UKG1I00041682
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Agenda
Post Office Board Agenda
Date: I 03 June 2021 Time 10:05 — 11:50 hrs Location I Finsbury Dials, 20 Finsbury
& Street, London EC2Y 9AQ
14:15 - 17:15 hrs 1.19 Wakefield (via Microsoft
Teams)
Present Other Attendees
‘* Tim Parker (Chairman) © Ken McCall (SID) ‘© Veronica Branton (Company ‘© Martin Kearsley (Product Portfolio
Secretary) Director ~ Banking, Payments &
Transactional Products) (Item 6.)
‘© Nick Read (CEO) © Carla Stent (NED) ‘© Max Jacobi (Strategic Financial * Zdravko Mladenov (Head of
Planning and Analysis Director) Business Transformation Unit)
(Items 5.) (Item 7.)
‘* Zarin Patel (NED) Alisdair Cameron (CFO) I * Tim McInnes (Transformation & ‘Declan Salter (Historical Matters
Strategy Director) (Item 5.) Director) (Item 8.)
‘* Tom Cooper (NED) * Lisa Harrington (NED) I * Dan Zinner (Chief Operating Officer) I ¢ Ben Foat (Group General Counsel)
(Items 4. & 5.) {Items 4.)
Saf Ismail (NED) * Elliot Jacobs (NED) ‘* Owen Woodley (Group Chief ‘+ Laurence O'Neill (Senior Legal
Commercial Officer) (Items 5. & 6.) Counsel - HR & IR) (Items 4.)
‘+ Andrew Taggart (External Solicitor— I © Chris Jeans (Barrister) (Items 4.)
HSF) (Items 4.)
Apologies: N/A
Agenda Item I Action Needed [Lead [ Timings
Performance and current issues
1 Welcome and Conflicts of Interest Noting Chairman
2. Minutes and Matters Arising? Approval Chairman/
h i
30°" March 2021 Veronica Branton 10:05 hrs
3. ‘Appointment of Elliot Jacobs and Saf Ismail as Non-_ I Approval Chairman
Executive Directors of Post Office Limited & Re-
appointment of Carla Stent as Non-Executive
Director and Chair of the Audit, Risk and Compliance
Committee
4. CEO Report (including discussion on Starling) Noting & Input Nick Read 10:05 hrs
Dan Zinner/ legal
team for Starling
Strategy
5. Strategic Plan Discussion AlCameron/ Dan I 11:00 hrs
Zinner/ Tim
McInnes/ Max
Jacobi
2.5 hr Meeting break 11:50 hrs
6. Banking Framework 3 pricing framework Approval Owen Woodley/ 14:15 hrs
Martin Kearsley
7. Strategic Platform Modernisation (SPM) Approval for Zdravko 15:15 hrs
recommendation to Mladenov
Shareholder
8. Financial Performance Report Noting & Input Al Cameron 16:.15 hrs
1 The minutes of the Board meetings to discuss the CCRC cases are approved at those meetings.
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Agenda
Post Office Board Agenda
9. Historical Matters Report Discussion Declan Salter 16:35 hrs
10. Approvals Approval 16:55 hrs
External Auditor Fees & Scope of Engagement
(2020/21)
© Post Office Operating Model (Organisational
Changes) funding approval
* Matters Reserved and Terms of Reference
changes
‘ PUDO update
Noting and Governance Items
11. © Health & Safety Report Noting
Improvement Development Group Report
«© Sealings
* Future Meeting Dates
© Forward Agenda
12. Any Other Business
13. Date of next scheduled meeting: Noting Chairman
27" July 2021.
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Tab 2.1 Minutes from 30th March 2021
POST OFFICE LIMITED BOARD MEETING
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MINUTES OF A MEETING OF THE BOARD OF DIRECTORS OF POST OFFICE LIMITED HELD ON TUESDAY 30 MARCH
2021 AT 20 FINSBURY STREET, LONDON EC2Y 9AQ BY CONFERENCE CALL AT 11:45 AM*
Present: Tim Parker Chairman (TP)
Nick Read Group Chief Executive Officer (NR)
Tom Cooper Non-Executive Director (TC)
Carla Stent Non-Executive Director (CS)
Lisa Harrington Non-Executive Director (LH)
Zarin Patel Non-Executive Director (ZP)
Alisdair Cameron Group Chief Finance Officer (AC)
In attendance: Veronica Branton Company Secretary (VB)
Max Jacobi Strategic Financial Planning and Analysis Director (MJ)
(Item 5.)
Dan Zinner Group Chief Operating Officer (DZ) (Items 5. & 6.)
Owen Woodley Group Chief Commercial Officer (OW) (Items 5. & 6.)
Martin Kearsley Product Portfolio Director - Banking, Payments &
Transactional Products (MK) (Item 6.1)
Tom Wasilewski Head of Commercial Development (Item 6.2)
Mark Siviter Product Portfolio Director - Mails, PUDO, Retail & Gov
Services (MS) (Item 6.2)
Zdravko Mladenov Head of Business Transformation Unit (ZM) (Item 6.3)
Catherine Stalker Independent Audit (CST) (Item 7.)
Richard Sheath Independent Audit (RS) (Item 7.)
Jeff Smyth Chief Information Officer (JS) (items 8.4 - 8.6)
Apologies: Ken McCall Senior Independent Director (KM)
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. Minutes and Matters Arising
The Board APPROVED the minutes of the Board meetings held on 26" January and 26"
February 2021.
The Board NOTED the action log and status of the actions shown.
3. Appointment of Tom Cooper as a member of the Nominations Committee
The Board APPROVED the appointment of Tom Cooper as a member of the Nominations
Committee.
4. CEO Report
Nick Read reported that overall performance had been good and provided an update on
the trends, noting that there had been no major changes from a trading or branch network
perspective, as well as in the financial services or insurance businesses during the period.
The core deliverables of the Telco sale, the Amazon trial progressing, the publication of the
Annual Report and Accounts for 2019/20 and the approval of the security documents had
* participation in the meeting was entirely via Microsoft Teams from participants’ personal addresses. In such
circumstances the Company's Articles of Association (Article 64) require that the location of the meeting be
deemed as the chairman's location. However, it was not deemed appropriate to record personal addresses on
the Company record. As such, the Registered Office is recorded as the meeting location.
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been completed. The coverage of the Annual Report and Accounts 2019/20 had been
balanced but with questions raised about POL’s ability to fund the litigation costs. Activity
was focussed on the Improvement Development Group work, including the key and urgent
priorities identified in the Deloitte report. The work from the KPMG team had been
disappointing initially but NR was having weekly conversations with the senior partner,
and the work and resources provided were much improved.
The Board had asked questions about the work we were doing on culture, this included:
“Adopt an area” for senior leaders; a “Week in the life of a Postmaster” training sessions
for all colleagues; “Stronger together” events to better define our ways of working, all of
which were leading to an all colleague conference at the end of April 2021. Our
expectations of colleagues at different levels of the organisation would be set out with a
framework to drive better performance. The work we were doing with Postmasters and to
support Postmasters had been outlined to the Board by Amanda Jones, including the
engagement with the senior team and how we were addressing issues raised, with a focus
on fixing the issues that were within our control.
The key priorities from the Postmaster consultation were outlined. We needed to improve
our communications cascade. NR noted that he had held conversations with a number of
public figures about the Public Inquiry and they all agreed that we needed to make a clear
distinction between the past and the present but that we could not “keep our heads
down” and had to communicate actively. Tim Parker noted that most of the problems had
occurred when Post Office was still part of Royal Mail Group.
NR reported that the interaction with the Inquiry Secretariat continued to be positive but
the requests and timelines for the provision of information were not consistently
structured. We were working through how colleagues could participate in the Public
Inquiry’s work most effectively and were supported in this regard by Lexington. We
needed to keep reminding people that the Post Office colleagues today were working to
make improvements. The reporting of the CACD judgments was likely to be
uncomfortable and we needed to be proactive in our communications, making clear the
distinction between the POL of the past and the POL of today. NR would be engaging in
communication activities over the next few weeks to be transparent about what we were
doing to manage today and tomorrow effectively. TP noted that it might be helpful to
refer to historical Post Office to draw the distinction clearly.
NR noted the people challenge in the organisation as individuals were being asked to do
more and to work quickly. We recognised this pressure but saw it as tied to the Public
Inquiry timeline. However, while we could “run” as an organisation we did not have the
capability to produce the changes needed in the longer-term.
A number of points were raised and addressed:
© Tim Parker asked about BEIS’s thinking on the Judicial Review application of which they
had been notified. Tom Cooper reported that BEIS had received a letter from Alan
Bates and his lawyers stating that the Public Inquiry should be a statutory inquiry and
setting out the reasons for that.
Tim Parker was interested in the Postmasters’ views on the Horizon system specifically.
NR reported that criticisms were largely about the processes that wrapped around the
platform which made operating Horizon complicated, rather than the system per se.
TP noted that the gap between perception and reality vis-a-vis the Horizon system was
critical. Al Cameron noted that he had been preparing for the Public Inquiry and the
team had referred to a paper about the IT system which had described it as “not fit for
purpose” but tracking back this had been do with the cost and sustainability of the
system rather than its current operation. NR agreed that it was an expensive system to
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run, that it was “clunky” but that it worked. TP noted that we also needed to
distinguish clearly between the different versions of Horizon.
* Lisa Harrington asked about the return to office work. She noted that the organisation
she was working for was trying to encourage people back into the office where this was
important for creativity and collaboration. NR thought it was important to talk to
colleagues about the approach and get their views, which we were doing. We would
start more face-to-face working on an ad-hoc basis after 21° June 2021; however, our
focus was on the Public Inquiry, and July and August should also be a time to give the
senior team some scope to take holiday and come back refreshed for September. Carla
Stent noted that in planning for the Public Inquiry some face-to-face discussions could
be helpful.
© Carla Sent raised the controls around the Amazon trial and for engaging with further
partners as the devices used were outside the Horizon system. NR reported that he
had asked Mark Siviter and Zdravko Mladenov to address these concerns in their
sessions later today. Lisa Harrington added that it was the integration rather than the
device per se that was the issue.
© Carla Stent asked whether participation of 1,700 Postmasters in the consultation was a
low number. NR thought not, given the historical levels of engagement but we needed
to keep building our engagement levels. TP added that typical surveys drew in those
with polarised views but it would be beneficial to increase Postmaster engagement
levels overall.
e Zarin Patel raised a number of points:
- with reference to the organisation “running hot” it seemed as though Dan Zinner
was addressing the requirements to improve the Postmaster experience but she
wondered who on the GE was able to step back and consider the overall risk and
controls impact of the changes we were making. NR thought that for risk
management there was an open question on whether we should bring audit and
risks together in a GE level role. ZP noted that she had been thinking more about
who the lateral thinkers on these issues would be on the GE. Carla Stent added that
we should be bringing Internal Audit into more of the conversations about change,
while a lot of the role sat with Al Cameron and Ben Foat. Al Cameron noted that
outstanding audit and risk professionals were rare and if we wanted a strategic role
for audit and risk we would need to approach this differently. Over the last year
risk and audit had been affected partly by bandwidth and partly by a lack of
confidence in being able to change the future. Tim Parker noted that first and
foremost you needed good people in roles and one of the key challenges for POL
was getting the right people in place responsible for taking the key decisions.
- ZP wanted to understand our digital strategy on Mails following our current focus
on the Public Inquiry as she was concerned that we were late to market. NR
reported that he had asked to understand the BAU change management
requirements in more detail. We had been slow to market and were working on
PUDO and customer journeys at the same time. POL investments over the past few
years had been focussed on the platform services.
- ZP would like to have a discussion at the Board on the Postmaster consultation and
the sense coming out of this that some Postmasters would prefer to be employees
- ZP agreed that it was right to be proactive in our communications but wondered
whether we would truly resolve the historical matters without an approach akin to
a truth and reconciliation commission. Al Cameron noted that some of the
Postmasters involved in the historical debate were seeking to obtain compensation
from BEIS. POL should be agnostic about the type of Inquiry run but be clear that
we would support whatever type of inquiry was run. NR added that we should be
clear that we thought Postmasters should be compensated where there had been
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Action: VB to
flag with
Amanda Jones
and add to
forward
agenda
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an injustice. TP noted that all parties had an interest in resolving the position of the
past.
The Board APPROVED an additional £2.8 m for project Starling (as part of the £11.4m
forecast previously outlined in 2020). This was to allow our external legal team to continue
providing support in the (pending) mediation discussions with the CWU/ Claimants’
solicitors and progress the next steps needed for the Tribunal hearing. A potential
settlement range with a ceiling of £2.9m had been estimated with delegated authority to
the Chief Operating Officer to seek to settle. In the event of mediation not succeeding, the
trial date was set for 7" June 2021.
Finance
Financial Performance Report
Al Cameron provided an overview of trading performance and network numbers. We were
struggling to increase opening hours because of lockdown restrictions. We had started to
recognise some provisions for HNGA at an operating cost level. HNGA was not a historical
matter. Trading profit stood at £37m to date for 2020/21.
A number of points were raised and addressed:
* Tom Cooper asked about the £5m included for provisions. Al Cameron explained that
£1.5m of this related to holiday pay and this figure might have to increase in the
2021/22 financial year. £2.9m related to the provision for HNGA
Lisa Harrington noted that her firm had offered to buy out holiday pay but contingent
on people booking a number of days’ leave each quarter to smooth absences. Al
Cameron noted that it could be an approach to consider, however, we knew there
were going to be work pressures over the summer
¢ Lisa Harrington asked what was included in non-staff costs and Max Jacobi would send
her a summary but explained that it was mostly provisions.
Budget Plan for 2021/22
To do: MJ
Al Cameron introduced the budget plan for 2021/21. The team had reviewed this in detail
with UKGI/ BEIS. We were not projecting a very positive trajectory for the reasons set out
in the paper on trading uncertainties and the limited scope for cost reductions as it was
not the right time to take significant costs out of the business nor would we want to
reduce Postmaster remuneration. We had deliberately stopped further work on
considering outsourcing options for Supply Chain. DMB franchising was linked to the
affordability of change spend. While we could remove c400 roles from functions it would
take a year to deliver on automation requirements and resources were focussed on the
Public Inquiry work. The trading profit assumption was £4m better than it had been in
January 2021.
Overperformance had been declining over time. NR noted that he had spoken with
directors about this individually. Costs would be incurred addressing the Public Inquiry
recommendations and the work also needed to take place in advance of the Public Inquiry.
Tranches 3 and 4 of the Organisation Design (OD) would not happen this year. The revenue
numbers were subject to variability and we were facing some significant headwinds. TP
noted that this uncertainty in travel was true for Samsonite as well.
Anumber of points were raised and addressed:
© Tom Cooper thought the trading profit figure should be higher notwithstanding that we
would not be able to remove significant costs this year and the trading uncertainty
because of travel market and so forth. He did not want to set an unrealistic target but
did want it to be challenging as a reward incentive. Al Cameron agreed that what was
or not within our control should be recognised by the Remuneration Committee so if
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we received an additional sum from FRES that had not been assumed that should not
increase the figures from a bonus perspective
© Zarin Patel asked about the Mails and Banking figures set out in appendix 11 of the
paper and why the Mails market outlook was not as positive as it had been when
agreeing the 4-year plan and whether were we being too prudent in our assumptions.
Lisa Harrington noted that she had the same question but wondered whether it was
primarily a timing issue. Al Cameron agreed that it could be a timing issue; volumes
would increase after the trial period with Amazon but would not deliver significant
profits immediately and the margins in Mails were low. Owen Woodley noted that the
figures were better in the outer years of the plan. Max Jacobi added that Mails was
one of the few areas better off from a trading perspective during the past year;
however, the material upside in Mails had been offset by the impact of lockdown on
the other businesses. OW added that it was difficult to anticipate the impact of
lockdown on Mails in the future, for example, the benefits of home shopping appeared
to be tailing off. Lisa Harrington noted that there would still be a material change in
buying patterns into the future. Tim Parker noted that it would be important to track
the changes under MDA2. Nick Read reported that we wanted to drive a different
sales behaviour in Postmasters supported by Area Manager briefings but we were
being prudent in our assumptions. Al Cameron added that there had been limited
active sales among Postmasters historically so it would not be prudent to assume a
radical shift in this pattern. TP explained that his point was more about RMG seeking
to take business away from POL. NR noted that this was the biggest threat felt by
Postmasters. ZP suggested that the Board look at delta on Mails at the end of Q1
trading to test whether our assumptions were too conservative.
© Carla Stent asked about the investment spend and prioritisation set out in appendix 8.
Dan Zinner reported that we had taken out £36m of change spend this month. This
linked to the deferral of OD changes and the slowing down of the DMB franchising
programme. We would be prioritising any improvements linked to conforming with
the judgments and £13-14m of spend linked to HNGA. DZ explained that some project
names had changed and elements of work had moved around. Carla Stent noted that it
would be helpful to show changes such as this.
¢ Dan Zinner explained that the £34m coming out of CIO costs related to headcount in
response to a question from Carla Stent.
© Carla Stent asked whether we were still focussing on the strategic measures we had
discussed in July 2020. NR confirmed that we were still focussing on Mails, Cash and
Banking but we had less investment money available to us. We had changed our
outlook on headcount for the reasons discussed already. Our assumptions had been
more optimistic in July 2020 when we had not absorbed the implications of the Public
Inquiry fully and had not assumed lockdown 2 and 3. Some of the changes were where
we had targeted for self-serve arrangements for Postmasters, headcount reductions
and greater speed of DMB franchising which would not be prudent now though the
position could change in the future.
* Al Cameron noted that UKGI and Tom Cooper had challenged the HMBU budget and he
agreed that the legal costs needed to be controlled. Some of the contractors in HMBU
were paid above market rates. The trajectory was higher than the budget and this
would be worked through. This might be a zero-sum game but should result in better
controls.
* Tim Parker noted that there had been four or five meetings with UKGI/ BEIS about the
budget but asked whether we were still in a position where it would be difficult for
Tom Cooper to recommend the budget to the Minister with the trading profit
assumption currently shown. Tom Cooper reported that he had shared the views that
he had raised with the Board on the revenue line with UKGI/ BEIS. In aggregate the
Action: AC/
MI
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revenue lines seemed conservative; he had no particular issue with the cost line but
thought the budget should be set in the region of £50-60m. We needed the Team to
focus ona stretching target. Legal costs remained an issue of concern and UKGI/ BEIS
had been flagging this since the summer. It was important that we avoid conflating the
budget with an open and honest discussion on pay. TP asked what the next steps
would be if the Board approved a budget which the Minister thought too low. TC
explained that UKGI/ BEIS would have to provide advice to the Minister on whether or
not to approve the budget. TP referred to the recent letter from UKGI which had raised
historical outperformance, an apparent incremental £26m of benefits and the
underlying performance of the budget being worse. He asked what we would do if we
accepted a higher budget and then the team were significantly behind at end of Q1 as
we wanted a budget that would be motivating for the Team while representing a
challenging target. POL had a reasonably fixed cost structure outside of its legal costs.
The real unknown issue was revenue. We could accept, for example, a higher
assumption for Travel, if we took a view that that market would pick up significantly
but a £60m budget was significantly higher than the £38m proposed. AC noted that
the legal costs were an important issue but did not change the position on trading
profit. There was a question of what levers we had to improve performance but AC did
not think these existed to increase trading profit by an additional £10-20m and was not
clear what we could do differently as an executive team. Tom Cooper suggested there
should be a range to reflect a range of possible outcomes with outperformance not
achieved until the top of that range had been reached; he felt it was a mistake not to
set out the legal costs in this document and have a full discussion about this now. AC
noted that we also had to reflect that we had a number of declining business lines and
Max Jacobi reported that he had taken the UKGI team through the benefits, which
were not entirely driven by project benefits. We had tried to be clear on how project —_ Action: AC/
benefits flowed through the business. TP noted that we needed to understand the MI)
declining elements clearly.
TP noted that POL had consistently taken people out of the business over the last few
years and struggled to understand any inefficiencies creeping into the business. NR
reported that POL had around 3,500 employees, 1,000 plus worked in DMBs and circa
800 worked in Supply Chain but, at previously discussed, there were reasons for not
progressing with options for outsourcing now. Ultimately, we wanted to reach a figure
of c 1,600 — 1,700 employees. NR agreed that we needed to manage the legal costs
differently and we would be addressing the issue.
Carla Stent noted that there was material uncertainty around a number of factors and
this made it difficult to produce a budget. We should work with the knowledge that
we have, focus on investment spend, set a trading profit target that was stretching but
achievable but look at this after the first quarter and second quarter and review the
remuneration position following this. Tim Parker noted that we either accepted the
fixed costs or we did not. We may not have the right answers on Mails and Banking but
the team had provided their view on this. The one element we could take a view on
was Travel and adjust the budgets if our assumptions on this were wrong. We had to
back the Team and TP did not think there should be a range of figures. Al Cameron
noted that the profit drop from FRES last year was circa £30m and the Travel market
would not revive in Q1 this year but we could be clear on the profit assumptions for
FRES and this was a binary output. TP noted that it was clear that there was disquiet at
BEIS about an outcome that was lower this year than last but he was not comfortable
with increasing the assumptions as much as proposed by BEIS. Al Cameron added that
we were not assuming that we would make less money on a like-for-like basis this year
than last year. We had sold the Telco business and had included £9m for declining
business areas. Our starting point was £29m down. Dan Zinner added that we had an
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existential threat posed by the litigation and we had to fix all the issues we were
uncovering. The cost structure would come under more pressure rather than less. Tim
Parker noted that he would like to reach a position that the BEIS Team was likely to
support.
The Board AGREED that a range of scenarios/ outcomes should be included for FRES and
this would be worked through over the next few days. Otherwise, the draft budget for
2021/22 was APPROVED for submission to BEIS. The assumptions for Mails, in particular, Action: AC/
would be reviewed at the end of Q1. The legal costs for HMBU would be addressed. MI
Strategy Updates
Banking Framework 3
Owen Woodley introduced paper. Today’s focus was on agreeing a general approach to
the next stage of the discussions with the banks and developments of the pricing
framework. There was a “sweet spot” between the provision of counter services and
maximising the value of the services provided, as well as addressing the reaction of the
banks to BF2 and developments of alternatives to Post Office for deposits and
withdrawals. Banking services were critical to POL revenue flows.
Martin Kearsley reported that the income for Postmasters from the provision of banking
services had increased over the past few years. BF2 generated circa £190m a year. A range
of £715-745m was included over three years for BF3 and the thinking behind the range
was explained. It was proposed that we move from a stepped approach for numbers of
transactions to a curve which was designed to encourage volume and moving withdrawals
closer to a market rate to increase our competitiveness and discourage any banks from
leaving the Banking Framework. Santander was likely to take up the option to stay on BF2
rates. We wanted to avoid providing the banks with an ultimatum and to improve levels of
trust. The final deal would be brought back to the Board for approval in June 2021.
Nadia Farr explained the approach to the work Accenture had undertaken. Phase 1 had
been focussed on external findings and we now had a good overarching view of the
market trends. There had been a deep dive into the views of the banks on the counter
service role POL provided and Accenture had looked at the alternatives for service
provision the banks had in place or could develop. Postmasters generally thought
remuneration was fair but thought the framework could be more consistent across the
banks. Services and what the fee covered was a more significant issue for the banks
generally than the fee itself. There were some counter cash alternatives in place which
were more established for withdrawals with ATMs and cashback, which was experiencing
a revival. The threats came where solutions could compete with the branch network and
where variable unit pricing was available.
Phase 2 of the work was the design phase with the objective of developing a more flexible
service.
Martin Kearsley noted that some retailers, such as Hendersons and Morrisons, were
having their cash delivered directly. In addition, Government was moving rapidly to allow
cashback with purchases through the Paypoint trial. The top five banks in the Framework
were looking for a net neutral or better position reflecting the “lock-in” pricing option
available for those in BF2 when moving to BF3. There had been a series of external
engagements to guide us through the development of the model.
A number of points were raised and addressed:
© Tom Cooper thought the proposed approach made sense in aggregate, including
reducing withdrawal pricing. However, he thought that the changes proposed to the
framework fee were problematic because as our volumes declined in the future we
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would have no mechanism to reduce our fixed costs which still needed to be covered.
We should also address the AML issue and provide an incentive for the banks to
support full compliance and be able to provide a positive message on supporting a
reduction in financial crime. Martin Kearsley reported that changing from a step
system to a curve was to incentivise volumes by removing cliff edges. Our cost base
was between £65-70m and we would be recouping more than this. The proposal was
to put a cap at £90m and above this sum a fee on a per transaction basis that was
favourable to the banks. Our assumptions were that the trade received could generate
up to £109m. We still had the option of not including a cap. Tom Cooper noted that he
was not convinced of our cost base estimate because of our Supply Chain and IT costs.
This amounted to effectively providing 11,500 branches for free and he could not see
why we should cap our income. We were providing a service and in doing so should
not place ourselves with fixed costs we could not cover. Al Cameron thought that
maintaining a position that we had a cost reflective base would be difficult unless we
could be clear how this was comprised and how we were going to drive efficiencies. If
we stopped providing banking services we would still have a network and the costs
associated with running this. We needed to give the banks some incentives to
participate in BF3.
¢ Tim Parker noted that the view had been that Barclays was the bank most likely to
pursue alternatives to Post Office services and asked whether this was still the case. Al
Cameron explained that the banks’ position entering BF2 was that they were keeping
Post Office profitable. How satisfied or otherwise the banks were with our proposals
would affect their approach in the discussions on BF3.
