum to develop a ‘hearts and minds’ culture, share best
practice, videos and visuals and provision of tool kit and self-audit tool.
2. To continue the development of our Managers to ensure compliance with safety
calendar activities, completion of training and local risk assessments.
3. To progress the recommendations from the Robbery and Violence review and Road
Risk Action Plan.
4. Digitalise H&S tools including Accident reporting (ERICA) and the Safety Calendar,
working closely with IT.
5. Update training content and support the deployment of Harassment by Customers
policy, implementing procedures to reduce risk and likelihood and impact of violence.
6. To review lone working guidelines for Support Centres, guidance to alleviate driver
fatigue and compliance to the mobile phone whist driving policy.
7. Undertake an independent audit of the Property Compliance Framework with support
from HSL/HSE, building on our previous H&S audit.
8. To extend the ‘mental health first aid’ initiative to provide support to the wider
business and network colleagues.
9. Reintroduce mobile health checks for DMB and Supply Chain colleagues.
Appendix A
5 Year Safety Performance
Year/KPI 15/16 I 16/17 I 17/18 I 18/19 I 19/20
Forecast
All accidents 198 129 112 81 76
All accidents/1000 29.3 21.0 22.0 16.9 20.8
Absence accidents 38 16 21 15 12
Absence Accs/1000 5.62 2.61 4.13 3.14 2.98
LTIFR 0.367 I 0.168 I 0.271 I 0.184 0.176
Days lost due to
accidents 792 259 480 245 284
Days lost/1000 117 36 94 51 70
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Tab 13.3 Future Meeting Dates
POST OFFICE LIMITED
BOARD
PAGE 1 OF 2
Post Office Limited Board Meetings
Author: Diane Blanchard
Executive Summary
Context
Meeting date: 30 July 2019
The Directors are requested to note the future meetings dates scheduled in respect of Post
Office Limited Board and Committee meetings.
The Report
2019
Monday 23 September 2019 08.30 - 10.30 ARC
Monday 23 September 2019 10.30 - 11.00 Nominations Committee
Monday 23 September 2019 11.00 - 12.00 Remuneration Committee
Monday 23 September 2019 12.30 - 17.30 Board
Tuesday 29 October 2019 11.45 - 16.30 Board
Monday 25 November 2019 16.00 - 18.00 ARC
Tuesday 26 November 2019 09.30 - 10.00 Nominations Committee
Tuesday 26 November 2019 10.00 - 11.00 Remuneration Committee
Tuesday 26 November 2019 11.15 - 16.30 Board
2020
Tuesday 28 January 2020 09.30 - 12.00 ARC
Tuesday 28 January 2020 12.30 - 17.30 Board
Tuesday 11 February 2020 10.00 - 11.00 Nominations Committee
Tuesday 11 February 2020 11.00 - 12.00 Remuneration Committee
Tuesday 24 March 2020 09.00 - 11.30 ARC
Tuesday 24 March 2020 11.45 - 16.30 Board
Tuesday 19 May 2020 09.30 - 12.00 ARC
Tuesday 26 May 2020 11.00 - 16.00 Board
Tuesday 26 May 2020 16.00 - 16.30 Nominations Committee
Tuesday 26 May 2020 16.30 - 17.30 Remuneration Committee
Strictly Confidential
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Tab 13.3 Future Meeting Dates
Monday 27 July 2020 14.30 - 17.00 ARC
Tuesday 28 July 2020 09.00 - 13.00 Board
Tuesday 28 July 2020 13.30 - 18.00 Board Strategy Away Day - 1
Wednesday 29 July 2020 08.30 - 16.30 Board Strategy Away Day - 2
Tuesday 22 September 2020 09.00 - 11.30 ARC
Tuesday 22 September 2020 11.30 - 12.00 Nominations Committee
Tuesday 22 September 2020 12.00 - 13.00 Remuneration Committee
Tuesday 22 September 2020 13.30 - 17.00 Board
Tuesday 27 October 2020 09.30 - 14.00 Board
Tuesday 24 November 2020 09.00 - 11.30 ARC
Tuesday 24 November 2020 11.30 - 12.00 Nominations Committee
Tuesday 24 November 2020 12.00 - 13.00 Remuneration Committee
Tuesday 24 November 2020 13.30 - 17.30 Board
2021
Tuesday 26 January 2021 09.00 - 11.30 ARC
Tuesday 26 January 2021 11.45 - 16.30 Board
Tuesday 9 February 2021 10.00 - 11.00 Nominations Committee
Tuesday 9 February 2021 11.00 - 12.00 Remuneration Committee
Tuesday 30 March 2021 09.00 - 11.30 ARC
Tuesday 30 March 2021 11.45 - 16.30 Board
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Tab 13.4 Forward Agendas
Post Office Board Agenda
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Date: Monday 23 September 2019 I Time I [12.30 - 17.30 hrs] I Location I 1.19 Wakefield
Present Other Attendees
© Tim Parker (Chairman) I © Tim Franklin Veronica Branton
(Head of Secretariat)
Nick Read (CEO) © Carla Stent
Ken McCall «Tom Cooper
Alisdair Cameron
Agenda Item Action Needed Lead Timings
1. I Welcome and Conflicts of Interest Noting Chairman
2. I Minutes of Previous Board meetings including I Approval Chairman/
Status Report Veronica Branton I 12.30- 12.45 hrs
3. I Report back from Committees (verbal) Noting
- ARC Committee Carla Stent
- Remuneration Committee Ken McCall
: Nominations Committee Chairman
4. I CEO Report Noting & Input
5. I Finance Al Cameron
5.1 Financial Performance Report Noting & Input
6. I FST&I and Retail Quarterly Reports Noting & Input Owen Woodley/
Kathryn Sherratt
Debbie Smith/
Cathy Mayor
7. I Services of General Economic Interest Noting & Input Debbie Smith/
Compliance Tracy Marshall
8. I Royal Mail Negotiations Noting & Input Debbie Smith/
Mark Siviter
9. I IT Strategy Noting & Input Rob Houghton
10.I Group Litigation Update Noting & Input Ben Foat/ Alan
Watts/ Amanda
Jones/ Julie
Thomas
11.I Health and Safety Report, including violence Noting & Input Mo Kang/ Martin
and robberies report Hopcroft
12.I Payzone Bills Payments Capital Injection Approval Debbie Smith/
Andrew Goddard
13.I Items for Noting Noting All
13.1 Sealings
13.2 Future Meeting Dates
13.3 Forward Agendas
14.) Any Other Business Noting and Input Chairman
15.I Date of next meeting Noting Chairman
29 October 2019
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