© Carla Stent remarked that when we had increased pricing for BF2 the banks had asked
whether this was the “thin end of the wedge”; she asked whether our views on the
banks’ perception of this had changed because that could affect the structure we Action: MK for
proposed. In addition, customer service had been raised as one of the “pain points” for the June
the banks so it would be helpful to understand how these concerns had been report to the
investigated and addressed in the next report to the Board. Board
PUDO
Owen Woodley noted that the paper set out the position with the Amazon trial, the next
steps in expanding this service and our work to secure DPD as a further partner. It had
been announced that the CEO of DPD was leaving so we would need to see if this had any
implications for our discussions. The team continued to develop the proposition and look
at integration with Horizon.
Mark Siviter noted that PUDO was at the core of the strategy to make up market share as
we entered MDA2. There was a roadmap for digitisation and we were working through
the required mitigations as we entered MDA2 with variable pricing and the removal of the
exclusive relationship with Royal Mail Group (RMG). RMG had reacted as was expected.
There had been promotions for their Click and Drop service which was targeted more at
social senders than small businesses; the latter was where the opportunities lay for Post
Office primarily. The team were starting to see the numbers for more of the market as
they had conversations with other potential partners. Hermes was promoting its service
through free collection from people’s doors and had already increased its market share.
Post Office’s job was to work through our strategy and de-risk any steps RMG might take
that reduced Post Office’s fees. The team were focussing in on: 1) what we needed to do
to support the new network model with frictionless customer journeys and switching out
of the Horizon system that made more services available 2) expanding the digital platform,
including Drop and Go but with some additional elements such as E-Bay integration and
taking more control of the digital capacity; 3) giving consideration to building an online
sales channel. The plan was to come back to the Board in July 2021. It was true that we
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were late in joining the market but the principal reason for this had been our previous
exclusivity deal with RMG. Our Mails work still represented c70% of the market. 87% of
Postmasters were better off under MDA2 agreement on a like- for-like basis.
Anumber of points were raised and addressed:
* Lisa Harrington asked about financial integration, operational robustness and
feedback on the developments from Postmasters. Tom Wasilewski reported that
those branches participating in the Amazon trial were averaging 3-4 items a branch
per day. We were still at an embryonic stage and were seeking to extend this
capacity in two areas: 1) inbound parcels with customer collection and, 2) customer
drop off. Other services were harder to run and less predictable. The team were
running a co-creation group with Postmasters to consider solutions for managing
capacity constraints and how to address problems that arose. Integration with the
backend systems was being worked on over the next month. LH asked how we would
obtain assurance that the system was working, particularly if it involved Postmaster
remuneration. TW noted that the Amazon trial was a separate stream of work
running on separate devices but we wanted to integrate our PUDO services with
Horizon. Al Cameron noted that this would be a major piece of work. Remuneration
integrity was a significant element of the SPM work and the SPM team had been
having conversations with the PUDO team but a lot of new requirements had
emerged from these conversations and we needed to come back to the Board with a
view on this. Carla Stent noted that we would need to weigh up the risks and returns.
AC would bring back a paper to the 3 June 2021 Board meeting covering PUDO ‘Action: AC
integration with Horizon, cashless branches and SPM integration. Tom Cooper noted
that Payzone outlets already operated without cash and asked whether we could
leverage this opportunity. AC agreed that we needed greater integration with
Payzone but needed to consider legal and competition issues carefully. The options
for greater integration with Payzone were going to be discussed by the GE in April
2021.
© Tim Parker noted that there seemed to be significant activity in the PUDO market,
including Hermes increasing their market share significantly. Mark Siviter thought
that an optimal position for Post Office would be to continue providing RMG
Universal Service Obligation (USO) products, expanding our service with Amazon and
introducing another partner, such as Hermes, but via a longer-term framework
agreement.
The Board NOTED:
i. The launch of the Amazon Click and Collect trial
ii, The roadmap and releases for the PUDO project.
SPM
Zdravko Mladenov provided a progress update. There had been a significant amount of
activity across the business and we were due to launch 400 non-Horizon locations on the
1* of September 2021. The SPM Team was being developed by pairing internal and
external expertise. A governance model had been agreed with UKGI/ BEIS. Approval of the
multi-year business case would be sought from the Board on 3% June 2021 which would
then be sent to BEIS for review over the summer. Programmatic and technical assurance
work would be undertaken on the SPM work, including on remuneration calculations. The
focus over the next three months would be putting in place the 400 non-Horizon locations
and developing the business case.
A number of points were raised and addressed:
¢ Lisa Harrington asked how the SPM work fitted with the Belfast Exit plan. Zdravko
Mladenov reported that we needed to rebuild some of the elements that we had
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originally thought could be “lifted and shifted” from the Belfast data centre as a black
box. Jeff Smyth and Zdravko Mladenov had been in regular discussion and agreed
that the migration of elements could only happen once but did not yet have all the
solutions in place. This issue did not relate to the database which was being taken out
of Horizon.
« — Zarin Patel noted that the Board would want to have a deep dive into the business
case before approving it as this was going to be one of the biggest decisions it would
be making. Lisa Harrington added that we should bring the board together to show
the work taking place with live demos.
* — Carla Stent asked about when the Board would have sight of the assurances on the
programmatic and technical aspects of the Programme as this that would help the
Board to sign off the business case. It was confirmed that the assurance work would
be paid for by POL but both POL and UKGI/ BEIS would receive the advice. It was
proposed to “piggyback” this work on existing controls using existing providers. Carla
Stent advised that care needed to be taken to get this right as the approach described
had not always been successful in the past.
e Lisa Harrington asked whether the team had sufficient resources, noting that there
had not been significant simplification of the product sets. Zdravko Mladenov
reported that we were proceeding well with the resource requirements for the
technical team but more resource was still be needed in other areas.
Action: ZM
The Board NOTED the progress update on the Strategic Platform Modernisation (SPM)
programme and APPROVED a drawdown of £4.68M to deliver a range of concrete
outcomes and deliverables until June 2021 including (a) continuing the technical
development to launch the 400 new ‘Horizon-free’ Express propositions; (b) completing
the multi-year business case for UKGI/ BEIS; (c) completing the future Device and
Peripherals Strategy; (d) scoping the legal changes required to commercial agreements
affected by Horizon; and, (e) identifying the options to deliver better Branch MI to
Postmasters in the next 12 months.
7. Independently facilitated Board review
Catherine Stalker introduced the Board review for 2020, noting that the objective was for
the Board to be able to ask questions about the report and discuss what it wanted to do
next in light of the recommendations. The headlines were that the Board had good
foundations on which to build notwithstanding the pressures of recent times, with a focus
on resolving past issues. A clear strategic direction had been set. All directors were
aligned on the goals for Post Office. There was a good range of strengths and expertise on
the Board with a strong Chair, good working relationships and a good company secretariat.
Five areas of focus were recommended:
1) determining where the Board wanted to spend its time with a clear forward
agenda.
2) dealing with succession challenges, including making time to discuss the executive
team who were critical to the future of POL. This should include the Board
spending time with Nick Read so he could use the Board as a sounding board and
so the Board had insight into the pressures on individuals.
3) Putting in place a timely plan to manage the succession of some long-standing
board members and to integrate new members, including the two new postmaster
NEDs.
4) time needed to be spent on culture. One means of acquiring information on this
could be a culture dashboard. The NEDs also needed to get out and about more
once they were able to. This had happened less than on some other boards
Independent Audit had reviewed.
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5) there had been good development of the Risk Management framework but the
Board needed to stand back from the risk processes and structures to look at the
impact and the value. Risk management needed to add value to how things were
running in the business and a learning culture needed to be developed.
A number of points were raised and addressed:
¢ Carla Stent noted that we had devoted a lot of time to risk so it was sobering to
consider how much more needed to be done; she had had conversations with Al
Cameron and Nick Read about this and the approach that might be taken to drive a
more operational approach to risk management.
¢ Zarin Patel noted that “grounded trust” was a good phrase and we had been more risk
averse that we might otherwise have been because of the changes taking place and the
Public Inquiry, but we needed to take a shift in the direction as proposed in the Report.
¢ Lisa Harrington noted that she agreed with the points made in the report, including
needing to get out and about more. The relationship with our key stakeholder had not
been commented upon much and that had surprised her. Catherine Stalker explained
that Independent Audit had reviewed many organisations that were overseen by UKGI.
There was an inherent conflict in being a shareholder director but the POL Board was
managing it in the best way possible. Tom Cooper’s participation was valued by the
Board and, like a private equity director, he had greater involvement and access to
more information than other directors, but there was no suggestion that changes
should be made.
* Tom Cooper noted that he understood the points raised on culture but there were
some limitations to this. It was hard to “get your arms around” culture. One could
state your ambition and what you wanted to achieve but it was difficult to check and
assess whether the organisation was actually doing this. Tim Parker thought that the
authenticity of management was critical to culture. People had to see that what you
were saying was what you were actually doing. We needed to talk much more about
Postmasters as a Board. We were only beginning this shift in focus but over time we
would capture people’s hearts and minds. Changes in culture were never
instantaneous but all of us wanted the culture to change. Catherine Stalker agreed
that culture was driven by the management team and that it was hard for a board to
stay in touch with this but nevertheless there had not been evidence in the papers and
discussions on culture coming through to the Board as a significant topic. A focus on
culture would be both data driven and through the individuals reporting to the Board
(e.g. the Group People Officer and the Head of Internal Audit) and there was also the
“sniff test” of seeing how things operated on the ground. Richard Sneath added that
useful discussions could be sparked by the Board asking the executive how they drove
the right behaviours which also brought alive what was happening on the ground.
« AlCameron noted that he had been reflecting on how we had spent our time as a
board, the agenda we were driving, and the time spent responding to requests. Some
of the legal issues were very important but we also needed to recognise that BAU and
strategy were key for the longer-term success of the business. Tom Cooper noted that
the Board would nevertheless need to spend time overseeing the management of the
compensation schemes. Tim Parker noted that while much time had been spent on
reviewing individual cases referred to the Court of Appeal this had helped us set
parameters for the approach to future cases and to reach the conclusion that the
appeals should not be opposed in the overwhelming majority of cases which had been
vital. Boards only had a finite amount of time and the theme of the Report was that our
aspiration must be to focus more on BAU and strategy in future. Colleagues were keen
to revert to a more strategic view. TP also agreed with the points raised around
succession planning and talent in the Report.
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© Carla Stent asked what Independent Audit’s advice would be as we brought the new
Postmaster NEDs on board. Richard Sneath noted that Independent Audit had
experience of pension trustee boards. It would be important to make sure that the
Postmaster NEDs were fully involved in the Board’s discussions and decisions and their
contributions were encouraged and heard. Tim Parker agreed that the Postmaster
NEDs must be treated as equal players and would try to get the right balance between
encouraging contributions while recognising that it took some time to get up to speed
if you were new to a board. Catherine Stalker added that it could be beneficial for
existing NEDs to go on some of the induction visits with the Postmaster NEDs to help
forge those relationships.
Tim Parker referred to the “quick wins” included in the Report. Some decisions, such as
holding the ARC and Board meetings on the same day, had been to try not to impinge too
much on people’s diaries. However, all of the points were worthy of consideration and we
would will be following up on the recommendations positively and review these again in
July 2021.
Approvals
Annual Governance Report
The Board NOTED the following to which no changes were proposed:
(a) The Delegated Authorities from the Board, including subsidiary companies and
liabilities and indemnities (full document in Reading Room, summary in Appendix 1)
(b) The delegations in place for the authentication of the Company Seal (Appendix 2)
(c) The Board Committee Terms of Reference (ToR) reviews and the Review of Matters
Reserved to the Board (full reports in Reading Room, summary in paragraph 4)
(d) The Directors’ Register of Interests (Appendix 3).
The Board APPROVED the Authorised Signatories to which changes were proposed
because of changes in roles and responsibilities (Appendix 2).
Network Strategy, including DMB Funding
The Board:
© APPROVED the exit and replacement of 57 DMB branches in 2021/22 at a cost of
£18.9m, generating £4.4m annual recurring benefits.
© NOTED the progress in developing new light-touch formats and plans for further
piloting and roll-out during 2021/22.
Nick Read reported that next month we would announce the end of the moratorium of
franchising DMBs which was the right thing to do strategically to move to a fully franchised
organisation.
Procurement Risk Exceptions
a. PREN29 — Public Affairs Services
The Board APPROVED an extension to an existing non-compliant direct award by an
additional 3-month term to Lexington Communications Ltd for the provision of specialist
parliamentary and government advice. This was required in order to maintain service
continuity in relation to the public inquiry.
The existing contract for the provision of advisory services in relation to ongoing and
potential inquiries had a value of up to £173,000 (until July 2021 - £101,000 having been
spent to date) but now required a further extension for an additional value of £332,889.
The total value of the spend for the Services would be £505,952.
b. Delegated Authority Request — Microsoft Enterprise Agreement
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The Board:
APPROVED the award of the contract to Microsoft Limited for the supply of Software
and Services up to a value of £12.5m with a forecast cost of £8.85m over a 3-year
contract.
DELEGATED AUTHORITY to the Chief Information Officer to finalise and approve the
final agreement as Contract Owner in accordance with the commercial terms set out
in the paper presented to the Board. The contract would be executed by an approved
authorised signatory.
c. Delegated Authority Request — Property, Facilities Management Services and
Security
The Board:
APPROVED the award of the contracts for: hard Facilities Management Services; soft
Facilities Management Services, security Grapevine Services (Planned & Reactive
Security Services - Alarm Monitoring & Maintenance, Criminal Intelligence etc) up to a
value of £150m*, with a forecast base cost of £74.5m (£14.8m p.a. aggregate
excluding project related work) over a 5-year contract (being an initial term of 5 years
for lots 1, 2 & 3 with a further 3-year extension option available for lot 3 (at a cost of
~€18.6m excluding project spend, for years 2026-2029).
DELEGATED AUTHORITY to the Group Chief Finance Officer to finalise and approve
the final agreement as Contract Owner, in accordance with the commercial terms set
out in the paper presented to the Board and including the permitted three one-year
extensions in due course. The contract would be executed by an approved authorised
signatory.
*advertised OJEU maximum value.
It was noted that the business case should come back to the Board if the projected spend
was significantly higher than that shown in the paper. Al Cameron noted that we expected
the spend to fall as we reduced our property footprint.
d. Delegated Authority Request — Media Planning & Media Buying
The Board:
APPROVED the award of the contract to CARAT Limited for the supply of Media
Planning, Buying and Attribution services up to a value of £65m*, with a forecast cost
of £48.2m over a 5-year contract (being an initial term of 2 years, plus three
permitted one-year extensions).
DELEGATED AUTHORITY to the Chief Commercial Officer to finalise and approve the
final agreement as Contract Owner, in accordance with the commercial terms set out
in the paper presented to the Board and including the permitted three one-year
extensions in due course. The contract would be executed by an approved authorised
signatory.
*advertised OJEU maximum value
The OJEU process to aggregate POL’s Media Planning and Buying services had concluded.
Al Cameron reported that spend in this area included all the aggregator spend. Nick Read
explained where the responsibilities in this area lay in the business and we would come to
the Board to look at this work again in due course.
e. Delegated Authority Request — Affiliates & Aggregators
The Board:
APPROVED the award of the contract to AWIN Limited for the supply of Affiliates and
Aggregators Network and Management Services up to a value of £50m*, with a
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forecast cost of £23.7m over a 5-year contract (being an initial term of 2 years, plus
three permitted one-year extensions).
* DELEGATED AUTHORITY to the Chief Commercial Officer to finalise and approve the
final agreement as Contract Owner, in accordance with the commercial terms set out
in the paper presented to the Board and including the permitted three one-year
extensions in due course. The contract would be executed by an approved authorised
signatory.
*advertised OJEU maximum spend.
This OJEU process - a separate Lot under the Media OJEU — had concluded delivering
POLa compliant and direct contract without agency margin overhead.
f. PREN31 — Digidentity
The Board APPROVED an extension to an existing non-compliant contract by an additional
13-month term to Digidentity Ltd, from 31 March 2021 to 22 April 2022 for the provision
of “Verify Services” (online identity registration service) to Post Office, required in order to
meet Post Office contractual obligations to UK Verify.
It was AGREED that our plans for developing our digital identity service would be included —_ Action: VB to
on the agenda for the July 2021 strategy sessions. include on July
agenda
PCI Compliance Programme
The Board APPROVED:
© £4.1m additional funding for the PCI Compliance Programme (taking total programme
funding to £19.9m).
* up to an additional £3m to be made available if required. These funds would need to
be requested, with justification, for approval by the Investment Committee.
Carla Stent noted that the costs of the PCI Compliance Programme continued to increase
and asked whether we were seeking to contain the Fujitsu costs. Jeff Smyth reported that
our confidence in the completion of the contract was growing and we were now into the
banking pilot phase. There were not many “unknowns” left but it was always possible that
we would identify further areas that required PCI compliance.
Fujitsu Horizon Negotiation
The Board:
APPROVED the award of the extension to the term of the Fujitsu Horizon Agreement
for the supply of Application Services from 1 April 2023 (“Extension CCN”).
The duration of the extension would be for a further 1+1 year period (one year was
contracted from execution of the extension and extended the agreement from 1 April
2023 to 31 March 2024, the optional extra year could be committed to no later than 31
March 2023 and extended the agreement from 1st April 2024 to 31 March 2025
(together the “Proposed Extension”). The forecast spend was estimated at £21.3m p/a
(£42.5m estimated total), some spend was variable and demand based, and there was
no minimum commitment.
DELEGATED AUTHORITY to the Chief Information Officer to approve the extension as
Contract Owner in accordance with the commercial terms set out in the paper
presented to the Board and including the permitted 1+1-year extensions in due course.
The extension(s) would be executed by an authorised signatory.
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9.2
9.3
9.4
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It was reported that we would be publishing a Voluntary Ex-Ante Transparency Notice
(VEAT) notice, following which there could be challenge but we would be publishing a s72
notice setting out the legal justification for the approach taken.
Belfast Exit
The Board:
© APPROVED a drawdown of £9.03m to fund project activity until the end of October 2021.
This would deliver migration of the Horizon database to AWS and the Branch cutover,
whereby all branches would be connected to AWS rather than Belfast. The programme
would return to Board in September 2021 to confirm delivery progress and propose next
steps.
* NOTED the revised approach to the migration which split the remaining delivery cost
(c£19m spend to complete) into two priority sets; Priority One being mandatory to avoid
the cost/risk associated with running Horizon on out of date, unsupported software during
the 2021 peak trading period and Priority Two completing Belfast datacentre exit (and for
which options to replace rather than migrate would be investigated as a way to avoid cost
duplication with SPM)
NOTED the engagement of an external consultancy to validate the division of scope into
two priority sets and to support POL efforts to optimise Priority Two scope delivery with an
update/recommendation to the Board in June 2021.
NOTED the updated project milestone dates.
It was noted the Jeff Smyth and Zdravko Mladenov were discussing the Belfast Exit
Programme and the SPM Programme and the interfaces between the two regularly.
Noting and governance items
Health & Safety Report
The Health & Safety Report was NOTED.
Mails Regulation paper
The Mails Regulation paper was NOTED.
Telco sale and completion update
The Telco sale and completion update was NOTED.
Historical Matters Business Unit Report
The Historical Matters Business Unit Report was NOTED.
Postmaster NED appointments
The Postmaster NED appointments paper was NOTED.
Sealings
The Board APPROVED the affixing of the Common Seal of the Company to the documents
set out against items number 2031 to 2056 inclusive in the seal register.
Future Meeting Dates
The future meeting dates were NOTED.
Forward Agenda
The draft agenda for 3" June 2021 was NOTED.
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Any Other Business
Independent Director with a legal background
Tim Parker referred to Tom Cooper’s note regarding appointing an independent director to
the Board with a legal background to help provide further oversight of the work on
historical matters, including the administration of the compensation schemes; TP asked
for the directors’ perspectives. Tom Cooper explained that the new director might be a
General Counsel of a large company who understood governance and could provide a legal
challenge, including on cost issues to the HMBU team which was not led by a lawyer. This
experience and oversight were needed, not just in relation to the Historical Shortfalls
Scheme but also for the criminal cases which could continue over a number of years while
needing to free up Board time for the BAU and strategic matters. BEIS would not remove
responsibility from POL for oversight of historical matters.
Anumber of points were raised, including:
« AlCameron agreed that the work and costs of the external legal teams needed to be
managed carefully but did not understand why that should be a Board position. It also
needed to be recognised that there was an independent panel dealing with the HSS
offers. Tom Cooper noted that the HMBU controlled most of the activities and BEIS did
not want to have day-to-day responsibility for these issues.
Zarin Patel thought it made sense to have a legally qualified director on the Board as
the position for the Board could become more complicated with the civil claims;
however, with the Postmaster NEDs there would be a large Board and we needed to
make sure that we appointed the right person. We did not want to create a shadow
General Counsel and so needed to work through the practicalities of how this role
would work.
© Carla Stent noted that she was reassured that this individual would be an independent
director. Our structure as a Board would need to be considered if we were going to
split ourselves into sub-committees to allow the Board to focus more on strategy. Tom
Cooper noted that the Board should not need to spend nearly as much time on
individual litigation cases in the future. A Board sub-committee on historical matters
could allow Board meetings to focus on BAU and strategy. NR agreed that the day-to-
day management for historical matters was not right yet. It would need to be
determined how we would expect the new NED to operate and what their
accountabilities would be as well as needing to resolve the underlying executive
structure. NR saw the overall benefit of having a lawyer on the Board because of the
contractual issues that needed to be resolved.
Tim Parker noted that the large amount of public money at stake meant that BEIS
needed to have confidence in the approach we were taking. We wanted someone with
relevant expertise akin to Lisa Harrington’s in IT and transformation which enabled her
to have input into the IT and SPM teams’ work which the other NEDs could not. Tom
Cooper confirmed that this would be a non-executive role and he envisaged the time
commitment being somewhere between that of the Remuneration Committee and
ARC Committee Chairs. Nick Read would need to decide the best construct for the
executive deliverables. Tom Cooper would discuss the proposed approach with Lisa
Harrington in more detail outside the Board meeting. The appointment request to BEIS
would need to be made before the next Board Meeting. A Panel from the Board would
have to interview the shortlisted candidates following the advertising and shifting
processes.
Internal Audit fees
The Board APPROVED an increase of £150k in internal audit fees for the 2019/20 financial
year.
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There being no other business the Chairman declared the meeting closed at 16.15 hrs.
11. Date of next scheduled meeting
3" June 2021.
Chairman Date
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REFERENCE
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‘ACTION
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‘DUE DATE
UKGI00041682
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STATUS
Board Meeting 28 January 2020
10.2 Payzone Bill Payments Limited
~ Capital Equity Injection Request
Board Meeting 24 November 2020
7. Historical Matters Business Unit
report
»)
‘Additional Board Meeting 07 Decem
IThe Board asked that assurance was provided that,
he capital equity injection proposed was a tax
ficient arrangement before consenting to approve,
ber 2020
Veronica Branton to
relay to Payzone
clan Salter to relay 10
nFoat
‘The proposal is on hold. We have completed a
significant reappraisal and investment reduction
‘exercise and are awaiting 2 final decision on
2020/21 change spend approval. Upon receipt.
of this, we will return to the Board with a
recommendation for the funding arrangement
between POL and PZBP.
>
‘OPEN/CLOSED °
Open
REDACTIOI
To close
Funding / Historical Shortfalls
Claims Scheme
a)
Board Meeting 26 January 2024
‘elated considerations; he did not think that there
ere specific regulatory reporting requirements, but
hat position would be checked,
I Cameron reported that there were not any pension]
Bal cameron
Discussions have taken place with Linklaters and]
the Compliance team. We have obtained
confirmation that the pension regulator does
not need to be informed and in reviewing POL's
regulatory obligations we have not identified
any requirements for POL to inform its
regulators of is financial position, but it was
suggested that a thorough exercise is conducted!
0 certain key contracts are being collated and
reviewed to ensure certain obligations haven't
been missed. We'll then go through the relevant
documents with Linklaters.
‘Open and
ongoing
5.1 Strategie Platform
Modernisation (SPM)
Strictly Confidential
ban Zinner and Zdravko Miadenov were asked to
rovide more detall to the Board as to why exiting
Horizon was the right thing to do, allowing the Board
an Zinner/ Zdravko
ladenov
Page 1 of 3
This action isin progress and will be presented
to Board on 03° June as part of the larger
review of the SPM business case and plans.
To close
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Post Office Limited Board Actions as at 07.05.2021 z
to properly consider this and make a decision. °
5.3 Pick Up Drop Off Services Ken McCall requested that hard to place branches pan inner ‘To be factored into the carrier andnetwork I To close
(PuD0) ere considered in carrier and network discussions, iscussons.
tng it would be helpful if the carrier approach ‘The aim ofthe PUDO strategy isto make as
id offer something to these branches. Dan Zinner ‘many branches, including hard to place, 23
jwas asked to look into tis possible available to clients. While we will use
ing and the commercial agreements to
ineentivise maximum use ofthe network this
willneed to be balanced against the reality of
customer demang, branch suitability (capacity
and capability) and carrier operational coverage
and economies
4. CEO Report fo schedule a discussion at the Board on the eronicato fag with The agenda for 3 lune has a number of ‘Open
Postmaster consultation and the sense coming out of manda Jones and add to decision items so we did't have enough time to
his that some Postmasters would prefertobe forward agenda include a discussion onthe consultation. The
mployees. proposal isto schedule ths discussion separateh
and Amanda is providing some dates for a
session that would include the CEO of
‘Quadrangle who supported the consultation
process.
5.2 Budget Plan for 2021/22
a fo Took at delta on Mails atthe end of Qi vading to Al Cameron/ Mac Jacob “The Budget was revised to Inchide stretch profit I To close
fest whether our assumptions were too conservative assumptions for labels by £Bm and FRES by £6m.
‘We will include an analysis ofthe postion on
Malls and FRCS trading in the July financial
performance report to the Board, where an
Adjustment to the stretch wil algo be reviewed.
») fo provide an overview of the dedining clements in fl Cameron/ Mac Jacobi
he budget.
6.1 Banking Framework 3 {fo explain how customer service concerns raised by Martin Kearsley ‘Covered inthe BF3 paper includedon the 3° I To cose
he banks had been investigated and addressed. June Board agenda.
62PUD0 [To produce a Board paper on covering PUDO Jai Cameron to take Paper tobe included on the Board agenda for I Open
tegration with Horizon, cashless branches and SPM forward 27 July 2024
integration
Strictly Confidential Page 2 of 3
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Post Office Limited Board Actions as at 07.05.2021 B
635M [fo have a deep dive on the SPM business casein ravko Miadenav Paper included on Board agenda for 03@ lune I To close °
advance of a decision being sought. and discussions held in advance with a number
‘of NEDs,
7. Independently facilitated Board To include an item on the recommendations from the Veronica to include on July Tem included on the forward agenda forthe I To close
review Board review on the July Board agenda 2021 jenda Board meeting on 27° July 2021.
8.3 Procurement Risk Exceptions:
@) Media planning and buying Media planning and buying services. To provide an ‘Annoting paper will be submitted to the Board I Open
services verview or have a presentation to the Board on meeting on 27° July 2022.
jnere the responsibilities for media planning and
ying services layin the business.
‘by PREN3I- Digidentity [To include an item on the development of our digital Veronica to include on July Ingluded as @ strategy session for 27°/ 28° july I To close
identity service in the July 2022 strategy sessions. _ agenda
8.6 Belfast Exit
a TTo include an item on the progress of the Belfast Ext Veronica to include on Included on the forward agenda for the Board I To close
Plan and recommended next steps on the September Beptember agenda meeting on 28° September 2021,
Board agenda.
») fo Include an item on the engagement of an external Neronica to include on ‘We will revert with findings at July Board To close
nsultancy to validate the division of scope into two Forward agenda Included on forward plan,
rority sets and to support POL efforts to optimise
Priority Two scope detivety for the Belfast Exit Plan.
Strictly Confidential Page 3 of 3
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Tab 3 NED Appointments
@
POST OFFICE LIMITED
BOARD REPORT
Title: Non-Executive Director Meeting Date: I 03" June 2021
Appointments
. Veronica Branton, Company . - ;
Author: Secretary Sponsor: Tim Parker, Chairman
Input Sought: Decision
The Shareholder has given consent to the following appointments which the Nominations
Committee recommends to the Board.
The Board is asked to APPROVE the appointment of Elliot Jacobs as a Non-Executive Director
of Post Office Limited for a period of three years from 6 June 2021 to the nearest Board
meeting three years from that date.
The Board is asked to APPROVE the appointment of Saf Ismail as a Non-Executive Director of
Post Office Limited for a period of three years from 6'" June 2021 to the nearest Board meeting
three years from that date.
The Board is asked to APPROVE the re-appointment of Carla Stent as a Non-Executive Director
of Post Office Limited for a period of two years from 28" January 2022 to the nearest Board
meeting two years from that date. The Board is also asked to APPROVE that Carla Stent
continues to serve as the Chair of the Audit, Risk and Compliance Committee during her re-
appointment period.
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POST OFFICE LIMITED
BOARD REPOR
con A iver Meeting rd
I Title: Chief Executive’s Report Date: 3” June 2021
I Author: I Nick Read, Group CEO Sponsor: N/A
Input Sought: Noting
Items enclosed in this report are for the Board to note and advise if any further
discussion/information is required.
Executive Summary
It is unlikely that in its long history the Post Office has ever endured a period of such intense
scrutiny, as it has over the last six weeks. The fallout from the Court of Appeal judgment on
the 23rd April, the scale of the criticism and the conclusions of the Appeal judges will stay
with the organisation for years to come. Post Office was variously described in the summary
as egregious, oppressive, obstinate, complacent and self-interested. It is not difficult to see
how the conclusion of Limb 2 was determined, once this judgment is digested. As the
judgment described “the same failures occurred week after week, case after case - systemic
failures which were never challenged in any paperwork seen by the court...the longer it went
on the more self-serving Post Office Limited became”.
It is probably too early to really assess the impact upon the brand. Not least because there is
still plenty more mileage in this desperate story. The movement of the Inquiry to a Statutory
footing will prolong closure by at least 18 months and most commentators think it highly
unlikely that Sir Wyn will conclude his report in the Autumn of 2022. The overturning of
criminal conviction cases will last even longer. How our stakeholders — postmasters,
colleagues and potential recruits, as well as customers, commercial partners and the
shareholder react — is difficult to gauge. What is clear is that no potential rebuilding can really
begin until blame and compensation are addressed. Arguably blame will in part be covered by
the widening of the scope, remit and powers that Sir Wyn has demanded. Stakeholders
appear to believe so. My appearance at the APPG (and the questions I received) certainly
supports this theory. Compensation needs to be seen through three lenses - the GLO 555,
HSS payments, and the overturned convictions. The speed, transparency and simplicity with
which we can execute this will go a long way to addressing trust. However, it is here that I
have least confidence. The determination of the Government to distance itself from
discharging its duties - the Minister has repeatedly said that “compensation packages are a
matter for the Post Office” - is concerning, given we have no funding. The drag on the
business of stumbling through this phase should not be underestimated. A repeat of the HSS
experience, which paralysed the business, would be unforgivable.
You will see in our initial strategy paper that I believe the business will need to change
direction if it is to survive. We must resolve and fix the past. This is more than just
operational and IT fixes but deep cultural change. This will be deeper, take longer and be
more expensive than we at first envisaged. We will need to invest in the brand to re-establish
our one key USP - consumer brand trust. We were much loved, albeit customers could not
quite articulate why, and we need to rediscover it. We need to be clear on our purpose and
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the shareholder's principle objective; A \ network of 1 11, 1.500 branches adding to o the social fabric
of the country. A social obligation and an infrastructure that underpins communities across
the country. We need to win back the trust of postmasters. We have made good progress
over the last 18 months but the experience of the last 6 weeks and the mistimed consultation
of MDA2 have revealed the fragility of this relationship. Postmasters feel brow beaten and we
are battling against 10 years of “does our partner have our best interests at heart” as one
Postmaster remarked to me. We have much to do to regain their hearts and minds. It will be
critical to find a model that aligns the needs of the shareholder, POL and Postmasters.
Remuneration will be central to this.
Yet despite this backdrop the business has remained resilient. The field team in particular
have faced into an extremely difficult environment with great stoicism. The commercial teams
have made genuine progress in developing the business; The Amazon trials are going well,
we have made commercial and operational progress with DPD and are on track for PUDO
trials in July. BF3 and the longer-term strategy to be the solution for cash are particularly
exciting, as we will discuss later in the meeting. Our strategy to win over the banks, treasury
and the regulators has been well received. The Yoti deal is delivering and our plans around
relaunching our travel business have come together comprehensively and we are ready. We
have also made good progress with SPM and will be ready for trials later in the summer and
will have 400 Express branches up and running by April 2022.
Visible leadership and communication have never been more important. The organisation
needs belief. It needs confidence in a credible vision and in a route out of this crisis. It needs
a balanced perspective on the issues we are encountering, and it needs calm decision
making. My focus is to try and provide this - through our colleague and postmaster
conferences, by articulating our intent to 2025, our new ways of working and our six core
priorities, through regular 10@10’s, SLG meetings and getting out to meet postmasters and
commercial partners. As a Board we need to shift our focus from assessing the past to
supporting and driving organisational health and effectiveness in the present and for the
future. This is very much the emphasis of the content of this board meeting.
Performance outlook
1. Although P1 saw the end of formal lockdown in England, the UK was still under strict
restrictions during the first half of the period. IMRG reported huge declines in online
retail growth as customers returned to high street retailers. Springboard also reported a
significant increase in retail footfall after the first week post-lockdown ending. The levels
reached were only achieved two months after the first lockdown ended last year,
meaning physical retail has returned far quicker than expected.
2. Asaresult, Mails performance was below budget, with trading revenue down £4.4m
(13%) to budget and £3m in Trading Profit; led by Labels and Special Delivery.
Performance was strong in week 1 whilst lockdown was still in place however, there was
a reduction in growth thereafter across the product portfolio.
3. In P1, Banking, Payments and Travel have met budget. In Banking, deposits have grown
strongly as lockdown begins to ease. Withdrawals are slower, but this is to be expected
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with highly cash dependent areas such as Northern Ireland and Scotland still in full
lockdown. Further recovery is expected as the hospitality industry and further regions
fully reopen.
Overall we achieved profit expectations for the month through upside on cost lines
(mainly timing or one-off related). This included lower levels of postmaster
remuneration flow through, and we will therefore be monitoring Mails trends carefully
from both a postmaster and profit perspective.
The trends in P2 continues on a similar theme. Footfall numbers remain on average at
9.5m, 5% lower than planned and income is similarly depressed on the back of Mails
under-performance. We have failed in the Network to meet target consistently over the
last 6 weeks and this will see Postmaster remuneration also fall backwards.
We are on course to open discussions with the Board on the 3rd June around our
Strategic Plan submission and related funding bid later this year.
We are still working to a draft 21/22 budget whilst further material is finalised for UKGI
on the Historical Matters element of the budget.
Business Updates
Cash and Bankin
8.
9.
10.
11.
12.
13.
P1 has seen all three business areas (Banking, Payments and Travel) meet budget.
Banking Services performance in P1 was £0.2m favourable to budget. The strong
recovery seen in 2020/21 continues into P1, with further growth in withdrawals and
deposits. Business deposit volumes and values are slightly adverse to budget, but this is
offset by a reduction in the Santander credit for corporate deposits (which we charge at
a lower rate), showing £0.2m favourable overall for deposits.
Banking Framework 3 discussions continue to track to the previously presented plan,
and further updates will be provided at a separate session later in the Board meeting.
The Community Access to Cash Pilots have all launched successfully, including two new
‘BankHUBs’ which opened in Rochford and Cambuslang. Both received favourable media
coverage as well as positive footfall.
In Payments, key top-ups and seasonal growth has driven consistent performance in
Period 1 and the introduction of new payment terminals, offering faster processing for
Postmasters, has been well received.
The Travel business continues to face into the effects of Covid-19, although strong
performance in Moneygram and Postal orders shows money transfer is still much
needed. Preparations are underway to ensure a fast start to the travel business once
Government guidance becomes clearer. We have incentives and distribution plans in
place alongside the re-registering of branches with HMRC ahead of the launch.
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Mails and Parcels
14. Mails performance in P1 was behind budget by £3m in trading profit. The stretch against
the Labels product created an adverse variance of c£1m in trading profit (£2m in
revenue terms) and this gap will likely recur throughout the year (c.10% of Labels
annual revenue target). In addition, the budget hypothesis was a gradual ease out of
lockdown rather than the more dramatic reduction in sales as seen during P1. The Q1
budget has an additional £5m revenue (£2m in P1) gap with the biggest declines coming
from higher basket sizes as business returned to physical channels.
15. Following Investment Committee approval, the PUDO business case will go to Board on
3° June 2021 to authorise a further £2.41m (in addition to current approved spend of
£2.86m) for FY21/22 to deliver PUDO (Total project spend: £5.27m).
16. Post Office is submitting a response to Ofcom’s Call For Inputs regarding the review of the
regulatory framework of Postal Services on Thursday 20'" May. Ofcom will consider and
publish the responses over the summer, and the formal consultation process will begin in
the autumn, with the date yet to be confirmed.
Platform Products - Financial Services, Insurance and Identit
17. Trading has been positive in P1 across the platform products, with all lines of business
on or ahead of budget for revenue and trading profit.
18. In Insurance, the new business market for General Insurance (Motor and Home) is
subdued, but retention is performing better, and we are focussing on maximising value
whilst maintaining policy count. We continue to focus heavily on the FCA changes to
pricing rules being implemented in January 2022, which could have a wide range of
commercial outcomes. Modelling suggests outcomes are likely positive for Post Office
Insurance in the first year or two, but we are focussing on agility and flexibility to cope
with what will be a very dynamic market.
19. There was a very small upside ahead of budget in Travel Insurance sales in the early
weeks of May, but no sign of any significant market recovery. We continue to monitor
the RAG status of individual countries, but our intelligence suggests there remains some
consumer reluctance to travel overseas.
20. Credit Card volumes are significantly ahead of budget, with a new commercial
arrangement (Capital One responsible for all marketing activity and costs) working well
and channels such as Facebook performing strongly. A branch trial of mobile lead
generation via text or QR code (with Postmaster Remuneration via embedded FAD
codes) is live and results will emerge through May.
21. Bank of Ireland’s outlook has improved, and the partnership has been reinvigorated.
This is due to an agreed plan to maximise joint-venture profit with a focus on value over
volume. Our savings balances are getting smaller, but higher joint-venture incentive
payments look likely, and we are protected by a minimum income guarantee.
22. We have built and launched the EasyID app within the Yoti partnership in digital identity.
The in-branch tablet capability is in development and on track. We have made progress
with GDS to enable our Verify service (extended earlier this year) to be provided by the
Yoti partnership rather than Digidentity. The partnership is working well, and in addition
4
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to completing technology builds, there is a necessary y focus ¢ on 1 converting capability into
utility and revenue.
Network
Postmaster Engagement
23. We held a virtual Postmaster Conference on the evening of 27‘ April attended by 500
Postmasters where I set out my strategic intent to 2025 including the aspiration to
create a profit sharing model. A Q&A session followed where we addressed over 50
questions. It was clear the big questions for Postmasters are MDA2, how to remunerate
fairly, preventing cannibalisation of existing Post Offices whilst growing the network and,
the uncertainty of how trading will play out this year.
24. Consulting with Postmasters on the proposed new remuneration rates for MDA2 has
been a priority for the field team since mid-April. As of 21st May, 7,333 visits/calls have
been completed with the intention that all of the network will have been engaged at
least once, by end of w/c 24"" May. These 1-1 engagements with Postmasters have been
supplemented by 2 NFSP hosted events, w/c 10 May and 4 regional events w/c 17
May, to provide an opportunity for Postmasters to ask questions about the impact of the
new MDA and also to give context to the competitiveness of the Mails market and the
challenges and opportunities for Post Office. Whilst we expected there would be a
negative reaction from c14% of Postmasters who are modelled to be potentially
adversely affected by the proposed new rates, we have experienced a strong reaction
from Postmasters across the board in 3 areas, specifically; 1. Proposed Special Delivery
rates 2, Proposed Parcel Force rates and 3. questions about the time period used for
modelling. This reaction is borne out of an underlying mistrust of POL about our real
intentions for remuneration, founded on years of remuneration erosion and reductions.
On 215t May we communicated a decision that we will delay the implementation date of
MDA2 by a further 3 months until 1 April 2022. This will allow for better engagement,
explanation...and listening. The current consultation process will conclude on the 6"
June, after which there will be several months of detailed quantitative and qualitative
analysis to form recommendations, prior to sharing with Postmasters in September.
25. As part of the formal Postmaster consultation exercise that took place earlier this year,
Postmasters told us that there were six top priorities for improvement: Remuneration, IT
systems and processes, Communication, Training, Access to senior management and
finally, greater innovation and the establishment of Postmaster working groups. Co-
creation sessions, facilitated by Quadrangle and led by senior leaders and Postmasters,
have now taken place across all six priority areas, allowing us to seek further specific
feedback on improvements and test potential solutions and new ways of working. These
sessions have provided us with useful insights which will feed into our improvement
plans over coming months and we will continue to engage and ‘co-create’.
26. The consultation survey itself revealed that around a third of postmasters feel
unsupported by Post Office and do not feel valued. We'll be monitoring Postmaster
sentiment regularly throughout the year, using Quadrangle to conduct short surveys to
measure changes in sentiment and overall Postmaster experience as a result of
improvements and tangible actions implemented.
27. To further strengthen our engagement with Postmasters, a new Postmaster Director role
has been created. This role will champion the importance of the Postmaster at all levels
5
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within Post Office and lead activity that drives Postmaster and trade body engagement,
interactions, improvements and cultural change. It is our intention to actively seek a
current serving Postmaster to fulfil this role and a recruitment campaign will be launch in
early June. We will also be looking at specific secondment opportunities - 3, 6, 9,
months in duration — to get postmasters into the centre to support on projects and help
shape future solutions.
Postmaster Service and Support
28. In line with the Government easing of lockdown restrictions, field teams returned to face
to face visits in mid-April. Their primary focus has been on MDA2 whilst supporting
Postmasters to maximise growth in business banking, with the reopening of non-
essential retail and hospitality. Additionally, alongside the impact of localised bank
closures, we have been preparing to kick start Travel Money and Travel Insurance in our
largest branches, to coincide with the traffic light system for overseas leisure travel.
29. Good progress has been made in finalising Postmaster Support policies. We now have a
suite of policies that define our relationship with Postmasters on key issues. These have
been underpinned by a series of process improvements, for example; making changes to
the settle centrally functionality on Horizon - allowing Postmasters to settle any balance
centrally where there was previously a minimum limit of £150. We have fixed the issue
in Horizon that was not allowing low value transaction corrections to be issued to
branches. This has enabled credit transaction corrections, being processed by the branch
reconciliation team since 28" January 2021, to flow through to Postmaster accounts.
30. We have launched Postmaster satisfaction surveys for the Branch Support Centre and IT
Digital Service Desk. These surveys are sent by email and replace the telephone surveys
that have been in place since November 2020. The response rate is significantly higher
and early satisfaction measures from the Branch Support Centre (the first area to
launch) are encouraging with 88.5% of Postmasters satisfied or very satisfied with the
service received in Period 1 (from 209 responses).
31. Ahead of discussions commencing with Government later in the year on our future
funding, which we expect to be part of a 3-year Spending Review in the autumn, we
have prepared a paper for the Board which sets out our recommended strategic
narrative, three year financial forecast and outline funding request. This paper covers a
lot of ground and it represents the start of our engagement process with you, which we
expect to continue over the summer in the run up to a targeted approval in late August /
early September. Following the Board meeting, we will pull together an engagement
plan to allow for more detailed discussion on areas of particular interest to make sure we
are able to respond to your input fully in our final recommended plans. We also plan to
cover a number of these topics at our July Board Away Day.
32. I set out the core strands of my vision for POL in colleague and postmaster events in
recent weeks and this has provided us with a framework to look at our priorities and
direction. This is covered in detail in the paper but, in summary, our principal focus is to
provide redress to postmasters for POL’s past mistakes. We aim to work with
Government on how we approach and pay for this, but it is clear that we are unable to
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fund these costs, and the uncertainty we face i is till causing } distraction and disruption to
our running of the business. Second, we must establish a sustainable platform that
allows us to move forward. In particular, instead of pursuing profit as our primary goal, I
believe it is right that we double down on our commitment to protect service provision
and grow the network, and for us to invest so that we can maximise policy outcomes for
our shareholder. I look forward to our discussion at the Board on what I consider to be
an ambitious plan, but one that hits at the very core of what, after the past twenty
years, we absolutely must be doing.
33. In more near-term transformation activities, our P1 Change spend was £12.3m, £2.9m
below plan, mainly from proactive management decisions to delay DMB strategy
announcements and delays in CIO and SPM programme spend. HMBU programme
spend was higher due to the timing of spend on legal fees and consultancy fees. Full
year requested Change spend is under constant review with Investment Committee as
P2 forecast indicates a 16% increase above the £169m budget. This is actively being
managed and a common occurrence. P1 Change Benefits were £6.8m, £0.7 below
budget mostly due to incorrect phasing for closed projects within Financial Services, this
will be corrected in P2. Full year forecast is still on budget.
34. In P2 we have 121 actively tracked “projects” (any CapEx is tracked as a “project”), 8 of
which are on-hold. In P1 and P2 we've seen 5 new projects commence, and 16 projects
close (including SuccessFactors 1&2, Panther and FJ Exit.) Our Change Group resource
requirements have continued to increase, mostly in HMU, SPM and the recently created
Postmaster Service Improvement Programme. We have a total of 187 Change Group
contractors in P2 compared to 75 in March 2020 (pre-covid levels of activity); our total
P2 Change Group resource pool is 12% employee (FTE/FTC) and 88% contractors,
whereas 12 months earlier this was 35% employee/65% contractors.
Network Strategy & Delivery
35. The major focus of our Network Delivery team during Q1 is on re-building the network to
over 11,500 branches, given that our current waiver expires at the end of June. The
open network stood at 11,441 at the end of April following a net increase of 26 in the
month. Plans are in place for opening or re-opening over 100 branches by July to close
the remaining gap and offset expected closures.
36. Preparations are continuing for the piloting of our new Express proposition in up to 50
locations over the next 3 months, with the first tranche scheduled to go live in the w/c
21st June. The pilots will test small footprint technology and a simplified product set
(PUDO and bill payments) designed to operate alongside the main retail counter. In the
first instance they will be hosted in a combination of existing Payzone locations and new
branches with Strategic Partners such as Co-op and WH Smith.
37. We have paused announcements on DMB exits until at least mid-June to allow time for
meaningful dialogue with the CWU on their alternative proposals (due to be submitted
by 24 May) and to enable us to manage the interdependencies with wider stakeholder
risks, including Starling. While this will delay benefits delivery, this will be partly offset
by our plans to commence a voluntary redundancy exercise across the DMB network to
adjust staffing models in light of changing customer demand (a cost of £1.2m with
£700k recurring benefit).
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38. Following the r recent process of engagement with all remaining ‘Hard to 5 Place’ branches,
94 have opted to stay on their existing contracts (effectively moving to a similar status
as Community branches and removing a liability of £8.5m) leaving 277 still to find
replacements to enable them to exit with compensation. Based on the current pipeline of
prospects we expect to deliver 18 replacements during Q1 and up to 97 by March 2022.
39. Beyond the current consultation of MDA2 remuneration, the next phase of work on
network strategy is reviewing our wider commercial and contractual framework with
postmasters, with initial conclusions to be discussed at the July Board awayday.
Strategic Partners
40. The management of financial stability and risk profile within our top Strategic Partners
has been implemented and shared with ARC. This profiling process, which includes
financial (facts), trading (trends) and a wider commercial (overall) lens, has highlighted
an ‘amber’ risk for WH Smith, McColls and Mid-counties Co-Op. This was expected and
is being monitored monthly both internally and with the partner themselves.
41. Our Strategic Partnership team, recently re-organised and under the new leadership of
Katie Secretan (ex Costa), is developing a roadmap to deliver professional partnership
management. In practice this means greater routine and rigour, building engagement
and enhancing commercialisation (i.e. focus on data and insights to drive trading) to
enable joint business planning. This includes the increase and realignment of resource,
the upweighting of capability and a clear definition of roles and accountabilities to deliver
a tiered approach of support to our partners based on their size, scale, brand/purpose
alignment and strategic potential. There are early successes in the joint plans
developed to trial new formats and propositions with WH Smiths, Co-op, Rymans,
Henderson (Spar NI). Additionally, this new focus has enabled network growth
conversations for places where our blueprint gaps can be filled. For example, we will
place 5 Express trial locations with Timpson in blueprint locations across central
London. At the same time the Strategic Partnership team is working to build changes to
our internal processes to manage our Partners on a corporate basis, given their needs
are different from individual postmasters and they have a greater capability to add value
to our Network. This is an area of particular interest and opportunity for me (given my
Nisa experience) which is underdeveloped at present. There are 1400 branches in the
Strategic Partnership group. We should have an ambition to grow this by 30%.
=
9)
42. Improvement Delivery Group (IDG) and the wider Post Office team continue to make
good progress against the planned improvements. A total of 48 Oxblood red items
(those with highest priority due to detriment) have been delivered since the judgments,
with 41 having been internally audited as complete. We are on track to deliver the vast
majority of planned improvements due for end May 21. Two Oxblood improvements are
held pending a decision on the scope of the HSS (a specific Board paper is being
prepared on this), and another is only a couple of weeks behind following the need to
reconsider the Post Office approach to appeals panels. For these remaining
improvements, good underlying progress has been made and whilst not on track for end
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43.
May, we do expect to complete them shortly, having taken a little more time to ensure
we get the right outcome.
Looking forward, we have 14 Red items (those with potential to cause detriment) which
are due for delivery by August 21 and we will of course be progressing the resolution of
historic detriment alongside. More details are contained in the IDG paper in this pack.
IT activity
Service issue - Lottery
44,
We had a major lottery incident that impacted branches at the start of April. The
incident was caused by the closure of a project impacting master data. The resolution to
the incident was slow and Postmasters were impacted by errors made in attempts to
correct the issue in their accounts. To finally resolve the issue 15,768 transaction
corrections were issued (taking transaction corrections to 27,660 in Period 1 —- normally
c12,000 per period).
PCI-DSS
45.
Partner Testing and UAT has completed and there are no open software defects that
prevent the deployment of the solution into Model Office. The solution is being deployed
into Finsbury Dials Model Office for 2 weeks before the solution enters the branch live
piloting phase. Both the Model Office and live-pilot are tracking 2 weeks later than
forecasted with Model Office testing now scheduled to start on the 1% June 2021. The
delay was due to Fujitsu testing taking an additional week and an issue with the
exchange of encryption keys between Ingenico and VocaLink. Assuming the live pilot
progresses to plan with no major issues, our critical path to starting full branch estate
migration is dependent on Santander completing the migration of their interface to POL
onto the VocaLink network, which is due to complete early July 2021. Santander are still
reporting green on this task but there is a (new) potential risk given their recent
nationwide outage issue affecting their entire retail banking state which could have
change management knock on effects. We have requested an urgent session with their
Retail CIO to gain delivery date assurance and ratification.
Belfast Data Centre Cloud Migration
46.
47.
Our delivery plan continues and involves the migration of the Branch Database, BRDB, in
3 phases with the first stage scheduled to complete 25" May 2021. At this point, the
data from the primary BRDB database in Belfast will be continuously and synchronously
copied to a new AWS cloud hosted BRDB instance. This enablement will be followed by a
period of extensive testing to validate the integrity of the data before moving to phase
2. The second phase involves the further data migrations to use the AWS BRDB as the
live production source & destination for 3'¢ party client files which are processed via the
Post Office Data Gateway (PODG) and this is scheduled to complete by 30" June 2021.
Aside from the BRDB there are 2 other key workstreams. Firstly the migration of the
Branch Access Layer (BAL), which is the main system that ‘orchestrates’ customer
journeys by either directing transactions for persistence in the BRDB or in some cases
routing requests to 3 party clients for real time transactions. The migration of the BAL
is a fundamental enablement task to commence counter migrations to cloud, however
progress is slow due to:
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1A "A limited pool of Fujitsu SME resources with ‘the deep knowledge of the B BAL. This is
further constrained by resource contention conflict to support other priorities (like
HIJ/Inquiry)
2. Limited amounts of suitable existing test artefacts resulting in the need to create
new test material from scratch.
3. Contention over the use of limited test environments with other POL projects and
programmes
48. The request of FJ was to complete the migration of the BAL by mid-July 2021 to allow
the migration of branches to complete before the POL estate wide change freeze starts.
This will now not complete in time and the current estimate for the completion of this
work is early September 2021. The other key workstream is the migration of the
applications that deal with 3" party integrations. Following analysis work conducted by
AWS and POL Cloud Office, we are pursuing a route to migrate this functionality out of
Horizon. A proof of concept is underway where this approach is being trialled for 3
clients; Mails Track & Trace, DVLA, and an internal Horizon supporting interface. This
revised approach has the clear advantage of allowing the interfaces to be re-used by
SPM and will further reduce the scope of services that POL relies upon from Fujitsu i.e.
Horizon scope reduction. External assurance work has also started to validate the
approach taken by the team to execute the migration. The primary focus is to validate
the approach Fujitsu are taking with the BAL, to provide independent assurance on the
database migration approach, and to further validate the client integration proof of
concept approach/outcomes.
49. Jeff Smyth and I are planning to visit to the data centre in Belfast in June and will be
meeting with key Fujitsu executives during the visit to discuss our ongoing workstreams.
Branch & Digital Engineering
50. B&DE continue to build the capability required to deliver SPM along with other business
programs. The team has grown to 44 and where roles are enduring we are building out
long term capabilities through permanent resourcing. In parallel, we have launched a
“Scaled Development Partner” procurement using our Digital Services Framework to
ensure we have appropriate technical support and scale for delivery.
51. For SPM, our most immediate focus is the September Express Proposition Go-Live.
Enablement encompasses many workstreams: Retailer settlement, Payzone & Finance
integration, Agent Remuneration, Master Data Management integration, Royal Mail Track
and Trace integration (in conjunction with Belfast Cloud Centre of Excellence) and
Product Journey Engine (PJE). Device selection has been delayed due to the Device team
focus on Amazon PuDo device selection and testing. Market re-engagements is imminent
with parallel planning for procurement activity.
52. Other projects progress: Multi-Carrier PuDo has made excellent progress. A cross-
functional team has worked with DPD and is currently in e2e testing and is gearing up
for an early June go-live. Amazon scaling-up is continuing in parallel. In sourced ATM
solution design is complete for Back Office integration and management with build
activity underway. In Identity, DVLA integration testing is completed, SIA work has
started and Passport journeys will be re-enabled in early June (HMPO controlled pause).
We are also exploring opportunities with the Department of Health to support vaccine
passports.
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Business Transformation Unit
53. Good progress continues within the Business Transformation Unit (BTU). The SPM
programme is progressing towards a late September launch of the first Express branch
with non-Horizon technology. The next big milestone is having 400 Express locations live
by April 2022. In parallel, the business transformation part of BTU is kicking into gear
with the focus being on “Project BAFTA” - a targeted, cross-functional effort to
modernise our branch accounting and cash management processes in tandem with the
‘puild’ of the Horizon-replacement software.
54. On Branch Hub, our online portal for engagement with Postmasters, the team launched
this month the first MVP release of its “Branch Performance and MI” module with
encouraging trial results. The module is aimed at providing Postmasters with direct
access to sales, transaction and benchmarking data, which will allow them to more
profitably operate their businesses.
People Activity
Post Office Culture and Ways of Working
55. We launched our new Ways of Working on 27* April at the ‘We are Post Office’ Colleague
conference. Our 3 new Ways of Working are:-
e We work in partnership
e We are one team
e We deliver
56. These each have 6 supporting statements to provide guidance on the expectations of
each pillar — these will be used to build out a behavioural framework that will define the
behaviours for colleagues, managers and leaders in Post Office that will be used to
supplement performance, development, recruitment processes. Our Ways of Working
are wrapped around with our ‘We are Post Office’ colleague commitments where we
celebrate Diversity and Inclusion, encourage Learning and Growth and champion care
and support.
57. The embedding planned, linked to Postmaster engagement, is currently being
developed.
58. Our “We are Post Office” campaign continues to embed and bring to life our new Ways of
Working. Activities include People Manager workshops to establish the new Ways of
Working, video campaigns from GE sharing the commitments they have made to each
Way of Working along with regular stories to celebrate and reinforce the new Ways of
Working. Our internal intranet has been updated to create a Culture Hub providing
colleagues and managers with the tools and information to support the Cultural
transformation.
59. The ‘Week in the life of a Postmaster’ workshops have been attended by all support
function colleagues. 90.7% of colleagues rated their session either good or excellent.
Before watching the films and having the discussions, on average, colleagues rated their
Postmaster knowledge at 6.51 out of 10, which increased to 8.56 out of 10 after seeing
them - a 20.5% improvement. Follow up material is being provided to GE direct reports
to continue the conversations in their team meetings.
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Future of the Workplace
60. As we emerge from the pandemic and await further guidance in June on how social
distancing will affect us, we are looking at the Future of the Workplace and how this will
look and feel. We have asked all colleagues to complete a survey to provide insight into
the how they are feeling about remote working, the new ways of working we have
implemented during lockdown, such as Empower hour and shorter meetings times, as
well as their thoughts on the purpose of our office spaces.
61. Early results indicate a large majority are supportive of continued remote working,
however that needs to be balanced with managing team and human interaction. Plans
are to use the summer months to test and learn scenarios, with a full return to the office
with the new ways of working planned for September.
Annual bonus (short & long term incentive plans)
62. Once again, we have failed to start the new financial year with a bonus scheme. This is
particularly disappointing given there were no schemes last year. However, we continue
to work with the Shareholder to set and agree the appropriate measures for the bonus
and long-term incentive for 2021 that is suitably stretching and aligned to our strategic
intent and priorities. This will be discussed at the next Remuneration Committee
meeting in July.
Directors Remuneration Report
63. Work is ongoing to finalise the Directors Remuneration Report which will include
disclosing the CEO Pay Ratio for the first time this year. Approximately 70% of
companies have published their CEO-to-worker pay ratio, with the median ratio at 37:1.
The highest CEO pay ratio is 723:1 and the lowest is 11:1. We anticipate Post Office to
be at the lower end between 12-14:1.
Ongoing focus and concerns
Industrial Relations
64. CWU Pay award 21/22 - CWU have issued their pay claim for 21/22 financial year.
They are asking for 3% increase to basic pay, a 1 hour reduction of the full time working
week, 2% improvement to employer pension contributions, improvements to MtSF (I.e.
collectively agreed) redundancy terms, improvements to contractual annual leave and a
commitment to introducing a collective defined contribution pension scheme (as in Royal
Mail). We have delayed negotiations until June to allow us to focus solely on Project
Starling. With such demands, we can anticipate a dispute later in the year.
65. Pensions - Project Assurance — We met with the Unions on 18th May and agreed that
we would issue a high-level communication to indicate to members that errors (still to
be fully quantified) have been made by POL that we are keen to correct and ensure the
correct benefits will be paid to those affected. This is slightly earlier than we would have
preferred but by communicating now this will mitigate the impact of Union
communication that they are insisting are issued and allows POL and the Trustees to
take the lead with messaging to members.
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Project Starling
67.
Separate communications will be ¢ sent by POL, RMPP P and the L Unions on 1 June albeit
with prior viewing. The relationship with the Trustee has improved in recent weeks, with
engagement with the Chair directly at a meeting in early May, which has led to a more
collaborative way of working. The Pension Administrators expect to be able to start the
corrections to member benefits in September hence there can be no individual
communication on impact until the Autumn. We continue to explore how to meet the
buyout date of 31 March 2022.
We will have a live update during the Board meeting as negotiations are still ongoing. The
current situation (24 May) is that despite intense discussions and negotiations with the
CWU, we could not agree terms to allow for a joint application to postpone the Employment
Tribunal. Although we applied in our own capacity for a postponement, the Judge is going
ahead with the ET on 7 June. We are clearly now working on our trial strategy, in parallel
with further engagement with the CWU. We will share our proposed approach at the Board
meeting.
Public Inquiry
68.
69.
70.
71.
72.
73.
74.
With the agreement of the Prime Minster, Minister Scully has converted the Independent
Inquiry to a statutory Inquiry, which will officially take effect from 1* june 2021. Sir
Wyn will remain as Chair and given the substantive change to the Terms of Reference
will be allocated more time to undertake his work, and we expect the inquiry to publish
their main report in Autumn 2022, rather than summer 2021. BEIS believe even this
date is ambitious.
The inquiry will complete its planned engagements throughout May, but public hearings
that had been expected to take place in June will be delayed. They will not occur before
October and are most likely to be delayed until the New Year.
Sir Wyn will publish a progress report in September. This is unlikely to have any
‘findings’ but will have more detail on his approach and plans given the statutory footing
his Inquiry now has.
As a response to this development, we will be reviewing the construct of the HMBU.
Firstly to detach the operational and IT fix workstreams and get them embedded back in
BAU. The IDG will manage these processes along with GLO conformance.
We will then upweight the Inquiry team to reflect the greater legal footing, formality and
information gathering expectations that will be put upon it. This team needs to be more
proactive in its dealings with the Secretariat.
Finally, we will reshape the prosecution assessment and compensation workstreams to
ensure we make the governance, reporting and oversight more effective.
Declan will roll off in July and we will bring in different skills which have more emphasis
on legal expertise, government experience, compensation scheme management and
stakeholder building.
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Communications overview and Political & Requlatory environment
75. As mentioned earlier, along with Amanda Jones, I have spoken in the last month at two
NFSP events which formed part of their Annual AGM and annual conference. There was
no shortage of topics to address, but the main areas of interest centred on our strategy
and understanding the Future of the Post Office, as well as discussing MDA2 and the new 41
deal with Royal Mail. I have the next working group session with Minister Scully and the
NFSP on 26" May, where we will cover both of these areas as well as how Post Office will
emerge from lockdown and the restrictions of Covid-19.
76. I spoke at the All-party parliamentary group (APPG) on 18'* May, chaired by Marion
Fellows MP. It was a wide-ranging meeting and broadly positive. Interestingly the spirit
was more collegiate than usual, with a desire to help. Questions included; How can we,
as parliamentarians, help you get cut through with Government on compensation and on
addressing Fujitsu. A new approach.
77. Iwrote to Secretary of State Matt Hancock to bring to the Government’s attention our
new identity services partnership with Yoti and our potential to make a substantial and
effective contribution to a safe return to international travel, for both business and
leisure purposes. As a result of this, I had a useful initial meeting with Lord Bethell of
Romford, the Parliamentary Under Secretary whose portfolio covers test and trace
technology. The meeting was an opportunity for Post Office to (i) introduce the
Company’s wider identity service offer as a pillar of our future business model; (ii)
further explore and demonstrate how the EasyID App can be integrated into the NHS
App for the purposes of identity verification and configured to enable users to verify
their specific Covid-19 vaccination and test credentials to third parties; and (iii) discuss
further areas of strategic alignment with identity services. Further dialogue is expected
as we explore mutual possibilities.
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Project Starling 03" June 2021
Laurence O'Neil, Senior Legal
Counsel - HR & IR / Rod Campbell,
Project Starling
Dan Zinner, Group Chief
Operating Officer
Authors:
Decision on Trial Strategy
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01 Jun 2021 Supplemental Witness Statement Exchange
07 Jun 2021 Employment Tribunal Hearing commencement.
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‘a
<a
POST OFFICE LIMITED
OARD REPORT
52 of 204
Title: I Strategic Plan - Discussion Meeting Date: I 03 June 2021
Al Cameron (Group Chief
Finance Officer)
Dan Zinner (Group Chief
Operating Officer)
Max Jacobi (SFP&A Director)
Authors: I Tim McInnes (Strategy and I Sponsors:
Transformation Director)
Context & Summary
We believe that the Government is most likely to run a 3-year Spending Review this year,
probably during the Autumn. In preparation for this process, we agreed with the Board in March
that we would share our views on Post Office Ltd.’s (POL’s) priorities for this period, alongside
and associated financial plan (inclusive of funding requirements) at this Board. This is informed
by our last plan, approved by the Board in August 2020, as well as our learnings over the past
18 months which have taught us a considerable amount about what we need to do to rebuild
trust across the postmaster community, and not just those affected by the GLO. This paper is
therefore designed to start a conversation with the Board and our shareholder that we expect
will conclude at the end of August with an agreed Strategic Plan for POL and an accompanying
funding request to UKGI. That will allow sufficient time for the plan to be due diligenced by
UKGI's advisers and for approvals, prior to the Spending Review itself.
The final paper will have three components to it:
* Our vision and narrative, laying out where we have come from and most importantly
what we want to concentrate on over the coming period (including where this is different
from one year ago).
« The key components of the financial plan that we believe flows from these priorities.
e Additional detail and clarity where needed to answer questions from the various parties.
Being the initial step in this process, the focus for 03 June should be:
« Our vision and narrative.
« The key components of the financial plan.
We recognise that this plan will evolve over the coming months as we work to form a consensus
with the Board and UKGI. We will also work through an external assurance process with UKGI
and add further detail as required in support of the final bid document to UKGI.
Some elements of our plan will necessarily deviate from those discussed in last year’s SR Bid
(before it was rephased and reduced in scope to one year, and Telco proceeds were reprioritised
to support the cost of the HSS). We have learned a lot from the pandemic, about what should
matter most and what we are capable of, and this has informed our thinking. Alongside this we
have clarified our priorities and how to deliver against them. We also have more information to
base a post Covid trading outlook on (although there is still uncertainty). We expect there to
be debate about our proposals and we welcome the dialogue and scrutiny.
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[1 I What is Our Vision and What Do We Want to Achieve?
Cs
A Sustainable Post Office Network
1. In recent postmaster and colleague communications we have been clear that addressing
the past is our #1 priority and that, over the next four years, our forward-looking strategy
will be concentrated in seven principal areas.
Our Strategic Focus Our Goal by 2024/25
1. Prioritise strong, trusting
and rewarding relationships with
our postmasters
A New and Respectful Partnership with Our
Postmasters
2. Grow our network, making sure
we have the right services in the
right locations nationwide
A Network Meeting the Needs of Consumers,
Small Businesses, Postmasters and Communities
3. Innovate in mails, working with
more carriers and delivering more of
what consumers and SMEs want
A Clear Leader in the UK Retail Mails and Parcels
Market
4. Secure free, convenient and
reliable access to cash in
every community
A Critical Role in the Future of the UK Cash and
Banking Industry
5. Build commercial partnerships
to launch new products and services
in our branches and online
A Focused Portfolio of Services Supporting
Income and Footfall Growth
6. Invest in new branch technology
for postmasters’ and online for
their customers
A New IT Platform That Supports Our Network
and Postmasters’ Work
7. Create value for our shareholder
with a successful, sustainable
and efficient business
A Sustainable Post Office Network, for the
Shareholder and Postmasters.
ViVFiGFiVi+visiey
2. First and foremost we will prioritise building the right relationships with our postmasters,
establishing a partnership where we not only listen and communicate better but also where
we give postmasters what they need to run their branches, the right support and
commercial partnership that their hard work deserves. We will also comply fully with the
GLO and put in place the controls framework we need to make sure something like this
can never happen again. Where we encounter trade-offs — such as in relation to availability
of funding, organisational and senior management capacity, or where elements of our
plans are not perfectly aligned - our relationship with our postmasters will take
precedence. This is because we firmly believe that resetting and investing in our
relationship with postmasters is the critical component in us having a trusting partnership,
creating a sustainable post office network and achieving, successfully, our shareholder’s
desired policy outcomes for our business.
3. We admit that we fell far short of where we need to be with our postmasters in recent
years, and that is why we need to act. Mr Justice Fraser’s findings in the GLO and the
work we have undertaken subsequently to this paint a stark picture, where a focus on
profit, gaps in capability, weaknesses in systems and controls and an unsupportive culture
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pressure and liabilities that we are having to rely on the shareholder to fund. This must
be fixed.
4. Linked to this, we must also shift how we talk about profit. Through recent discussions
with the shareholder, as well as our postmasters, we know that delivering a profit at the
end of the year is not our principal goal. As a business that has continued to rely on
external funding as profits have increased, and also given the vulnerabilities that have
now been exposed, this focus does not present an accurate picture of our strength,
sustainability or performance. Our network matters most and we must do what it takes to
make it sustainable. While profit is not and should not be inconsistent with this, our past
has shown that a focus on profit does not serve POL, our postmasters or the shareholder
well in the long run.
5. To achieve this, we need to invest in our people, capability and culture as well as the
technology, the support, the systems and the processes required for branches and for POL
itself. As part of this postmasters must also be rewarded better, receiving an equitable
share of the network economics. We should be held to account on how we spend our funds
and invest in the business while clearly articulating this to postmasters. With two new
postmaster NEDs on the Board, we will be more transparent in this area.
6. We must of course also have a business that can support itself and, subject to the priorities
we set out in this paper, the demands placed on us by our shareholder and other
constraints we face, we should also minimise our need to call on the public-purse for
external funding. We will therefore do what we can to generate funds that can be used to
invest in sustaining and developing our business, and generate surpluses that would allow
us to reduce our need for subsidy, though in the near-term this will not be our primary
ambition. We are, however, proposing to self-fund around 70% of investment activities
as the plan stands.
7. In this plan we are proposing: (i) a subsidy of £50m a year, which is flat on prior years
and means we are absorbing the expected cost of responding to Project Starling (this is
still materially lower than the estimated £70m annual cost of us discharging our network
obligations, excl. other costs associated with public ownership); and (ii) a total change
spend programme excl. funding of historical matters of £474 million, of which we are
seeking support of £140m from the shareholder.
8. Our targeted outcome in 24/25 will be a sustainable network run by an appropriately
rewarded and well-supported population of postmasters, delivering critical services in
every corner of the UK. The social and economic value we deliver will have increased and
we will also be supporting government's stated goal of delivering a national recovery from
the pandemic, supporting jobs, businesses and economic growth.
Changing Market Context and Learnings from the Pandemic
9. Since we were separated from Royal Mail in 2012 our shareholder has invested more than
£1.3bn in our modernisation, principally to remodel the network through Network
Transformation, and to position our business for success in Government Services and
Financial Services, but also to reduce and make our cost base more flexible. While Network
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Transformation delivered what it set out to achieve, investing in more 2 than 7,000 Main
and Local post offices and demonstrably pulling the network into the 21st Century, the
commercial outcomes that were expected did not materialise. A coordinated strategy to
win government business failed, as Departments across Whitehall sought to digitise and
cut costs, pulling business away from the network. Our plans to build a competitive in-
branch Financial Services proposition also struggled against the tide of the wider financial
services market which was more competitive than planned and which shifted increasingly
away from physical interactions, and due to our partnership with Bank of Ireland not
delivering what we needed from it.
10. As a newly independent business in 2012 we also lacked the foundations to succeed, in
terms of relationships, culture, technology, business intelligence and process maturity and
we did not invest enough in these areas. Our recent history has exposed these weaknesses
very publicly.
11. Over this period our other businesses, particularly mails, cash and banking, bill payments
and travel did perform far better than we thought though. Our relationship with Royal Mail
remains strong and we have grown together as the UK market for parcels has expanded,
and the risk of Royal Mail disintermediating in-branch business has also been slow to
emerge. Through the banking frameworks we have grown footfall, income and profit
significantly and we now have the opportunity to position ourselves at the centre of the
UK cash market in a way which was unthinkable only a few years ago. Bill payments has
also proven to be more resilient than expected and, supported by our acquisition of
Payzone, we have built market share in this footfall and cash generative market. And in
travel, despite disruption and innovations from new entrants and our established
competitors, we remain the market leader in foreign exchange and we also now control
more of the travel insurance value-chain allowing us to create value in ways not possible
before.
12. Therefore, while we do have a modernised network and can point to a number of
commercial successes, we do not necessarily have a network or a business that is oriented
to deliver for postmasters, or to meet the needs of communities, consumers and small
businesses. In addition, postmasters have not benefitted from the promised footfall or
income from higher-value services that they were expecting when Network
Transformation began, and particularly when the then government committed to the post
office network being the ‘Front Office of Government’, and instead they have seen a
number of long-established services withdrawn and income from running their branch
come under pressure. This has also damaged trust.
13. This background context was a key ingredient in our network and wider strategic work in
2020 which remains valid today, and as such the commitment to building a sustainable
network that we are making is consistent with the priorities, outcomes and strategic
objectives set out in our August 2020 funding submission (see Appendix 2). Our
experiences over the past 18 months have however also influenced our plans, showing us
where we have strengths, and can have more confidence in our ability to deliver, but also
where we are weaker and therefore need to have discipline in our planning.
14. During the pandemic our newly reorganised executive team showed that with focus and
the right structure we can work across teams effectively to deliver ambitious goals; in
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March 2020 we pivoted quickly in response to the first lockdown getting PP&E into the
network fast and ramping up support to postmasters, including for remuneration, and this
has won us considerable goodwill. During the past year, with considerable senior
management engagement, we also delivered a new 10-year contract with Royal Mail, we
launched the PUDO trials and the CACP pilots, and we completed the long-planned sale of
our Telco business. These successes have all also shown us that, as a business, we have
finite capacity to deliver and that we must be disciplined in our approach to change if we
want to succeed. With HMU we also learned that where things matter, we cannot delegate.
Progress with the HSS has not been as fast as we would have liked and the scale and
complexity of this unit, as well as the impact it has elsewhere in our business, means we
must keep its activities close. We have learned from this experience and are addressing
these challenges now.
15. Our work over the past year, and particularly our recent experience with the MDA2
changes, has also shown us that the relationship we have with our postmasters is far
weaker than we first thought and that it will take more than compliance with the GLO,
better support and communication and higher remuneration to rebuild trust. We need to
rebuild our relationship with our postmasters from the ground up and earn back trust over
time. The GLO and the recent Court of Appeal ruling also shows that our brand as retailer,
franchisor, supplier and employer of choice has been severely damaged and if we want to
re-establish our former position, we again need to invest time and resources. Finally, we
have also identified a need to drive a change in our culture, to engage more openly and
collaboratively with our colleagues and to build capability in a number of key areas if our
plans are to succeed. This includes not only our ability to drive change but also how we
work once that change has taken place, with POL taking more ownership of our operations
in-house.
16. Finally, looking forward, we must accept that a large part of senior management's time
this financial year will be focused on supporting the delivery of the statutory Post Office
Horizon IT Inquiry as well as planning and implementing its recommendations and that
this will have repercussions on our capacity to deliver elsewhere. As outlined above, the
past 18 months have shown that if we try to do too much or we delegate where it is not
appropriate we risk failure; for the inquiry to succeed, and in the best interests of our
network, postmasters, colleagues and shareholders, this is not a gamble we believe we
should take.
Our Plan to Deliver a Sustainable Post Office Network
17. Given what we have learned over the past 18 months, the starting point for our strategic
plan is different today compared to what we expected it to be last year when we submitted
our funding request, and while there is clear continuity in our plans we are now proposing
to go further in some areas while pulling back in others. Our commitment to a sustainable
network cuts across all parts of our vision, and to repair our relationships with our
postmasters and rebuild trust, positioning POL as a modern sought-after franchise, a lot
needs to happen.
We will embed new ways of working within POL and, through the Postmaster Service
Prioritising Improvement Programme, overhaul how we support our postmasters on a day-to-day
(eeiueeiars I basis, improving communication and listening, training and on/offboarding,
continuous improvement, dispute management and supply chain and stock processes.
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@
We will continue to exit from our DMBs, find solutions for our hard-to-place branches
and respond quickly to the outcome of Project Starling, while at the same time
Network selectively deploying new propositions and automation. This will drive efficiency and
Growth top line growth, but also, by solving a number of long-established challenges, deliver
Mails
Innovation
Securing
Cash
Building
Partnerships
a more sustainable network, more franchisable formats and easier-to-manage churn.
We will consolidate our #1 position in the retail parcels market by building on our
third-party parcel pilots to extend this service more widely across the network, work
with more carriers and offer more services. We will also explore investing in digitising
the mails journey to simplify the postmaster and customer experience, to retain more
volumes in branches, as well as options to sell mails products online.
We will complete the migration of BOI’s ATM estate and launch BF3, strengthening
our role as the leading provider of cash and basic banking in the UK, with a focus on
underserved communities. As banks continue to close branches in the period the
importance of our role will rise and coupled with investment in automation, we will
make sure we are optimally positioned for opportunities presented by BF4.
We will remain committed to our core bill payment and travel businesses but also
explore the development of other commercial opportunities, in existing as well as new
markets, using a platform model. This will bring together our retail brand and network
with partners’ investment and product capability, to create new profitable growth
opportunities for postmasters and POL.
We will give postmasters the technology they need, replacing Horizon, launching
P-\dinlelies! Branch Hub 2.0 and investing in new data capabilities. This will deliver a more intuitive
Technology and easier to train POS system, simpler branch operation and administration, clearer
comms channels and better business intelligence and management information.
We will bring our transformation journey to an end, creating long-term social,
Creating economic and financial value by embedding the right culture and behaviours, building
Value out our capabilities and putting in place the right systems, controls and processes —
18.
19.
in branches and in POL itself - to operate, sustain and develop our network.
Since much of this change will take time to deliver, in the immediate term, we also plan
to put in place a new profit-sharing arrangement that will allow postmasters to participate
in our recovery from the pandemic and our commercial growth. We are also conscious
that without us delivering tangible benefits to postmasters in the near-term - for instance
in the form of higher remuneration, new technology, improved service levels or process
improvements - our ambitions to rebuild trust will lack credibility and likely falter. A profit-
sharing arrangement is therefore an important step to take. The details of these
arrangements will need to be agreed with the Board and our shareholder however we
envisage it could deliver a minimum level of growth in remuneration at a group-level year
on year, and also be a mechanism that rewards all postmasters regardless of tenure,
format or location.
We also know today that not all of these activities will benefit postmasters directly, and
some may even disadvantage selected branches, however they are all steps we believe
we must take to secure the delivery of a sustainable network.
« Network Growth: the plan seeks to grow the network to around 12,000 branches
(c.4.7% net growth), strengthening coverage in key urban markets where we have
fallen behind the competition in terms of convenience and accessibility for customers.
This should improve our ability to secure new carrier relationships, capture growth in
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remuneration network-wide. It should also enable us to manage network churn more
effectively, reducing the dependency on high cost Outreach to meet network numbers.
targets. While the strategic imperative is clear, we are acutely aware that at the local
level the opening of new branches will cause significant concern for existing nearby
postmasters. We are seeking to address these concerns through three steps: (i)
careful selection of new locations driven by data on customer demand and competition
to pinpoint those areas where a new site should help grow our market share; (ii) using
our new, lighter-touch formats rather than full-service solutions to drive the majority
of the network growth, thereby limiting the scope for cannibalisation (the parcels
volumes expected in our new Express format accounts for just 1.6% of the
remuneration of a typical Mains branch and 5.5% of a typical Locals — so even in the
unlikely worst case scenario that all of this volume came from nearby branches the
impact would be small); and (iii) re-establishing an appeals panel with the NFSP to
review any cases where a postmaster does believe a new branch has had a material
impact on their business, to enable us to identify suitable mitigating actions.
¢ Building Partnerships: Although we aim to prioritise our commercial investments in
areas that will drive footfall into the network, some growth opportunities open to us
will be direct to consumer, bypassing branches and delivering no direct benefit to
postmasters. These areas do however remain part of our strategy since they typically
require low levels of investment and management bandwidth, are cash generative and
they help to diversify our revenue. Postmasters will still gain, from the profit share as
well as from the investments the income we generate allow us to make in our
infrastructure, but we are also committed to working with our clients, such as Yoti,
and postmasters to explore ways in which branches can play a more active role. This
could be as a sales channel, through innovations that unlock opportunities to deliver
services in-store or simply by supporting the brand that these revenue streams are
leveraging.
20. In the immediate term our current plans do not offer up any large-scale cost
transformation, in relation to staff or non-staff costs, and we have also dialled back our
ambitions around our network strategy, as we have only limited organisational capacity
and, likely lack access to necessary funding. Since 2012 we have made significant progress
in reducing and restructuring our cost base and in transforming our network but to do
more, particularly at scale, will now be costly, complex and, in many instances, also
controversial with our colleagues and postmasters. We have already rescoped and delayed
a number of initiatives set out in the plans we put to our shareholder in August 2020,
including some headcount reductions and the start date for when we will begin the next
phase of exiting our DMBs, principally in response to funding pressures caused by the
HSS, handling concerns with our Unions and limits on senior management capacity. These
challenges remain and given the important work we have identified to rebuild relationships
with our postmasters we have decided to reprioritise and place less emphasis on certain
programmes. This revised emphasis is therefore reflected in our plans.
21. The Board have in the past discussed significant headcount reductions, at levels materially
lower than the circa 3,100 FTE’s we have today, as well as challenging management on
reducing non-staff costs. Delivering a material impact here is complex, costly and takes
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upa significant amount of senior management time that cannot Wt then be deployed on other
activities. More importantly these activities are incompatible today with delivering a
sustainable network. Investing in capability and culture is difficult when people are fearful
for their jobs from staff cuts, and putting in place the technology, the support, the systems
and the processes we require, at the same time as we are transforming core operational
functions to take out non-staff costs, materially increases execution risk on both sides of
the challenge. This does not mean we will not prioritise efficiency and reducing costs where
we see opportunities to do so, but it does mean we will not actively take on these projects
where we believe they pose a risk to what we are prioritising elsewhere.
22. We welcome input from UKGI’s assurance advisers to inform whether we can take a
different approach here and whether there might be areas for savings however, in recent
years, new opportunities have not been identified as part of this challenge process. In
addition, we still believe that there are significant benefits to be realised from changing
our appetite to contract, legal or procurement risk, however we understand that there is
limited appetite to explore this.
23. In our network strategy, and in response to the concerns raised with us by postmasters
around cannibalisation, we have scaled back our plans to add branches where we believe
there could be opportunities to do so, and we will also be converting fewer Mains to Locals
than originally planned, mitigating saving on investment but also forgoing financial
benefits from these changes. The current network structure is a legacy of Network
Transformation and while its shape will need to change, if we are to meet the needs of
consumers and small businesses today and ultimately also deliver a truly sustainable
network, we are proposing to do this more slowly and over a longer period of time. This
refocusing also frees up management capacity to deliver other parts of our network plans
and reduce execution risk, in particular in relation to our DMB programme and
implementing changes that respond to Project Starling (incl. risk reduction activities). Less
change in the network also means the team are better able to support other initiatives
across the business - in particular our mails and cash and banking strategies, and the
delivery of SPM and Branch Hub 2.0 - where successful delivery is critical to us achieving
the sustainability we are committing to.
24. Our plans to deliver a sustainable network by 24/25 are ambitious but necessary and, if
successfully achieved, will deliver material benefits for postmasters, in the form of a
transformed relationship with POL and increased remuneration, and our shareholder, in
the form of better policy outcomes and positive financial value. With a sustainable
network, subsidy should also be starting to decline and our need for investment funding
will also be much lower, at a level serviceable not through grants but by loans from our
shareholder. It will also mark the end of POL’s transformation, and for the first time since
our separation from Royal Mail in 2012 we will have put in place the right foundations,
and the flexibility the business needs, to respond to any future challenges.
Funding the Past
25. Over the past year we have had a series of discussions with our shareholder about the
funding of historical matters associated with the GLO and we understand that it wants POL
to hold the front line of public accountability for past wrongdoings and, where possible, to
bear a material share of the costs. In discussions following our funding settlement we
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26.
27.
OFFICE,
agreed to pa of our own funds towards the cost of the HSS (i.e. the original forecast
cost of the scheme) as well as more proceeds realised by the sale of Telco than had
originally been forecast. We are also funding all project costs, which go far beyond ‘legal
costs’. Once these funds have been used, the project costs spent, and in the absence of a
material outperformance by POL, or a direction from our shareholder to ‘strip’ out further
value, we cannot afford to contribute more to the costs of funding the past if we are also
committing to deliver a sustainable network.
Moving forward we will therefore be asking our shareholder for a clear financial separation
between our past and our future. As a business we expect to bear the costs of establishing
strong, trusting and rewarding relationships with our postmasters, as well as the cost of
legal advice and any new costs associated with Project Starling (supported by an increase
in subsidy where necessary), however in the coming years we still expect to face very
significant and unaffordable claims, from: (i) the HSS and any associated litigation if the
scheme is unsuccessful; (ii) postmasters who were wrongfully convicted and who seek
compensation; (iii) risks related to the treatment of the December 2019 GLO settlement;
(iv) other areas that have been identified by our improvement activities and, given the
recent change in the statutory nature and scope of the Post Office Horizon IT Inquiry,
which we expect to arise in the coming months; and (v) potential settlement and wider
costs associated with Project Starling. While we could put ranges on these, uncertainty is
high, though we are sure that, in aggregate, they are beyond what POL can afford and so
we will need shareholder support to fund them. We will also look to the shareholder to
fund future process costs associated with these, in line with established precedent in the
public sector for similar schemes. Payments will need to be made fully, fairly and quickly
for justice to be seen to be done, and for POL and Government to manage reputational
risk, particularly in light of recent changes to the scope and legal standing of the Post
Office Horizon IT Inquiry.
It is not in the shareholder's interest for POL to continue to face uncertainty regarding the
funding of these claims, since not only will the obligation to fund ultimately fall to the
shareholder in all scenarios, but continued uncertainty undermines operational decision-
making. It is also a distraction for management who need to focus on running the business
and remedy past failures, while also delivering a large-scale programme of change.
What Financial Plan does this translate into?
Profit and Contribution
28.
At a headline level we are growing profits beyond pre-Covid levels whilst also supporting
the Network and Postmasters:
Sin Piel She leaps AGRO sO DF 9A PI8 aI a LI: Lup excl: Lelee AGH FOYT ATOR IY 249 Ts:
Revenue 955 957 855 870 892 925 Revenue 810 815 855 ‘870 892 925
Cost Of Sales (i33) (119) (42) 38) (31): (33) Cost Of Sales (23; (28) (42). (38) UB} ga}
PM Rem ” (387) ” aor)” 1438)" 4453)” 4476) PMRem ” 386)” yao)” yeo7;” 438." 14533” (476)
FRES 28 a 8 9 4 21 FRES 28 real 8 9 Fr)
Other Income B 4 0 0 Other income B 4 0 0 0
Staff Costs (274) (162) (460) (449) (45) Staff Costs (270) ) (leo) (449) (345)
Non staffCosts (242) (202), (208) {213} Non staff Costs (208} {195} {202} {208}. (213)
EBITDAS: BP 35. St AS 4 EBLEDAS: 5S 13 SP. AS. O4
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ROST
OFFICE
29. The summary walk-throughs in this section will focus on our progress from 20/21 to 24/25
(and will exclude Telephony impacts), however, appendices 3 through 8 provide further
business unit level detail on all financial lines across all years. 20/21 numbers are draft as
we are still closing out year-end procedures.
30. Against our draft 20/21 performance we expect to grow profitability by £66m. Although
there are several moving parts to this story, they have four main components:
« Trading recoveries and growth of £113m;
e Staff related cost savings of £26m;
« Infrastructure cost increases in IT as we build capability and transition to SPM of
£33m;
« Increases in postmaster renumeration of £38m as a result of profit sharing and
potential new network contracts (PNNC/Starling).
EBITDAS (excl. Telco} from 20/21 to 24/25
8
is
42 i) (33) II
Qo 7
27 (10) (2)
ae re
& 4 BS
oi ow” ge
yg “3
gee gg"
‘y e .y
yor RP cg gg
~
wi?
oe sO)
gd gel aa?
i
31. We are making less profit in the outer years than previously discussed in last year’s draft
bid:
e Our trading expectations are higher, but we are not targeting reductions in Marketing
and Network non-staff costs alongside this;
e As discussed earlier, although we are still making back-office headcount reductions,
they are not at the high levels discussed last year;
e Profit-sharing and PNNC were not in last year’s discussions.
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23/24 EBITDAS (excl. Telco) from SR Bid to Latest View
said Trading
NCS Cost Challenge Pomyoo
(4)
(28)
(10)
Profit share PANG
a
other
Latest
32. We are, however, signposting a similar exit point, albeit a year later than previously
discussed (adjusting for the Telephony sale.
£m (SR Bid) 21/22
Revenue 819
Cost Of Sales (31)
PMRem (398)
FRES as
Other Income 2
Staff Costs (137)
Non staff Costs (216)
EBITDAS 54
33. Note that 24/25 was not previously discussed in last year’s SR bid.
22/23 23/24 £m (vs SR Bid)
853 844 Revenue
(30) (23) Cost Of Sales
(408) (401) PMRem
19 20 FRES
1 ie) Other Income
(107) (102) Staff Costs
(211) (214) Non staff Costs
117 124 EBITDAS
17
(8)
(30)
(20)
(2)
(a2)
3
(72)
(8)
(52)
(6)
(43)
(60)
34. Against our 21/22 stretch budget of £52m, we are signalling a slight decrease in profits
for 22/23, to £45m before growth in the outer years. Whilst we are expecting trading
growth (and associated P&N costs from opening up the Network fully) and further cost
saving benefits, the first year introduction of Profit Share and PCCN costs outweighs this
growth (our current budget assumes no impact on 21/22, although MDA2 will likely put
pressure on this).
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EBITDAS (excl. Telco) from 21/22 to 22/23
1
- aaoee (eee
bees :
(25)
Trading PaN Other
20/21 EBITDAS DMB & OD Profit Share & PNNC 24/25 EBITDAS
Trading & Revenues
35. Our revenues are expected to increase by 14% over the period on a like for like basis.
Over half of this growth is expected to come from Banking volumes, with the rest driven
by parcels growth in Mails and a recovery in Insurance. The loss of POCA revenues is the
only material reduction expected.
Revenues (excl. Telco) from 20/21 to 24/25
GEE
_
Banking & ATM Mails Pol POCa Other Trading 24/25
Postmaster Renumeration
36. Alongside our growth in revenues, we are predicting a corresponding growth in
postmaster remuneration of around 12% over the same period. We will see Banking
and Mails outstrip the lost remuneration from POCA closing out, with overall trading
pushing up renumeration £43m (inclusive of shifts from DMB and Network programs).
37. Our planning assumptions include £28m of profit share (25% of EBITDAS) in 24/25,
however, this translates to a £21m increase versus 20/21 levels, as it offsets against the
£7m of top-up’s paid as part of our Covid response last year. We are also signposting
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£10m of increased renumeration relating to PNNC, however, this is an estimate and could
be higher (up to £30m). These costs have the potential to erode our options on profit-
sharing and/or investment self-funding.
PM Rem (excl. Telco) from 20/21 to 24/25
490 10
Ea Ey 2 476
a0 21 8) ; =
450 u
10 aa
wo fe Ga
410 410 o
390
370
350
Banking & ATM DMB & Network PNNC Other
20/21 Mails Profit Share POCa 24/25
38. Alongside trading growth, the additional profit share element allows average renumeration
per franchise to grow each year from 21/22, but only to a level slightly above those of
14/15. While the decline between 14/15 and 19/20 was driven by our transformation of
the Network, we should be conscious that Postmaster running costs will continue to
increase.
Average PM Rem per Branch [£k} mmm Average PM Rem % since 14/15 =====CP1% since 14/15,
42 120%
40
38 110% ——
36 100%
34
0
Tidal . a
30 380%
A <7) 2 2 ~ oa 1 o © > wy
OP PP ah a ht Oo
PEE PH SEM ST NN gh gh wo
Costs
39. Staff costs are currently expected to fall by a net 13% under the current plan - with
three main drivers:
¢ DMB exits will reduce staff costs in Postmaster & Network.
« POM/OD work is currently positioned to target a further £8m of savings beyond those
already delivered.
« Increased capability costs from HMBU, BTU/SPM and CIO.
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Staff Costs (excl. Telco} from 20/21 to 24/25
(80)
{90}
(200)
(210)
8
, [ise]
(330)
15) 3 5
(140) 8) e) =e (140)
(350)
(260)
(270)
(2:80)
20/21 DMB POM/OD Historical Matters ClO. & BTU Inflation ‘other 24/25
40. Our non-staff cost base is expected to grow, by 9% against 20/21 levels. Trading related
increases from revenue growth and recovery drive this - accounting for £16m (around
90%) of the increase. This also includes £3m of Government Services savings through
moving away from AEI booths and a further £3m benefit from closing out POCA.
Non-Staff Costs (excl. Telco} from 20/21 to 24/25
E -
3 3
I
(195) 6)
(23) ics
4) (2) (213)
20/21 AEL POCA POL Banking & ATM P&N BIU 24/25
Investments
41. We are currently proposing on investing £474m over the next 3 years. Excluding Historical
Matters program costs this represents investment of £464m and assumes no further
settlement costs are borne by POL beyond the £89m agreed for 21/22 alongside £27m of
program costs.
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FY21 to FY22 to
pyaa/22 I fy22/23 FY2a/24FA28/25 a sna pvaa spend
1.Relationship with Postmasters 24 16 14 qt 66 41
2.Network Locations and growth 34 43 54 44 144 110
3.Jnnovate in Mails 4 5 13 11 32 28
4.Access to Cash 10 8 5 7 31 20
5.Commercial Partnerships 3 2 2 2 9 7
6.New Branch and Online Technology 59 91 98 53 301 242
7.Shareholder value 5 12 (12) 2 8 2
8.Historical Matters/CCRC 134 5 5 - 144 10
9.0ther 12 6 3 3 24 12
10.Past Project - : - - : :
Grand Total 286 188 183 103 759 474
42. Against our Strategic Strands we are concentrating the majority of our resources on New
Branch and Online Technology, and Network investment, in line with our priorities
discussed earlier:
1.Relationship with Postmasters ea
3.Innovate in Mails [oe]
4.Access to Cash [I
‘9.0ther B
5.Commercial Partnerships
7.Shareholder value
ay
a)
y
8.Historical Matters/CCRC
43. Within this portfolio of investment, 70% is represented by the largest 10 projects:
real
: Fyai/22, Fy22/23 923/24 Fy2a/25 Fv2i/22io 222?
i na pe
‘Strategic Platform Modernisation 6.New Branch and Online Technology 19 45 64 22 150, 131
DMB Strategy 2.Network Locations and growth 17 17 26 : 59 42
Legacy risk branches 2.Network Locations and growth 12 11 23 23
Copper Stop Sell 6.New Branch and Online Technology 1 5 8 8 21 20
Business Development & Innovation _3.Innovate in Mails - - 10 10 20 20
Back Office/Core/Colleague 6.New Branch and Online Technology - 10 3 5 17 7
Horizon Issues Judgement 8.Historical Matters/CCRC 8 6 6 Ss 24 17
Counter Cash Automation 4.Access to Cash 1 4 4 7 16 15
POL Data Platform (PDP) 6.New Branch and Online Technology 4 6 6 2 18 4
Network Maintenance 2.Network Locations and growth 3 4 5 4 16 13
Grand Total 53 107, 142 62 364 311
Appendices 9 & 11 give further detail on our investments and their associated benefits.
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What Support are we Requesting?
Financial
44. There are two areas of financial support we need to make decisions around: Investment
Grant and Network Subsidy Payments (NSP).
45. On NSP we are aware the shareholder is keen to see a future decline in support levels;
however, our current proposals keep payments at the current annual figure of £50m per
annum. As mentioned earlier, we are still maintaining a loss-making portion of the
Network that costs more than £50m, and are actually predicting the costs to service it to
increase as we respond to the IDG and Inquiry recommendations. We are also forecasting
costs relating to PNNC from changes in government policy.
46. For Investment Grant funding continues to be based upon a request that allows us to
maintain our Security Headroom cashflow at a suitable level (historically agreed to be
around £100m), while still self-funding as much investment as possible from our profitable
operations.
47. We are currently modelling £140m of incremental investment grant to fund a wide-
reaching programme of change. While this maintains a reasonable level of Security
Headroom across the period as a whole, there is are lower points in 23/24 where our
investment levels cannot be replenished by profits until the following year. We may
therefore need to review the pace and phasing at which we deliver change, however this
is something we constantly do already.
Security Headroom Bridge
£m FY21/22 FY22/23 FY23/24 FY24/25
Security Headroom Brought Forward 157 113 126 76
Cash flows from trading 87 90 197. 137
Cash flows from investment activities (19) (88) (150) (110)
Movements in payables (23) 11 (17) 28
Movements in non-qualifying assets (3) 0 () 0
Net HSS settlements (88) ie 0 0
Security Headroom Carried Forward 113 126 76 132
48. Facility Headroom declines over the period, and although it is not expected to breach, it
is lower than we would normally like in 24/25. This is driven by increased levels of Network
cash (forecasted to spike slightly in 24/25) to facilitate the larger levels of Banking
volumes alongside the offsetting effect that our POCA business provides. This is something
we will be reviewing further as we work through the coming months.
Facility Headroom Bridge
£m FY21/22 _FY22/23_FY23/24 FY24/25
Facility Headroom Brought Forward 324 235 208 130
Cash flows from trading 87 90 117 137
Cash flows from investment activities (19) (88) (150) —‘ (110)
Movements in payables (10) 11 (17) 28
Movements in current assets (60) (39) (28) (114)
Net HSS settlements (88) 0 0 0 16
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@
49. Further review of our Facility and Security Headroom positions will therefore need to be
done as part of our route to a formal SR bid, as they will need to be improved by
rephasing of investment or increased levels of funding.
50. Appendix 10 gives fuller detail on our cashflow outlook.
51. Net Assets remain negative over the period (as expected), however, do steadily improve
over the period as our profits recover and we unwind our litigation obligations, potentially
being close to parity at the end of 24/25. After the recent work conducted earlier this
year, we do not currently consider net liabilities to be an issue as long as there is a plan
to return to net assets in the long term and work within our various agreed terms.
rapes
im
Tap?
$m
Net assets b/f (64.3)
Operational {inc subsidy and interest} 85.8 95 91 uy 144
Depreciation / amortisation / impairment (128.4) I (102) (71) (59} (60)
Exceptional spend (excl. HSS programmes} I (48.5} (70) (72) (74} (33)
HSS Programme Spend (50.9) {52} (ay {1a} (5)
HSS Asset 65.4
Investment funding 125 100 40 oO
Sale of Telco - net proceeds 64.2 0 o {0} 0
Sale of Telco - net liabilities (9.4)
Dividend payment 0 oO
Net assets c/f (86.4) (90) (53) {39} 7
52. Weare proposing to self-fund 70% of our investments, however, this is only feasible if we
limit funding related to HSS and CCRC as discussed earlier. If we do not do this, then
clearly the quantum of funding required will need to be higher to deliver the same agenda.
In summary then:
Next Steps
Next Steps
53. We will take the Board’s questions and feedback on this document and respond or organise
further discussions as required through the coming months. We will also work with the
assurance team from UKGI over the through June and July. A further update is then due
to be discussed with the Board in August.
17
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68 of 204 POL Board Meeting - 03 June 2021-03/06/21
UKG100041682
UKG100041682
Tab 5 Strategic Plan
Appendix 1: Bridge from Last Year's SR Bid to Settlement Amount
In August 2020 we set out in our original funding submission a request for £402m over three
years from the shareholder, comprising £302m in 21/22 and £50m in each of 22/23 and 23/24.
At UKGI’s request we rephased this, to avoid being funded in advance of need, and in our final
funding submission we revised our proposal to £252m in 21/22, £100m in 22/23 and £50m in
23/24. This £402m request was made up of £150m subsidy (£50m a year) and £252m
investment funding.
Contrary to expectations the December 2020 Spending Review was for only one year (21/22)
and in this POL received a £227m settlement, comprising £50m network subsidy and £177m
investment funding. Compared to the £252m rephased bid for 21/22 on its own this was a
positive outcome. Since that settlement was agreed however POL has been required to make
significant contributions to the costs of the HSS, which were not anticipated, comprising!
of own-funds and a £32m contribution from the Telco sale.
e« Own Funds: In POL’s original submission we signalled an expected J Espend in 20/21
on the HSS (the estimated cost of the scheme at that time) but left open who would be
responsible for funding this (discussions were already taking place at the time with the
shareholder about unaffordability of these and other settlement costs for POL). The
requirement to fund was therefore not included in our plans that were submitted to
the shareholder, and by taking on this obligation POL has had to reprioritise 21/22
investment plans to accommodate the change.
e« Excess Telco Proceeds: In POL’s original and final funding submissions we assumed we
would retain the Telco business but that, in the event it was sold, we would reflect this in
an updated budget at the start of 2021 including the amount we would be able to contribute
towards the cost of the HSS. The plans that were submitted in early 2021 therefore reflected
the [settlement from HMG plus the Ha POL expected to retain from the sale
proceeds (i.e. realised was to go towards funding the HSS, with
representing foregone profit, marketing savings and reduced Telco capex over three =
In early April 2021 UKGI changed the methodology to be used to calculate the proceeds POL
could retain, resulting in POL having to allocate all net proceeds from the sale to funding
the costs of the HSS. Although we have been told that this [should form part of any
future funding bid (i.e. as it applies to foregone profits in future years), it impacts cash
today and as such has caused a further reprioritisation in our 21/22 investment plans.
Taking these ER noncoetss changes into account the settlement reached with the
shareholder for reduces to 47% lower than our request of fiz i
lower than the publicly announced Bag
Based on discussions with UKGI in the run up to the Spending Review as well as at the Board
on the treatment of Telco proceeds, our baseline funding ask for 21/22 and 22/23 carried over
from discussions last year is therefore £182m, comprising £50m subsidy across two years,
£50m investment funding ‘rephased’ out of 21/22 and £32m Telco proceeds. This assumes no
change in our operating environment, any increase in the costs associated with remedying the
past or any additional costs associated with meeting our network or service obligations to the
shareholder.
18
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POL Board Meeting - 03 June 2021-03/06/21 69 of 204
UKG1I00041682
UKG100041682
Tab 5 Strategic Plan
al Funding Request Bridge to Final Settlement Value
£302m
£252m
1 (€25m) I £227m
1 (635m) I
1 (€32m) I
Original Bid = Rephasing Impact Rephased Bid Negotiated Settlement w/ —_ less own-funds _less excess Telco Adjusted
(for 21/22) Reduction with BEIS. Proceeds Settlement w/
BEIS Bes
70 of 204
Appendix 2: August 2020 Priorities, Outcomes that Define Success and
Strategic Objectives
August 2020 Priorities:
e Providing easy, nationwide, physical and digital access to customers for cash, parcels and
other key services;
e Supporting postmasters to thrive through a combination of training, support, simplification
and pay; and
¢ Driving the business to be self-supporting through investment, cost reduction and
commercial progress.
Outcomes that Define Success for POL in August 2020:
e A national infrastructure of more than 12,000 branches, distributed nationwide to meet our
current access criteria, which supports the growth of small businesses across the country,
especially in areas that need it most.
« A different relationship with postmasters, served and enabled by POL, helping to support
and grow their small businesses.
«* Free national access for consumers and small businesses and SMEs to cash, Mails and bill
payments.
e Support, care and commercial opportunity for vulnerable and marginalised people and
communities, critical to the levelling up agenda, guaranteeing support for rural and urban
deprived areas.
e A Post Office structure that can invest sufficiently in the business from its profits, enabling
some profit sharing with both Government and postmasters.
19
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POL Board Meeting - 03 June 2021-03/06/21
UKG100041682
UKG100041682
Tab 5 Strategic Plan
Government's ambition to reach net zero carbon emissions by 2050.
Strategic Objectives in the August 2020 Proposal
e Extending our Royal Mail (RMG) agreement and expanding into the parcels market across
the UK, enabling small businesses in every town convenient access to sending and receiving
parcels.
¢ Delivering a 3 Banking Framework which sustains access to cash and facilitates easy cash
deposits for local businesses across the UK; and remains highly profitable while reassuring
the banks that they can continue to outsource to us.
¢ Re-building our broader travel business post CV-19.
e Reducing the costs and management support for other businesses including Mortgages,
Savings, Identity, Telco and Insurance. This will involve re-negotiating and further reducing
our relationship with Bank of Ireland.
e Reducing our cost base (excluding postmaster remuneration) by a further 11% and our
headcount to 1,600-1,700.
« Closing all directly managed branches to reduce the cost to serve,
e Delivering a new relationship with postmasters where we are simpler and cheaper to deal
with, are far more supportive and engage in a mutually beneficial, commercial partnership,
enabled by technology.
e Replacing postmaster contracts with modern versions, consistent with the GLO and ensuring
that postmasters cannot be confused with workers or employees.
¢ Increasing automation in the network without funding kit ourselves.
e Replacing the Horizon system and its Fujitsu support arrangement by 2023 or as soon as
possible.
* Growing a Post Office network to above 12,000 branches for the first time in many years as
we open substantially more flexible formats across the country, meeting the needs of
customers, clients and, of course, our postmasters who are the face of the Post Office.
* Opening up the possibility of a dividend payment to Government, matched by postmaster
profit share,
20
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POL Board Meeting - 03 June 2021-03/06/21 71 of 204
Tab 5 Strategic Plan
UKG100041682
UKGI00041682
72 of 204
Business Unit
Banking Services & ATMs
Banking, Payments and Transactional
Products Central
Central Commercial
Centrally Managed
clo
Commercial Planning & Strategy
Communications
Credit Cards
Customer Experience
Finance
FS, IDS and POI Central
Government Services
Historical Matters
Identity Services
LCG
Mails
Mails, PUDO, Retail and Branch Identity
Services Central
Mortgages/Savings/ Loans
Payment Services & Payzone
People
POCa
PO!
Postmaster & Network
Property
Retail / Lotto & Gift Cards
Supply Chain
Telephony
Transactional Financial Services
(blank)
Banking, Payments and Transactional
Products
Mails, PUDO, Retail and Branch Identity
Services
FS, IDS and POI
Business Transformation Unit
Grand Total
Confidential
Appendix 3: Contribution Detail
» FY (19/20) FY (20/21) FY (21/22) FY (22/23) FY (23/24) FY (24/25)
92.9
0.0
(3.3)
(7.2)
(97.7)
0.0
(3.3)
17
(47.5)
(10.4)
(2,3)
143
0.0
43
(7.0)
121.1
(1.6)
26.9
9.9
(12.7)
14
15.7
(29.2)
(23.4)
115
(32.6)
36.8
62.3
0.0
10.4
18
21.6
0.0
184.6
129.4
(0.2)
(2.8)
(19.3)
(92.9)
(1.3)
(3.7)
21
(16.5)
(15.0)
(1.8)
2.7
42
0.0
69.7
136.8
0.0
(25)
(6.6)
(110.7)
(1.5)
(5.3)
3.6
(16.6)
(17.4)
(0.7)
4.0
(4.0)
14
(7.6)
145.6
0.0
10.6
84
(10.0)
(11.7)
24
(27.5)
(20.2)
72
(34.7)
0.0
47.0
0.0
10.9
123
23
(0.8)
115.6
POL Board Meeting - 03 June 2021-03/06/21
145.8
0.0
(10.4)
(27.6)
(110.3)
(1.5)
(4.8)
4.2
(17.0)
(17.7)
(0.9)
6.0
5.6
18
(1.9)
128.8
154.9
0.0
(18.5)
(31.0)
(113.2)
(1.6)
(4.7)
45
(17.2)
(17.9)
(11)
2.5
2.9
13
(12.8)
104.5
156.7
0.0
(22.3)
(36.7)
(114.9)
(1.6)
(4.7)
5.0
(17.5)
(18.2)
(1.2)
0.0
0.0
0.0
(10.6)
24.0
21
UKG1I00041682
UKGI00041682
Tab 5 Strategic Plan
PO!
OFFICE J
EBITDAS (excl. Telco) from 20/21 to 24/25
.
a — a
113) (1)
28
ee, “ oF eo
cs ee ool tt
Appendix 4: Revenue Detail
Business Unit ~ FY (19/20) FY (20/21) FY (21/22) FY (22/23) FY (23/24) FY (24/25)
Banking Services & ATMs 164.8 204.9 232.2 251.6 264.6 268.6
Central Commercial 0.0 0.0 0.0 (2.5) (5.9) (7.5)
Centrally Managed She 3.0 a 2d (2.7) 18
Credit Cards 2.3 48 3.9 47 5.2 6.0
Government Services Be 13.6 18.5 tees) 18.4 a
Identity Services 44 9.9 7.0 5.5 5.6 8.8
Mails 346.0 397.2 406.8 405.1 416.7 432.7
Mortgages/Savings/ Loans 31.3 13.1 13.0 15.0 16.0 17.0
Payment Services & Payzone 30.6 29.4 27.8 27.8 27.0 26.5
POCa 21.7 14.5 11.0 2.3 1.2 1.2
PO! 48.3 23.8 28.9 cred 43.6 50.2
Retail / Lotto & Gift Cards 41.3 34.7 34.7 34.4 34.5 34.3
Supply Chain 9.6 85 9.4 8.9 88 87
Telephony 144.4 142.4 0.0 0.0 0.0 0.0
Transactional Financial Services 70.7 57.8 58.5 57.4 58.7 59.5
Grand Total 954.6 957.5 854.7 869.6 891.7 925.4
22
Confidential
POL Board Meeting - 03 June 2021-03/06/21 73 of 204
Tab 5 Strategic Plan
Appendix 5: Staff Detail
Business Unit
Banking Services & ATMs
Banking, Payments and Transactional
Products Central
Central Commercial
Centrally Managed
clo
Commercial Planning & Strategy
Communications
Credit Cards
Customer Experience
Finance
FS, IDS and PO! Central
Government Services
Historical Matters
Identity Services
LCG
Mails
Mails, PUDO, Retail and Branch Identity
Services Central
Mortgages/Savings/ Loans
Payment Services & Payzone
People
POCa
PO!
Postmaster & Network
Property
Retail / Lotto & Gift Cards
Supply Chain
Telephony
Transactional Financial Services
Business Transformation Unit.
Grand Total
Confidential
@
UKG1I00041682
UKGI00041682
» FY (19/20) FY (20/21) FY (21/22) FY (22/23) FY (23/24) FY (24/25)
(1.9)
0.0
(0.6)
(14.6)
(9.7)
0.0
(2.4)
(0.2)
(6.5)
(10.0)
0.0
(1.7)
0.0
(0.0)
(5.0)
(1.2)
(1.6)
(3.1)
(4.3)
(7.3)
(0.4)
(48)
(63.3)
(1.4)
(0.1)
(29.7)
(1.0)
(0.6)
0.0
(471.2)
(2.0)
(0.2)
(0.5)
(17.4)
(7.7)
(1.3)
(2.7)
(0.2)
(7.1)
(9.9)
0.0
(0.7)
(0.0)
(0.6)
(4.9)
(1.4)
(0.5)
(0.7)
(4.4)
(6.1)
(0.4)
(4.5)
(58.8)
(1.2)
(0.0)
(28.2)
(1.0)
(0.4)
0.0
(162.4)
(2.1)
0.0
(0.5)
(14.1)
(1.7)
(1.2)
(25)
(0.2)
(7.3)
(11.6)
0.0
(0.1)
(4.0)
(0.6)
(5.5)
(1.7)
0.0
(0.4)
(4.2)
(5.9)
0.0
(4.8)
(50.4)
(0.8)
(0.3)
(29.6)
0.0
(0.3)
(0.7)
(160.3)
POL Board Meeting - 03 June 2021-03/06/21
(2.4)
0.0
(0.5)
(8.3)
(13.5)
(1.2)
(23)
(0.2)
(7.6)
(11.8)
0.0
(0.1)
(4.0)
(0.6)
(5.7)
(1.7)
0.0
(0.4)
(4.1)
(5.0)
0.0
(49)
(43.0)
(0.9)
(0.4)
(28.3)
0.0
(0.4)
(19)
(148.8)
(2.2)
0.0
(0.5)
(6.7)
(13.7)
(1.2)
(2.3)
(0.2)
(7.8)
(12.9)
0.0
(0.1)
(4.0)
(0.6)
(5.7)
(1.7)
0.0
(0.4)
(4.1)
(4.9)
0.0
(5.0)
(32.5)
(0.9)
(0.4)
(27.1)
0.0
(0.4)
(10.3)
(144.6)
(22)
0.0
(0.5)
(6.7)
(13.9)
(1.3)
(2.3)
(0.2)
(7.9)
(12.1)
0.0
(0.1)
(4.0)
(0.6)
(57)
(1.8)
0.0
(0.4)
(4.2)
(5.0)
0.0
(5.1)
(28.2)
(0.9)
(0.4)
(27.0)
0.0
(0.4)
(9.1)
(139.8)
23
Tab 5 Strategic Plan
POST
OFFICE
UKGI00041682
UKG100041682
Business Unit
Banking Services & ATMs
Appendix 6: Non-Staff Cost Detail
» FY (19/20) FY (20/21) FY (21/22) FY (22/23) FY (23/24) FY (24/25)
Banking, Payments and Transactional
Products Central
Central Commercial
Centrally Managed
clo
Commercial Planning & Strategy
Communications
Credit Cards
Customer Experience
Finance
FS, IDS and PO! Central
Government Services
Historical Matters
Identity Services
LCG
Mails
Mails, PUDO, Retail and Branch Identity
Services Central
Mortgages/Savings/ Loans
Payment Services & Payzone
People
POCa
PO!
Postmaster & Network
Property
Retail / Lotto & Gift Cards
Supply Chain
Telephony
Transactional Financial Services
Business Transformation Unit
Grand Total
Confidential
(5.4) (6.4) (9.3)
0.0 (0.0) 0.0
(0.0) (0.0) 0.0
2.6 2.2 43
Go ies es
0.0 (0.0) (0.3)
(0.9) (2.2) (22)
(0.4) (0.9) (0.0)
(12.3) (9.4) (9.2)
(0.4) (5.1) (5.8)
0.0 0.0 0.0
(7.1) (6.0) (7.6)
0.0 (0.0) 0.0
(0.1) (0.5) (2.0)
(2.0) a5. 24
(4.8) (6.7) (5.3)
(0.0) (0.5) 0.0
0.1 (0.2) (0.5)
(3.0) (2.2) (2.4)
(5.4) (4.0) (4.1)
(4.4) (3.3) (3.0)
(18.4) (43.6) (13.9)
(7.0) (056) 47.0)
(22.0) (17.4) (19.4)
(0.9) (0.5) (0.2)
(14.8) (14.4) (12.9)
bade Fans 0.0
(3.2) (2.8) (1.9)
0.0 0.0 (0.1)
(242.4) (226.4) (201.9)
POL Board Meeting - 03 June 2021-03/06/21
(16.4)
0.0
0.0
11
(82.9)
(0.3)
(2.5)
(0.1)
(9.4)
(5.9)
0.0
(5.6)
0.0
(0.1)
(2.4)
(4.4)
0.0
(0.5)
(2.6)
(3.5)
(0.6)
(15.7)
(19.3)
(18.9)
(0.6)
(14.7)
0.0
(2.5)
0.0
(207.8)
(18.1)
0.0
0.0
13
(84.6)
(0.3)
(2.4)
(0.1)
(9.4)
(6.0)
(212.6)
(19.8)
0.0
0.0
12
(85.0)
(0.3)
(2.4)
(0.1)
(9.6)
(6.1)
0.0
(3.0)
0.0
(0.0)
(2.4)
(45)
0.0
(1.0)
{2.7}
(3.2)
0.0
(18.2)
(20.0)
(16.3)
(0.4)
(15.4)
0.0
(2.4)
(1.6)
(213.0)
24
75 of 204
Tab 5 Strategic Plan
UKG100041682
UKG100041682
Appendix 7: Postmaster Renumeration Detail
Business Unit
Banking Services & ATMs
Banking, Payments and Transactional
Products Central
Central Commercial
Centrally Managed
Credit Cards
FS, IDS and POI Central
Government Services
Identity Services
Mails
Mails, PUDO, Retail and Branch Identity
Services Central
Mortgages/Savings/ Loans
Payment Services & Payzone
POCa
Retail / Lotto & Gift Cards
Telephony
Transactional Financial Services
Grand Total
Business Unit
Banking Services & ATMs
Centrally Managed
clo
Credit Cards
Government Services
Identity Services
Mails
Mortgages/Savings/ Loans
Payment Services & Payzone
POCa
Pol
Retail / Lotto & Gift Cards
Supply Chain
Telephony
Transactional Financial Services
Grand Total
Confidential
y FY (19/20) FY (20/21) FY (21/22) FY (22/23) FY (23/24) FY (24/25)
(63.0)
0.0
(2.6)
(0.7)
(0.0)
(2.3)
(10.6)
(0.0)
(218.9)
0.0
(1.4)
(12.1)
(12.9)
(28.5)
(1.4)
(32.9)
(387.3)
Appendix 8: Cost of Sales Detail
>I FY (19/20)
(1.6)
0.1
0.0
0.0
(0.0)
(0.0)
0.0
0.0
(1.3)
(15.8)
(9.5)
(0.4)
0.0
(84.2)
(0.1)
(112.7)
(65.8)
0.0
(2.3)
(7.1)
0.0
(1.8)
(4.5)
(1.1)
(261.8)
0.0
(1.6)
(11.9)
(8.8)
(26.7)
(1.0)
(16.6)
(410.9)
FY (20/21)
(1.3)
0.0
0.0
(1.5)
(0.0)
(1.8)
0.0
0.0
(1.2)
(15.2)
(5.9)
(1.0)
0.0
(91.2)
(0.1)
(119.0)
(81.3)
0.0
(10)
0.0
(0.1)
(0.7)
(6.9)
(1.3)
(254.1)
0.0
(1.5)
(11.5)
(4.7)
(26.5)
0.0
(17.2)
(406.7)
FY (21/22)
(2.2)
0.0
(13.2)
0.0
0.0
(1.7)
0.0
0.0
(1.2)
(15.3)
(7.7)
(0.6)
0.0
0.0
(0.1)
(42.0)
POL Board Meeting - 03 June 2021-03/06/21
(84.0)
0.0
(7.4)
(22.5)
(0.2)
(0.9)
(6.8)
(1.4)
(256.5)
0.0
(1.5)
(11.2)
(1.1)
(27.8)
0.0
(16.9)
(438.3)
FY (22/23)
(3.2)
0.0
(13.8)
0.0
0.0
0.0
0.0
0.0
(1.4)
(9.7)
(10.1)
(0.1)
0.0
0.0
(0.1)
(38.2)
(86.2)
0.0
(22.1)
(23.0)
(0.5)
(1.1)
(6.4)
(1.0)
(263.5)
0.0
(2.0)
(10.7)
(0.8)
(27.6)
0.0
(18.6)
(453.4)
FY (23/24)
(3.3)
0.0
(14.9)
0.0
0.0
0.0
0.0
0.0
(1.4)
0.0
(11.4)
0.0
0.0
0.0
(0.2)
(30.8)
(86.7)
0.0
(14.3)
(33.0)
(0.7)
(1.2)
(6.3)
(0.4)
(272.2)
0.0
(2.5)
(10.3)
(0.8)
(27.1)
0.0
(20.2)
(475.6)
FY (24/25)
(3.3)
0.0
(16.1)
0.0
0.0
0.0
0.0
0.0
(1.4)
0.0
(12.8)
0.0
0.0
0.0
(0.2)
(33.5)
25
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Tab 5 Strategic Plan
ff Appendix 9: Investments Detail
Spend Detail by Strategic Strand:
~ 1 Relationship with Postmasters. Horizon Issues Judgement, 77] 59580 243, 166
Service Oriented Central Sup. Branch Hub 37] 49 4a 20 150 u3
Postmaster Service Improvement Programme sa] 30 20 © 20 ia 70
Other smaller Property Programmes zo} 21 19 18 78 58
Other smaller People Programmes 26} 04 29 oa
Other smaller Supply Chain Programmes 27 - - : 27 :
Other smaller Postmaster o1 - - - 04 .
‘LRelationship with Postmasters Total za] 162 aa 108 655 aaa
= 2.Network Locations and grawt DMB Strategy as7I 166 256 : 389 422
Legacy risk branches : 118 114 : 232 23.2
Network Strategy - Hard to Place Branches sa] 7917 : 189 96
Network Maintenance za} 375480 160 Ba
Basic/Express & M2L a7] 1452s 47 20
Outreach Optimisation 1200343 79 79
Other smaller Network 22] 05 10 10 47 25
Z.Network Locations and growth Total sa] a3. 537 137 1483) 1104
= unnovate in Malls Business Development & Innovation - 100 100 200 200
alls -PuDO raf 46 291.0 109 as
Other smaller Mails 15 - - : 15 :
3.innovate in Malls Total 3a] 46 9 0 224 285
= Access to Cash Counter Cash Automation a3} 380387 158 145
ATM Banking Strategy 92] 4018 : 150 38
Other smaller Banking Services & ATMs 090 - - : 0.0 -
‘4.Aecess to Cash Total wos] 78 sa 7a 308 203
~ 5.Commercial Partnerships: ‘Other smaller Mortgages/ Savings/ Loans Os Os 1.0 1.0 30 25
Other smaller POL -I 08 10 © 10 28 28
Other smaller Government Services as} oa : 7 oa
Other smaller Payment Services & Payzone oaI 03 0303 12 09
Other smaller Credit Cards 02} 01 01 0 os 03
Other smaller Identity Services - - - - . :
5.Commercial Partnerships Total 26 19 24 24 93 67
= 6.New Branch and Online Techne Strategic Platform Modernisation 19s] 450 640216 150. 1306
Copper Stop Sell os} so 7575 209 200
Other smaller C10 Programmes sa} 4003540 199 us
Belfast Exit asa] 32 - - yaa 32
POL Data Platform (POP) 37] 56 8923 175 138
Back Office/Core/Colleague -I 97 27 50 va va
PED Replacement Devices -I 2s - : 1s 25
Fujitsu Gap + IPR : 100 : 100 100
SAP- CFS contract expiry - 80 80 80
Risk and Resilience as} a9 9a 74 37
Project Oriven Test Environment FY20 2a} 24 1010 6a 4a
IT Security Programme FY21 os} 18 18 18 62 34
PC1 Compliance 55 55
6.New Branch and Ontine Technology Total ses] o11 92 saa 3010 rane
~ 7.Shareholder value Post Office Operating Model (POM) 4. 40 - : 81 40
Future of Stock 3s] 38 : : 76 38
Other smaller Supply Chain Programmes -I sa 18 : 74 74
People Placeholder : - 30 30 60 60
Controls Framework as} as - 50 35
Other smaller Property Programmes 1a] 10 0808 4a 26
Other smaller People Programmes 1a} os - : 27 09
Other smaller Finance Programmes 03} os - Fay os
Other smaller Payment Services & Payzone 00 : - : oo
Other smaller C10 Programmes - : : - :
Other smatler POL (00) : (00) :
Sale OF Assets @a} 68) 073) ea] (43) 6a]
7 Shareholder value Total sal swan 17 1 25
B.Historical Matters/CCRC HM Settlement - POL Funded 89.0 - - - 89.0
Historical Shortfall Scheme 28 28
CRC / Prosecutions wal 4340 - na 83
Other smaller Historieal Matters Programmes 63 : 63
Legal / General Advice sal 0s og 5a 1
Other smaller Historical Matters Setlement 08 - - : oa -
‘8.Historical Matters/CCRC Total 134.4 52 48 - 1444 10.0
26
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Tab 5 Strategic Plan
FV22/23 Fy23/2a Fy2n/25
Central Change team FY21
Other smaller Supply Chain Programmes
CT vacant leaseholds & CT onerous property contracts
Other smaller LCG Programmes
Other smaller PO!
Other smaller Payment Services & Payzone
Fi21 to Fy24)
Specd
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Other smaller People Programmes os} 03 - 09 03
Other smaller Finance Programmes 04 - - - 04 -
Other smaller POCA 03 - - - 03
Other smaller Mails 03 - - : 03 -
Other smaller CIO Programmes oa - - : on - 5
Other smaller Strategy and Transformation Programmes 00 - - 00
Other smaller Marketing : . - - -
Other smaller Property Programmes : : - : : :
Other smaller Retail / Lotto and Gift Cards
Other smaller Postmaster : - - : : -
Other smaller Transactional Financial Services : - - : : :
Other smaller Digital - - -
Other smaller Telephony Programmes (0.0) - B : (09) .
Other smaller Central. Programmes (0.0) - - - (09
9.0ther Total SiN) iui x Meno. pce, ST 240 119
‘Grand Total = = = = = zes7 I i883 1829 aos] 759.4 Cert
FY21 to Fv24
Spend!
Historical Shortfall Scheme - BEIS Funded -} Bs 23 : 158 158
Overturned Historical Prosecutions - BEIS Funded : 46 3.0 50 227 227
8.Historical Matters/CCRC Total 1346I 976 212 5.0 258.4 123.9
‘Grand Total : ane el eee “sea 1239
27
Tab 5 Strategic Plan
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UKGI00041682
Spend and Benefit Detail by Portfolio
2m apa wpa 2s 2m nis Bp wns
Cirert current current cuent FUER] Curent Curent Curent Carent
‘SPO Portfolio Project Morne Forecast Forecast Forecast Forecast/ia/4 if Forecast Forecast Forecast Forecast
=z] Gn Gon Gost Aenefits Benefits Benefits Benefits
Tanking, Payments & Other Tiwi Banting Suateey 324018 so izle 02
Buitish Gas it 10 0908 Os
Auitsh Gas (4000) 0303 03. 0a I 12 I os 05 oo
Community Access to Cash Pilots oo oo
Counter Cash Automation 1338 a6 a I ase I on oa) 9) 8)
International Payments (WU) aoe fo
IT Systems eo: oa = I op pot
Payeone (4000) 00 09
Payaone (Panther) 09 : oo I os 07 10 15
Paycone Client Onboarding oz = + I 02} or 02 o2 o2
Paycone Data System Upgrade 02 02 :
Paytone XAC Dewees os 08 2 os aa
Oca Est 03 - fof.
(Banking, Payments & Other Tor sas aaa a I ass eo
TF Patorn Enablement Tccenture Baek Ofiee contract expiry a0 I 20
Accenture Back Office Contract Renewal as 2s
T0561 00 - + I co I oo 09 0c 00
Back Otic Transformation Programme eee re er ee eT
ack Ofice/Core/Colleague 97 27 50 I wa -
atch messaging and Consolidation (PODG) 02 = = fof.
Belfast ext ss a2 J af ana
aP Open Banking 01 on
ap Payment Regulatory —SCA on of - -
Branch Device Replacement soe wpe
CoP reprocurement - 0309 0a
Connectivity Netware 20 12 v2 ]or 15 4s 45
Copper stop sell 09 507873 I 209 ct
counter printer replacement 03 = = I 03 I oo a1 or oa
Credence / MOM (Residual Activity) 10 10 -
(WC Test Environment o1 a1
Cpber Risk Assessment ot fl fee
005 Gap 1 1 - - I 20 SC
Deloite /Red Team Review 02 02
MARC oa 01 I (00 (ox) (0a) (@a)
£UCBranch Deployment 0707077
EUCCloud Migration oe os I or 01 04 on
cUCReprocurement a7 a2 I ae Pony oot
feat 00 oo
ForgeRock/8roadleat upgraces oo or = flor eee
Fujitsu Gap + 198 wo - I wf - -
Fujitsu negotiations (Everest) asa
G10 Hoszon interventions os os
IT Security rogramme — (03) (3) (03) (oa)
IT Security Programme F¥20 00 oo I os 05 05 05
IT Security Programe FY21 os 18 18a I 62 I 02) 4 G0 8
IT Security Sendce Now Module 00 ~ = I oo I foo} 00) 0) (oo)
IT Service Transformation Programme ae 16268 26 28
Joiners, Movers, Leavers 00 09
MSE Switches 01 a1
701 Compliance 55 - - Joss fan 63 60 60
PED Replacement Dewees - ons. Pps fee
FOL Data Praiform (POP) a7 56 58a I as
Project Driven Test Environment FY20 24 28 1010 I 68
ARR: Accenture Migration to Azure os 0s oss
RRR: IRE version for Counters oo : oo i
ABR; Project Manager FY20
ABR: Project ManagerFY2L oa on
RRR: Supely Chain Monitor Replacement 00 - -fof- -
aan 02 - fof...
Aecelpt Printers ao oo
Aiskand Resilience 14 a9 pag I 7a
Safe Haven Ext ~ 10 19 1p 10
SAP CFS contact exity ao I 20
SAP Renewal, CFS Ungrade 10 10 i:
SCCM node into Verizon oa ~ + fof se
Serwce Oriented Centea Sup, Branch Hub 3749. 4420 I 30 I 02 02 02a
strategic Platform Modernisation ws 0 0 16 I oi] ao 49) 403)
Sungard Replacement
Win 10 Device Refresh 95 - 05 Sop
[Tritton Enablement Total I wa 90 tsa I set] 73 86 SS
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qa mya 2 15
‘SPO Porttatio Project Name Senet Dieeeet Cleese
Forecast Forecast Farecest Forecast
Benefits Benefits Benefits Benefits
7 Wals Travel FS& Omer HEE a er
Botance Transfer Guarantee 02 03 03 oa
Boackhowk Giftcard Implementation : - oe : - I 45 oa pas
Business Development & Innovation. : - moa we} mo] - - :
Controls Framework - Malis op - - I os ws -
Credit Card Producy/Distribution development - oa on oa I os ~! & :
(Credit Cards In Branch - - : : 1 02 02
Credit Cards Pre-Approval Authorisation - so : : 5 05 05s
Dangerous Goods Tech, ‘mprovements 20/21 oe - I oz - : :
Digital check & Sena : - oe -I- soe -
Drop & Ge Online Journey Efficiency oe - [os I 01 oa 0707
Duck Creek Upgrade a - I os ~ -
Eagle Baloncing line os 05 19 1o I ae
Poa Pricing om - I os :
HARE tee Fx branch cha - - - os a8
Home & 1 Pricing & Data Analytics (Morpheus) : : : oa
Home Insurance Transformation (Nemesis) = = ae -I- 22)
Identity Procucs Medemisation oz oo - I os aa
Identity Procucs Modemisation -SiA
Identity Senvices Farnarship - - + I os e525 78
1DS in Branch Veritication - - - - I - I os 08 os or
Malis -FuDG 22 a6 78 19 I 39 I 07 a3 753s
Mails Swategy o + - oo I -
MDA2 Stamps stock os oo
Peregrine : - oe -I- fe a2 99 ass
PO! Reguratory & Compliance change os - - I os I oz 07 os -
Frotectien Supplier Review os 93 :
MG Commerciai Model & Rem Roll out pe - I os - :
Severn (Credit Cards) - - 33003748
Telco Strategy 0) - ~ I wa -
‘Ticontinuous smprovement (Cronus IN) ce : o7 1a
‘TD Continuous smprovement (Cronus (1) - soe : + I os : :
‘Travel & Home insurance Cl Pragrarame - - oe - I + Jin e103 os
‘Travel & Home Insurance Cl Programme th - ee 15 to I 28 - -
“Travel Hub 6s
‘AE\to Tablet migration (SIA, OVLAD - - I - I - -
ails, Travel £5 & Other Tor Boo) sot I wa I a EY
= Organisational Effectiveness ‘ORE 5 oo - I - I 0 04
Covid-19 Response eo - ~ I wai I a3 -
utture Transformation 26 04 - fas] -
Data GD Enablement toe ~ food - - :
Future of the Workpiace - - -I- coos
HR Target Operating Mode! : : : : - I os os os os
People OD Enablement os 08 - fas} - os 07 07
People Flacehoider so 30 I eo
Post Office Operating Mode! (POM 4.0400 - I sa I az as asa asa
Post Ortice Operating Mode! (POM) 3200 waa = oP eat =e é
Past Office Operating Mode! (FON) 4000 oo - oo I :
Project Assurance bs os oo I . -
PSSC SuccessFocors Enhancements oe = - [es I oo oa oa
sca - - - : 420 42042
sucz : - : 23002328
sca 7 232328
sca - - [oo 14a 4a
Success Factors - Phase 1 : - oe - I - I 34 34 3a 84
Success Factors - Phase 2 o1 er oa.
Talent and Capability Transformation oy - I o7 ~ I > -
‘Grganicatonal Effectiveness Total ce es ee ee eee
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Tab 5 Strategic Plan
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maps rym ps
Curent Current Curent
SPD Pontaio Project ame I sorecast Forecast Forecast Foreesst
S Benefits Berelito Benen Genstity
Tatiana R Networe ranch Suppor Model ee Bs bs os os
(own Networe Shape soe - I 56 58 56 58
CTyacantleasenoids RCT onerous proper contracs I 25 07 07 07 I 33 I 58 sa 58 58
Developing Cepebiliies es ee ec eT)
RO Steteay 67 5B 8S sev] 1 a1 193 ae
Field Restrucare Soe? - faz 12 aa
Fitanc proper me oo I cy oa ea eas
Horio" Quick Wins & Trans Comecions ees es ee ee
Hot Housing Rol-Our Spy pi sca -
Legacy risk branches + ona wal - 08 sa a7
Loss Prevertion Transformation oe - I er oz 02 on
Network Development (ee ee ee
Network Maintenance 2337 se 40 I aso ae
Network Paddington Project es - I e707 07 oF
Network Strategy - Hard to Place ranches 747 ag] o2 01 07 42
Network Transformation Programa - sf en I -
COutrener optimisation az 3a aa I 73. noo 5B
Postmaster Application Process so Se eee ee
Postmaster Engagement soot oa :
Postmaster Service improvement Programme so 20 20 I ae .
Proper Cat 2- Alarm Upgraces os 0s os I as I - a
Proper Cat 2- SecurtyProleas, os oe ops fous} - ~~
Property Cs: 2, Fogging Programme 1217 a2 I aa I - CE
Proper) Ost 1 Capex irvestment FY20/21 - = I oo oe
Propeny Cat 1 Capex investment FY21/22 ee ee
Sele otascets we oan ej far] =. -
sx oe Peg 92 02 a2
‘Commercial Framework & Contract Reforms ze os ap uf as] - ee
Basic/espess & M21 27a sz sa I a7 I oon aa
Postmaster & Netra Tor) Ma eta acm I as I aoa anaes
= Shorea Services BI Payments VAT Treatment 08101010
‘Central Change team F¥20 eo = 5
(Cental Change tesm FY21 18k aya * eect
Cerval Ledger Adjustments Cn = ae
crates oe -
Close Process Solution aoe oa I ism wai fai
Cora htanagement Framework oo Poe ee en en
Contols Framework as as Psp [ea ee) tea ea,
lncegrared PEL anc Budger Forecasting Co os I - 01 aa
Projec Staring woe as] - oS
Rationatise Treasury & Tax es Oc ee es
SAP Hierarchy 1 1 -
Source to Sette 20 - oo I os 21 a0 30
‘Shore Seren To EY Te
= Supaly Chain ‘ranch Printer Cont Reaution 2019 03 os I os 09 os aa
cash centre Macniner/Up-erade o + oo
Cosh Centre Strategy - 26 02 - I ap] - og oe
Cash Transformation Single Paze ee eee ey ba 7
GIT Porsmouth Retocation a on ea fay
VIF Replacement Vehicies 19/22 nose 19 I ca az 02
cuir Surateny er es re 08
Enabling the Suppiy Chain soe 16 ae
Future of Stock ee we] 42
Histocieat Matters for Sugpiy Chain os or] :
Single Managed Units ee ees 02 @2
Supply chain Other security measures oo - I I ea
‘Suppiy hain Cash Utity oe oa I ue
‘Suppiy chat improvement rogramme ze wy - oe
Supply Chain POA Replacements os os = fe} = op ee
‘Trunking Venicies on en
Venicies(Suppty chain) 10 os I is
‘Supp Cain Tosa 31s sos I es fsa
= Wistorical Mawers- Pagrammes Agee Balances oo - os]
cxRe Prosecutions 3143 aD aa] - oe
istorica! Shonal! Scheme ae. I ae] a
HU Ops Remediation oe I oe -
Horizon issues Judgemer mw s8 38 sa I as] - -
Judicial Review a7 or} - :
Legal / Generat Advice 2 09 OB 51
‘Operational improvements Phase 2 05 - = fo] ae
Overrned Historical Prosecutions p30 oe
POH ingulry oo os I = woe
Pst GLO Ops Improvement and Contracts ow - I -
Post GLO Small Frojecs a. fl] soe
Scamps Scheme or or I
‘istorcal Mates Programmes Toe Ses] Tee
= Wistoricl Matters-BEIS Funded Hi Sewdewent BEIS Funded wes 795 158 m3] - 7
Historical Shotfat Scheme ~BEIS Funded - ms a3 ae] - Soe
vereumed Historicn Prosecutions - BESS Funded ~ ss ap so I a7] a
Tigericel Mater 60S Fundea Tore Teen one Ie
= Wistaricl Mattes Setiement Ml Sewevent- POLTunded m0 0
HSS Post Orfer oa oe
ibiercal Meters Setiersent otal_] ne [7
‘Gran Tota ESTEE ME FOE EET ME ETEK MEET ET
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Appendix 10: Cashflow Detail
Security Headroom Bridge
em
Security Headroom Brought Forward
Trading profit (exc FRES)
Network Subsidy
FRES dividend
Financing costs
Other gains and losses
Cash flows from trading
Investment funding
Investment loan
Capex
Exceptional spend
Cash flows from investment activities
Movement in client payables
Movement in postmaster payables
Movement in other payables and provisions
Movements in payables
POMS cash
Inventory
POMS and Payzone debtors
Movements in non-qualifying assets
Movement in HSS provision
Movement in HSS asset
Net HSS settlements
Security Headroom Carried Forward
Facility Headroom Bridge
lem
Facility Headroom Brought Forward
Trading profit (exc FRES)
Network Subsidy
FRES dividend
Financing costs
Other gains and losses
Cash flows from trading
Investment funding
Investment loan
Capex
Exceptional spend
Cash flows from investment activities
Movement in client payables
Movementin Santander client payable
Movementin Postmaster payables
Movement in other payables and provisions
Movements in payables
Network cash
Cash in bank
inventory
Receivables
Movements in current assets
Movement in HSS provision
Movement in HSS asset
Net HSS settlements
Facility Headroom Carried Forward
157.3 113.0 126.2
440 382 GAS
50.0 50.0 50.0
(0.0) 8s 88
(66) (6.4) (6.3)
0.0 0.0 0.0
874 —«904—«117.0
125.0 1000 400
52.0 0.0 (7.0)
(74.0) (105.5) (98.6)
(121.8) (82.9) __(84.3)
(18.8) (88.3) (149.9)
19.6 7S 196
(5.7) 5.3 (33.7)
(36.5) (1.6) (3.3)
(227) 142 (17.4)
(2.6) 0.0 0.0
0.0 0.0 0.0
0.0 0.0 0.0
(26) 00 00
(113.0) (40.0) 0.0
25.4 40.0 0.0
(87.6) o 0.0
193.0 1262 75.9
324 235 208
44 38 64
50 50 50
(0) 8 9
(7) (6) (6)
ty) 0 0
87 oo 7
125 100 40
52 0 7)
(74) (105) (99)
(122) (83)_—(84)
(19) (88) (150)
20 8 20
13 (0) 0
(6) 5 (34)
(37) (2) (3)
(20) 41 (17)
(39) (21) (34)
(2) 0 0
0 0 0
(19) (19) 6
(60) (39) (28)
(113) (40) 0
25 40 °
(88) 0 0
POL Board Meeting - 03 June 2021-03/06/21
FY21/22_FY22/23_FY23/24_FY24/25
FY21/22_FY22/23_FY23/24_FY24/25
130
80
50
u
(7)
17
”)
(65)
(38)
(110)
(8)
28
(110)
(1)
(111)
B
31
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Tab 6 Banking Framework 3 pricing framework
POST OFFICE LIMITED
BOARD REPORT
a ee]
Title: Banking Framework 3 (‘BF3’) Meeting Date: I 3" June 2021
. Martin Kearsley, Banking . Owen Woodley, Group Chief
Author: I product Portfolio Director Sponsor: Commercial Officer
Input Sought: Decision
The Board is asked to please authorise the Banking team to:
i. Release the proposed final BF3 commercial offer to all existing partner banks;
ii. Continue discussions with Government and industry stakeholders about strategic
alliances that may deliver a longer-term multi-year solution;
iii. Make further adjustments to the commercial offer if required within the pre-approved
range post 30" June 2021.
Previous Governance Oversight
July 2020 Board meeting presentation on approach to BF3
January 2021 Board meeting noting paper on BF3 background, plan and progress
Executive and Board NED one-to-ones held throughout February 2021
GE socialisation 17" March 2021
March 2021 Board meeting decision paper authorising a BF3 commercial ‘range’
GE socialisation 26" May 2021
QupRwWne
Executive Summary
BF3 commercial and contract proposals will be released by 30‘ June 2021. Each bank will
decide by December 31%t 2021 whether to remain in the Banking Framework or to terminate.
Following key bank discussions, Government meetings, and stakeholder activities in the past
few months, we are expecting full engagement, and no leavers, as we move from Banking
Framework 2 (‘BF2’) to BF3. We have a growing conviction that a strong strategic partnership
supported by legislation will continue to Banking Framework 4 (‘BF4’).
The final commercial offer of £731m proposed here is centred in the range previously approved
(£715m-£745m total 3-year revenue, based on assumed volumes).
In presenting and discussing this offer with banks, and coordinating a series of CEO to CEO
meetings, the major banks are increasingly signalling an interest in a strategic partnership with
Post Office for a longer-term solution to access to cash. Successful engagement and
collaborative work in this area will optimise our income and reinforce Post Office as central to
cash and banking for the next 7-10 years.
Included in this update paper is a short expansion on those strategic steps and wider
discussions, as well as a description of emerging industry activity in this space.
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Questions addressed
1. What was banks’ reaction to the initial BF3 Commercial Proposal?
2. How have we addressed bank feedback?
3. What would we like to propose to the banks at the end of June?
4. What is the Post Office position regarding any requested changes post June?
5. What is the developing market context?
6. What is our longer-term strategic thinking?
7. How will this proposal impact Postmasters?
Report
Question 1: What was banks’ reaction to the initial BF3 Commercial Proposal?
1. The March 2021 Board review included feedback from Accenture regarding areas of
concern felt by all banks after BF2, including service and commercial challenges that were
important to address. This created a strong guide to our presentation of the initial BF3
commercial proposal.
2. We subsequently published our opening commercial position with the Banks on the 7‘
April. This was £745m over three years and assumed all banks accepted the BF3 terms.
This was at the top of our agreed negotiating range of £715m-£745m.
3. We held an industry-wide presentation of this proposal and then commenced engagement
with banks one-to-one. We have met with all key banks on this basis at least once, and
with the biggest banks three to four times.
4. Feedback on our proposal varied by Bank but overall:
a. The approach to BF3 has been far better received than BF2, with greater
engagement and transparency. This has been echoed in CEO-level meetings.
b. Mid-tier banks have reacted positively, recognising small improvements in their
pricing over the three years compared to BF2 pricing. Larger bank reactions
have been mixed due to their more complex structures.
c. Framework fee changes have been welcomed, including the principle of a cap
(which was increased following the debate at the March Board). Banks restated
their position regarding access to and transparency of our cost base in any future
discussions on minimum fees. We continued to push back on exposing any of
our cost base.
d. Improvements in the withdrawal fees to encourage greater volume landed well.
e. The increase in deposit fees has caused difficulties, in particular for Santander,
which makes the greatest use of our low corporate rate for deposits today. This
was expected and had been factored into our opening position.
f. We proposed two options for cheque handling:
i. retain the existing service, but with price increases for sustainability;
ii. a mew, more sustainable cheque service to replace our existing one.
g. Banks selected the first option and new pricing is now incorporated into the total
proposal.
h. Banks also continued to raise concerns about the legitimacy of many low-value,
non-round (‘LVNR’) withdrawals occurring within our network.
i. The encouragement to move to card-based transactions was welcomed, and
several have now enquired about moving to a Chip/PIN based solution.
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Tab 6 Banking Framework 3 pricing framework
5. Banks have assessed our assumptions regarding ‘their volumes leading t us to be more
confident in our modelling baseline volumes. This process helped us identify a small
number of unintended consequences which we used to justify revising our proposal.
6. All banks recognised the improved approach to BF3 pricing, but Santander would still be
significantly worse off under BF3. We have worked with them closely to address that gap
in our final proposal and believe they may now choose to move to BF3 pricing as a result.
Question 2: How have we addressed bank feedback?
7. Following feedback from the banks and clarification of volume assumptions, we made a
revised proposal on 7" May.
8. We accepted the banks’ choice regarding retaining the existing cheque service, but
significantly increased our pricing to make this more sustainable. We signposted to banks
that while we will continue to deliver this service as-is during BF3 we will replace this with
an updated solution by the end of BF3.
9. For deposits, we modified how deposit volumes are counted towards the discount tiers,
making the approach fairer for banks as they increase their usage and start using self-
service in the future. We have reduced the ad-valorem rates by 5%, which lessened the
impact on those banks who use the corporate rate today, and therefore improved
Santander’s overall position. This has further encouraged Chip & PIN development which
will help address the AML challenges we face.
10. In withdrawals, Post Office is responsible for ensuring that our service operates correctly
and within the agreed rules. To take the LVNR issue off the table and a reason for banks
to walk away from withdrawals, we proposed to not charge for any non-round withdrawals
under £10 (i.e. £3.28) while in parallel addressing any non-conformance through our area
manager teams. This equates to c.9% of our withdrawals, or c.1.5% of our total revenue.
These withdrawals will continue to count towards our framework fee in recognition that
over time our non-conformance processes will result in only legitimate transactions
remaining.
11. To bring Santander to a net neutral position in BF3 we introduced volume discount tiers
for the change giving service that benefitted its Corporate bank almost uniquely. The
additional benefit being that this pricing structure is now consistent with other banking
products.
12. All other elements of the proposal agreed at the March Board remain unchanged. Appendix
1 depicts the pricing adjustments made since the opening offer.
Question 3: What would we like to propose to the banks at the end of June?
13. Following our revised proposal almost all banks are now commercially the same or better
under BF3 than they are under BF2. This is illustrated in Appendix 2.
14. We do not propose making any further commercial proposals to the banks before issuing
our final set of prices at the end of June. We have shown that we have listened, addressed
concerns where we can, and from our one-to-ones we believe that most banks’ internal
business cases will point them towards accepting BF3 pricing. This final proposal
maximises the value from BF3 whilst de-risking losing any members, simultaneously
establishing the platform for BF4. See Question 6.
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15. our final offer will generate £731m i in revenue during BF3 and c£268m in n trading profit.
It will also generate c£E203m in Postmaster renumeration. This remains within the range
agreed by the Board in March. This proposal includes a framework fee cap set at £95m,
£5m higher than we presented in March, and based on our volume projections will be
achieved during the final year of BF3. Please see the Profit & Loss Forecast in Appendix 3.
Question 4: What is the Post Office position regarding any requested changes post
June?
16. Our proposal at the end of June will be definitive and we will remind banks of the 6-month
governance period. In that period, we neither expect (nor will we accept) any further
commercial challenge.
17. However, between June and December during the banks’ internal governance period there
may be examples of contractual requests for change based on variations in law, examples
such as:
a. AML changes - currently subject to much wider industry and Government review
b. Payment Systems Regulator (‘PSR’) variations on EBA guidelines -
recommendations from PSR continue to evolve
18. Our intent would be to consider those if/when published, and embed any approved
wording changes, unless significant commercial impact is implicit.
19. If a bank approaches us with a ‘unique to bank’ commercial challenge, we do not propose
to change our commercial model.
20. Should a wider challenge appear from multiple banks which would impact the totality of
the agreement, we may make judicious modifications within the original range down to
£715m - subject to existing delegated permission given to the CEO and CCO in March.
21. If such a challenge should take the entire agreement outside the range approved, then
we will revert to the Board for further authorisation.
22. During the CEO to CEO meetings held in March and April 2021, consistent themes including
seeking a broader strategic alliance emerged, due in part to the collegiate nature of our
existing relationship, but also reflecting on the wider ‘Access to Cash’ debate and the
looming legislative and stakeholder agenda, which is growing in intensity. To put this next
stage in context, the following short sections describe various steps being taken.
Question 5: What is the developing market context?
Legislation
23. The Treasury (‘HMT’) is preparing legislation to protect cash as banks close branches by
enforcing provision of alternative means. HMT’s view is that regulated banks should ensure
all their channels conform, and since the market is too fragile to rely on self-appointed
groups (such as the Ceeney/Postings proposals described below), legislation is needed.
Despite emerging bank resistance, HMT is adamant that the legislation will extend the
existing regulatory framework to mandate the banks to protect access to cash.
24. Government and industry regulators (FCA, PSR) and consumer groups (Which?, CAB)
continue to press for legislative pace from HMT to ensure access to cash is supported.
Appendix 4 shows the latest FCA statement regarding cash, protection, direction to banks
regarding the support of cash, Post Office, LINK and other key providers.
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25. The challenge w we have repeatedly pushed HMT on is is the slow timing ofa any y legislation, its
absence from the Queen’s Speech on 11th May 2021, and no apparent progress since it
was stated in the March 2020 budget. We understand a white paper is looming in June,
from which suggested law will be proposed and taken through Parliament.
26. The CEO of UK Finance, David Postings and the Chair of the CACP trials Natalie Ceeney
have partnered with the top 5 bank CEOs and Nationwide - who have all enthusiastically
committed to join a ‘clearing house’ model to agree, fund and support solutions being
deployed in struggling communities. On the surface, this is a notable step forward, but
HMT, other stakeholders and Post Office find many issues hiding within. A specific one is
that this group is seeking to mandate how cash services are delivered, and how much
they would be willing to pay. That is not welcome by HMT, and clearly seeks to constrict
delivery based on banks’ directions rather than the wider market.
27. We and LINK (both named in the paper as key partners) have welcomed the paper in its
role in ‘helping the debate’ but remain wary about bank intentions.
Pilots and Competition
28. Several hundred further bank closures have been announced in the last few weeks, and
this will continue through 2021. Remaining branches are increasingly being automated,
so true counter services are under continued threat.
29. Volumes and values of Post Office transactions continue to firstly recover (for withdrawals)
or surpass (for deposits) pre-Covid levels as the footfall increases and bank closures
continue to impact the market. The increases we are seeing align fully with our projections
in the business case previously presented.
30. The Community Access to Cash Pilot (‘CACP’) has now successfully launched with Post
Office at the very heart of all eight locations. In two locations (Burslem and Rochford) we
have launched pilot automation services for self-service deposits, and in two locations
(Cambuslang and Rochford) we have opened a brand-new concept branch, a BankHUB,
sharing space with banks who can meet with their customers day by day.
31. Other solutions are also being trialled by other (non-Post Office) providers - such as
Cashback Without Purchase (‘CWP’) which has now been given legal approval and will
generate competition to Post Office withdrawal services. Other solutions are app-based,
connecting customers who seek cash with small businesses who are holding excess.
32. The initial response to the BankHub launches has been overwhelmingly positive and is
already leading to further discussions with banks about potential future models and
partnership.
33. In terms of deposits, banks are now deploying ‘smartsafes’ into their small corporate
customer sites to enable real-time credit for cash, without needing either a bank branch
or a Post Office. We also expect trial of a VISA deposit scheme to commence this summer.
34. To that extent, we are facing more competition than before, but the two key service
providers are, and will remain, Post Office (for branch cash in and out) and LINK (for
ATMs).
Question 6: What is our longer-term strategic thinking?
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35. Our planned engagement included a series os of CEO te to CEO meetings starting in nmid- March.
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The initial meetings were ‘functional’; good, but guarded, awaiting detail, and feeling wary
of our plans. With the declaration of our round one commercial model, followed up by
further CEO meetings, the tone was noticeably more engaged, strategic and detailed. The
key theme emerging from those sessions is a clear desire to create a long-term fix to
cash, in parallel with the various other initiatives (HMT/FCA, Ceeney/Postings, CACP
output) where banks are interested in a multi-year (perhaps 5-10 years) commitment
with Post Office to ensure access to cash. Further themes include a desire for Post Office
to ‘do more’ regarding AML, although the solution to that is industry-wide, with banks
solely owning the regulatory requirement to monitor money laundering challenges. A final
theme consists of ‘improving service standards and training’, something that we have now
included into the contract.
36. The intended legislation that is possibly emerging from HMT will see a specific mandate
placed on banks to ensure their channels fulfil the needs of the communities they serve,
potentially based on geographical coverage. This is not what the banks want, preferring
regulation/legislation to be placed on the channels (Post Office, convenience stores,
supermarkets etc). Our understanding is that HMT and FCA/PSR do not believe this is
achievable due to the breadth of what that entails, so will make this a bank challenge.
37. Our strong engagement in CACP has also led to wider discussions that could see our role
expand from cash to also including hosting bank staff to provide community banking. This
creates a strong opportunity to re-enforce our role at the centre of communities providing
face to face services and is well aligned to our purpose. It also creates the potential for
further revenue streams for Postmasters, both directly through banking and through
additional footfall.
38. The combination of CEO to CEO meetings, output from the Bank Senior Working Group,
and the likely legislative output, are illustrating a desire to commit to a longer-term
solution. Our position is to confirm BF3 in preparation for a wider discussion to carry on
almost immediately to resolve whether we extend the BF3 term or migrate to a remodelled
BF4 for the longer term.
Question 7: How will this proposal impact Postmasters?
39. Banking is strategically important for both Post Office and Postmasters, representing the
second biggest source of remuneration. Our BF3 proposal is forecast to maintain all banks
within the framework ensuring that Post Office branches remain the go-to location in a
community for cash for all customers. Volumes are expected to increase compared to
today, delivering additional renumeration and footfall.
40. Total Postmaster Remuneration from BF3 is forecast to be c£203m. This number could
change following the Post Office strategic review of Postmaster remuneration given the
£268m profit generated by BF3.
41. As well as the direct benefits to Postmaster remuneration, BF3 will create an environment
where automation of our network for banking transactions can be funded, either directly
by the profit generated, or jointly with bank partners. This will increase the capacity of
our branches, the speed of processing and reduce errors, all aiding Postmasters to run a
more successful business.
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Risk Assessment, Mitigations & Legal Implications
A legal risk note has been added to the reading room for review.
Appendix 1 Pricing Adjustments from Opening
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Appendix 2 - Bank by Bank Pricing Comparison
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‘Total BF3 Revenues’ - Proposed BF3 Pricing vs Staying on BF2
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Modelling based on all banks moving to BF3 pricing, including Santander.
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Appendix 4
Access to Cash FCA/PSR Joint Statement
Access to cash and banking services remain vital for many consumers and businesses. Our
Financial Lives Survey in 2020 found that 5 million adults use cash for most of their
purchases. The pandemic has led to more people becoming familiar with contactless card
payments and internet shopping.
The overall decline in the use of cash makes it more expensive to maintain the existing
infrastructure that supports it. However, as we move out of the pandemic, cash continues to
serve a socially useful purpose for many communities. Following a fall in ATM withdrawals of
40% year-on-year across 2020, withdrawals have started to increase again since restrictions
have begun to ease.
Although our data shows that most people can access cash easily now, there is a need to
maintain access to cash and banking services for those that still need it, particularly
vulnerable consumers. At the same time, a critical part of maintaining this access will be
supporting others that can to transition to digital and other alternative ways of banking and
making payments.
This challenge requires industry, government and regulators to act. We are monitoring trends
and supervising firms to make sure access is available and we will use the tools at our
disposal to ensure this happens.
We expect individual firms to protect the ability of their customers to access cash and other
services that meet their needs when they close branches. We welcome the industry’s
proposal to work together to protect access and develop long term solutions, while ensuring
they comply with competition law.
We support the government's commitment to protect access to cash through legislation and
we will have a role in supervising that legislation.
Cash must remain available
Cash use is declining but remains an important way many people and businesses buy and sell
their day-to-day goods. The FCA and the PSR are committed to ensuring that cash, and the
infrastructure that supports it, remains available for those who need it.
This includes new and innovative ways for accessing cash, such as banking hubs that are
being piloted, alongside more traditional routes of bank branches, ATMs, cashback from
retailers and cash services over Post Office counters.
What the FCA and PSR have done about cash
During the pandemic, the FCA and PSR worked with industry to address the challenges of
ensuring cash access for the people who want to use it. This included analysing data, sharing
best practice, and agreeing actions to ensure continued access to cash. As a result, even at
the height of the crisis no more than 0.1% of the UK population lost access to a source of
cash within 3 miles.
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The FCA and PSR partnered with the University of Bristol last year to produce a
comprehensive assessment of cash access across the UK. We found that 95% of people are
able to access cash in urban areas within 650 metres and in rural areas within 3.5km. Bank
branches, ATMs and Post Offices all form part of this important infrastructure.
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Under the Post Office national access criteria, 99% of the population must live in areas within
3 miles of their nearest Post Office, and 90% within 1 mile. In addition, the PSR’s oversight of
LINK ensures that LINK continues to maintain a broad geographic footprint of free-to-use
ATMs.
In September 2020, the FCA published guidance setting out expectation that firms should
consider the impact of branch and ATM closures on their customers’ everyday banking needs
and consider the availability and provision of alternatives. We have been supervising branch
closures closely, assessing plans based on risk of harm posed to consumers.
In January 2021, we asked banks to pause closures where they are unable to meet the
expectations laid out in the guidance due to the coronavirus lockdown.
Legislation to protect cash
Last year, the government announced its intention to legislate to maintain access to cash in
the long-term. That legislation will support infrastructure into the future and provide a
framework to protect access to cash.
Our expectations of firms
We expect individual firms to play their part in protecting the ability of customers to access
cash and wider banking services in ways that meet their needs, particularly vulnerable
customers and SMEs.
Individual firms are responsible for making sure that when they close a branch or ATM in a
local area, there are alternatives available to provide services at a standard of service that
meets the needs of the customers using that branch or ATM. Firms will need to consider the
ability to withdraw and deposit cash, safety, accessibility and opening times.
To meet these responsibilities, over the short-term firms are likely to rely on the current
alternatives to branches to a large extent, such as Post Office and LINK services. We think
there can be significant benefits from making the most of, and where necessary enhancing
the existing services and policies. Over the longer-term there will also be scope for firms to
use other alternatives and innovations.
Industry activity and regulatory expectations
We welcome the commitment from industry to take forward action to protect access to cash
and close gaps in provision in a way that complies with competition law. This work should
also take account of regulatory and legislative developments and does not replace the
individual responsibilities of firms.
We also welcome the wider financial services industry actions to identify new ways to support
local community access. Innovative new methods are already being piloted across the
country and we are keen to see the outcomes of this work and how these solutions can be
applied more widely.
10
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The FCA and PSR will continue to work in an open and transparent way with consumer bodies
and the firms we regulate to achieve our desired outcomes, including using the full range of
regulatory tools available to us where appropriate.
Following on from our work with the University of Bristol last year, we intend to publish an
updated assessment of the UK’s cash infrastructure in the summer, alongside the FCA’s
recent consumer research into cash use. Furthermore, the PSR will shortly publish its review
of Specific Direction 8 (SD8).
11
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POST OFFICE LIMITED
BOARD REPORT
Multi-year business case to
BEIS for the Strategic Platform
itle: 2 I 3rd
Title: Modernisation Programme Meeting Date: I 3 June 2021
(SPMP)
Author: Zdravko Mladenov, Business Sponsor: Nick Read, Group CEO
Transformation Unit
Input Sought: Approval
The Board is requested to approve proceeding with the Strategic Platform Modernisation
Programme (SPMP) multi-year business case for approval by BEIS. The Board’s review and
approval of this case is a requirement established by UKGI and BEIS to trigger their own
further review and approval of the case. Sign-off by BEIS’ Permanent Secretary is expected
by August 2021.
Approval by the POL Board of the multi-year SPMP business case does not translate directly
into funding disbursement, does not change previously agreed SPMP deliverables and does
not commit to any future deliverables. Requests for funding drawdowns and agreement on
deliverables will come to the Board in separate tranches and following the regular Post Office
governance process, with the first tranche planned for the late July Board session.
The current cadence of reporting SPMP progress at Board meetings also remains unaffected,
but a separate, additional reporting process to UKGI and BEIS has been already instituted.
Previous Governance Oversight
GE and Board updates on SPM:
Nov '20 « The Board endorsed the creation of the Business Transformation Unit
(BTU), part of which becomes the SPM programme. See Appendix A for
details. The Board endorsed two main SPM objectives: (1) short- and long-
term tech-enablement for the POL business (e.g., new formats and
Postmaster propositions; optimisation of customer journeys); (2)
retirement of the Horizon platform and exit from the main FJ contract.
Jan ‘21 e The Board noted the early progress of SPM as part of BTU and endorsed
the proposed aspiration to deliver 400 new branches outside of Horizon
with the Express format by end of FY21/22.
Mar ‘21 e The Board noted the progress update on the programme; specifically the
successful programmatic and technological ramp-up, reflected in agreed
governance cadence with BEIS and in the accelerated ‘build’ of the
software solution to allow for 400 new, ‘Horizon-free’ Express branches to
open by March 2022. The Board approved a drawdown of £4.68M to
deliver a range of further concrete outcomes and deliverables, including
continuing with tech development and completing the multi-year business
case for UKGI/BEIS, covered in this submission.
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Trost
The focus of this paper is on the costs and benefits of the SPMP programme. The Reading
Room will contain the following further materials:
Full Business Case;
Executive Summary for the Board;
PowerPoint presentation covering main elements of this paper and the Executive
Summary;
External Programme Assurance Report by Deloitte - note that while the Deloitte
work was conducted collaboratively with POL’s Internal Audit (IA) department, the
report at this stage does not include a cover note from IA.
These Reading Room materials offer more depth than this paper can cover on the following
topics:
Context on Horizon - specifically, what are the financial and operational challenges
that Postmasters and POL face with the current system?
Options analysis - specifically, what options have been considered to address the
Horizon challenges (including retaining Horizon)? What are the different sets and
subsets of evaluation criteria? What is the recommendation?
Scope of SPMP - specifically, what has been included in addition to the “Do
Minimum”? What optionality exists to decrease or increase further the scope and at
what cost?
Costs and benefits of this programme - specifically, beyond the direct financial
benefits (e.g., IT OPEX savings), what are the indirect benefits for Postmasters and the
rest of the POL business?
Design and Delivery plans - specifically, what are the main design and delivery
principles (e.g., “Designed with Postmasters, for Postmasters”)? What is the
overarching SPM architecture? What is the delivery timetable? How are delivery
activities structured?
Device Strategy - specifically, what types of devices will replace the one-size-fits-all
Horizon counter in the short- and long-term?
Risks and mitigations - specifically, what are the major risks, which stakeholders
would be most affected if those risks materialise, how are we proposing to mitigate
those risks?
Lessons Learned from the past - specifically, what are the lessons from the attempt
to execute a similar transformation with IBM? What are the lessons from other major
POL IT programmes?
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Questions addressed
. What is the funding request for SPMP and how does it break down?
. What is the rationale and detail behind the contingency/risk provisions?
1
2
3. What are the benefits and payback period of the investment?
4. What is included in the ‘scope’ of this funding envelope? What optionality exists?
5
. What external assurance has been provided for this case?
Report
What is the funding proposal for SPMP and how does it break down?
1. The multi-year SPM business case sets out a total projected new cost of £174m over
three years between 2021/22 and 2024/25. This funding is split between an estimated
£56m CAPEX, £66m Exceptional and OPEX of £10m. 7
OPEX represents only 8% of the total and covers “dual run” costs with Horizon, i.e., the
costs to run and support the new core trading platform once elements of it have gone
live, but before rollout is fully completed. Once rollout is completed, the full OpEx costs
to run the new core trading platform will become BAU costs, replacing existing Horizon
OPEX.
2. The £174M envelope includes a contingency of £36m and £12m in costs for iVAT
(bottom-up estimated at ~9%) and SPO Levy (1%). The proposed figure excludes £6m
already approved by the Board for early, ‘no regret’ activity:
The total
anda
for 2024 delivery of SPMP
, HIMIT recommended optimis
with £120 WATISPO Levy
ow funding request of £174
Costs,
+ HtsT-recommended average optimism bias
‘contingency of 30% of Ibe projected cost
+ includes explained’ contingency 0.4.
slippage te 2025 ang ‘unknown unkriowns
Projesteset awarang optimist
SPOtery
fensiag Total request
cowed
3. Expected phasing of costs over the five-year life of the programme are as follows, by
expenditure type:
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FY20/21 FY21/22 FY22/23 -FY23/24 = FY24/25_— ‘Total
£m £m £m £m £m £m
CapEx 1.0 15.2 18.7 20.6 - 55.5
OpEx - 0.8 24 7.5 - 10.4
Exceptional - 13.4 22.9 27.2 2.7 66.1
1.0 29.4 43.7 55.3 2.7 132.0
iVAT/SPO 2.6 4.0 5.2 0.3 12.1
1.0 32.0 47.7 60.5 3.0 144.1
Contingency 36.1
Previous spend -5.8
Total [ 174.5
4. The chart below illustrates the break-down of the funding by main category and sub-
category:
Breakdown of the cost envelope
. tox iments WamEiie Ginna C058 Ras 7
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va
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Migration comme £1 tm + Comunercial: £2.0m
= ee il greos £2.90. + Comphance: £0.39
ining 8
Physical roliout £5 Gen Finance: £2.69
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weeks alter’) £8 fo + Procurement: £2.5m
Postmaster compensation: £. Brn
Cortngeney, SPO Levy MAT minus previews turctag of 6m
What is the rationale and detail behind the contingency/risk provisions?
5. The contingency of £36m represents an approx. 30% increase on the base project cost.
This figure of 30% was arrived at by using an “Optimism Bias” assessment,
recommended by HM Treasury and modelled using Treasury-provided historical data for
different cost categories in comparable programmes. The programme elements
compared include complexity of technology, degree of innovation required and
complexity of current and future contract structures.
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Therefore, an “Optimism Bias” that averaged 30% was allocated against most element
of the SPM multi-year cost model, excluding already incurred costs.
This Treasury-informed contingency is a top-down figure. From a bottom-up perspective,
the programme modelled scenarios around the principal known risk of delivery slippage,
which would then result in a delay to rollout and programme completion by April 2025
(instead of April 2024).
The table below shows the components of slippage costs:
ly ig costs increases
(primarily dual-run OPEX costs and IT leadership £11.5m
costs)
Cost of extended migration / deployment £3.1m
Business costs (Commercial, Finance, Operations, 1.2m 7
Procurement)
Programme and business process transformation
£1.5m
overhead
£17.3m
Thus, within the £36m contingency, we have a ‘known unknown’ SPM risk funding of
£17.3m, with a further £18.7m to cover ‘unknown unknown’ risks.
What are the benefits and payback period of the programme?
9.
10.
11.
Noting that a range of indirect non-financial benefits also exist (for details, see Appendix
A and Reading Room materials), the financial benefits of SPMP have been categorised
into direct and indirect. Direct financial benefits are those, which are directly created by
SPMP and will be achieved through this programme alone. Indirect financial benefits are
those, which other projects or activities will achieve having been enabled by the new
core trading platform and its devices (e.g., revenue and profitability growth by the
introduction of new products or the changes to the branch network).
Indirect financial benefits have not been quantified as part of this business case and are
not included in the benefits and payback calculations.
With regard to direct financial benefits, SPMP will deliver direct financial benefits
stemming from the reduction of IT operating expenses (e.g., internal operation and
management of the new core trading platform — see Appendix B), as well as
substantially lower ‘cost of change’ compared to currently with Horizon.
Current direct financial benefits are projected to total £24.7m per annum:
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Direct Financial Benefit I Amount I Explanation
Reduction of core platform I £18.6m I IT savings are expected to be made across several
run costs p/a. areas once the new platform is implemented,
these include:
e Infrastructure costs
¢ Core Platform application support
« Device Operating Systems and
Management Application
e Branch Device Costs
e Supply chain (printer ink and paper)
Reduction of change costs I £6.1m CapEx and exceptional costs incurred to make 7
p/a. changes to Horizon (e.g., PCI-DSS or Belfast Exit)
are expected to be significantly lower due to:
e the inherent flexibility of the new system,
e.g., less resource will be required to make
changes, and
« the differential in the cost of a salaried
internal member of Post Office staff versus
the high margin Fujitsu rate card charges
incurred today
12. These benefits have been calculated in a robust, bottom-up way, through a joint effort
by the SPMP programme, the IT team and Post Office Finance. At this early stage,
however, they should still be treated as preliminary and not guaranteed. The estimates
will be reviewed annually, with increasingly more mature figures provided to Board on a
frequent basis as part of the regular SPMP-Board reporting cadence.
13. For modelling purposes, the programme has assumed that direct financial benefits start
accruing only in FY 24/25 due to the low probability of capturing any further savings
against the Horizon contract (post-Belfast Exit) earlier than the contract exit date. The
savings assume the planned rollout occurs in line with current plans, i.e., delivery delays
will also delay benefit capture.
14. Realising only these direct financial benefits results in an overall investment payback
period of ~5.8 years (without spending the contingency) and ~7.3 years (with spending
the contingency).
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Tab 7 Strategic Platform Modernisation (SPM)
What is included in the ‘scope’ of this funding envelope? What optionality exists?
15.
16.
17.
18.
The principle components, recommended by the POL management team to comprise the
scope of the programme are:
(a) The “Do Minimum”: replacement of the Horizon system in all branches, including
devices and peripherals where needed (e.g., printers);
(b) Only “Must-Do” business transformation: the modernisation of
product/customer journeys and core underlying processes (“Postmaster journeys”) that
affect the Postmaster experience with the core trading platform (e.g., cash
management) to the extent that those are required to avoid building the Horizon
replacement as a ‘copy/paste’ of Horizon.
(c) An “Enhanced” deployment, migration, Postmaster engagement and
communications package: examples include training primarily in-person and in-
branch; extensive support on the day of migration for a branch (e.g., full day in-person
support); extensive post-rollout support known as day-after, week-after, two-weeks-
after hyper care; budget for external professional comms support; extended capacity for
the internal business change and change management team; Postmaster financial
compensation for missed revenue due to the estimated 4-hour non-trading window for
migration;
(d) Minimal funding for Mails Automation: in total, approximately £3m has been
included for the design, purchase and deployment of 660 self-serve kiosks for Mails
products only.
Appendix C provides further detail.
The programme is based on an aggressive timetable to complete by March 2024, thus
ideally allowing for Horizon contract exit earlier than March 2025, but also containing a
year of ‘buffer’ Fujitsu support. Key target milestones are the completion of a ‘slim
counter’ with Mails and Banking by June 2022 and of the ‘full counter’ by December
2022. Rollout is then expected to commence in early 2023 via pilots and initially by
small groups, then slowly ramping up to ~100 branches migrated per day and
completing by March 2024.
See Appendix D for details.
The cost modelling is based on the assumption that the Horizon replacement solution is
developed under POL leadership through a mixed sourcing model - i.e., leveraging a
combination of POL permanent positions, day rate contractors and resources from 2-3
external partners. Under a mixed ‘build-buy’ model, some components are presumed to
be purchased off-the-shelf; examples include a payments module or a module to
process legacy pre-paid bill payment transactions.
What is explicitly not in the scope of this funding proposal:
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Tab 7 Strategic Platform Modernisation (SPM)
Digital Mails - the programme does not cover the provision of an online platform
for Mails services;
Network planning and operationalisation of new branch formats —- for example, the
programme does not costs of RMG collections for Express and Basic formats, or for
additional credit management teams;
Non-SPM BAU IT costs, including Horizon running costs and IT change costs
associated with Horizon;
Postmaster contract replacement - the programme does not cover the replacement
of contracts for Postmasters, but will collaborate with the Network Optimisation
programme to leverage the technology rollout as an impetus for new contract
adoption. Such a collaboration won’t result in material cost increases for SPM,
although may pose risk to the March 2024 timetable.
Data and reporting - the programme presumes all data and reporting will be
handled via the POL Data programme or Branch Hub, Branch Hub is also presumed 7
to be delivering the Postmaster Journeys that relate to reporting of branch
performance and other branch management information.
19. A view of the options at a high, strategic level is provided in Appendix E.
At a more tactical options level, the management team has made a series of decisions to
include or not include various modules and components. These decisions represent our
scope recommendation to the Board, but each one be reversed.
Appendix F outlines the main tactical options and associated costs.
20. In addition, the programme team is targeting a “Top 10” list of opportunities to reduce
total programme costs further; however, at this stage, we are unable to commit to
greater reductions against those items. The “Top 10” are:
# Opportunity Description
Reduce the number of counters from 23,000 to
1 Device Reductions 19,000-21,000
Achieve a 3-5% vacancy rate for relevant
2 Vacancy Rate positions
Convert contractors into permanent roles
3 Contractor conversion (where applicable)
Contract the appropriate deployment and post-
rollout hypercare work as a package with
4 Outsource deployment external provider
Buy a "Base EPOS" (including recurring license
costs) and upgrade it, including with the bespoke
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5 Buy a "Base EPOS" POL-specific components already built
Re-use the external, third-party integrations
6 Belfast Exit Integrations developed under Belfast Exit
8
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Tab 7 Strategic Platform Modernisation (SPM)
Reduce Bill Pay development costs due to
outsourcing of Legacy Pre-Pay Build; reduce the
Legacy Pre-Pay and other ‘difficult’ I cost to transfer other ‘expensive’ products
7 product costs (APOP Payout and Postal Orders) to SPM
Minimise support needs for PM Compensation
and Cash Management, and move it away from
8 Back Office Costs Accenture
Reduce license costs paid to non-core third party
providers; optimise AWS Hosting Costs in steady
9 Hosting and license Costs state
Reduce consumption of contractor CCOE
platform engineers and shift to permanent
10 Cloud Centre of Excellence shared roles
What external assurance has been provided for this case?
21.
22.
23.
An external programmatic auditor, Deloitte, was engaged with a scope defined by UKGI
and BEIS. The report is included in the Reading Room.
Deloitte interviewed 10+ key stakeholders inside and outside the programme and
reviewed a wide array of programme documentation, including the cost models and
delivery plans. Key findings suggest scope for improvement primarily in the areas of
programmatic setup and the integration with broader POL strategy, but flag no major
concerns with the funding proposal itself.
The Deloitte team worked closely with POL’s Internal Audit (IA) function, which is
producing an audit of the programme in parallel. That audit will be presented at the next
ARC meeting, but because of the condensed timelines for this business case, the Deloitte
report does not currently include an IA cover note or a Management Response. Both will
be presented at the next ARC meeting.
In addition to external assurance, the SPMP team has worked closely with Internal Audit
to identify the lessons learned from previous large-scale technology programmes at Post
Office and from the failed attempt to retire Horizon with IBM in 2016-18.
Appendix H provides an overview of the main lessons from the IBM experience, which is
the closest ‘comparator’ to SPMP.
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Appendix A: Overview of SPMP benefits
The Investment will deliver a range of benefits to Post Office, both directly and through
enablement of other programmes and projects
Direct Benefits Indirect Benefits Beneficiaries
SajrwreiaI bent ena hp PROF
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Benefits is
ins ab, i fo ie
Hickeenes seme
ee 4
i : ee 2
fh tnevtite peace’ hy SPM fos a ay
‘ripe hap) sion ky ether aeiarariian. fe ee ee
Tibld 3 i tae
Business e st ee
Benefits Ihe arog. fs ee
ae 3
ee a
CONFIDENTIAL ANE COMMEROIALLY SENSITIVE - FOR HOST OFFICE INTERNAL USE ONLY @ ”
See PowerPoint in the Reading Room for a lot more granular deep-dive on SPMP
benefits!
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Appendix B: IT OPEX savings assessment
in £k ('000s)
Current spend, post- I Expected Spend post
Category Belfast Exit SPM Variance
Infrastructure 1,861 1,372 489
Core Platform Application Support 21,963 11,535 10,428
Device Operating System & Mgmt App 1,096 728 368
In-Branch Support and Device Costs 10,578 6,127 4,451
Paper and Ink Costs 4,195 1,110 3,085
Back Office Support - 264 -264
TOTAL 39,693 21,136 18,557
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Appendix C: Scope of SPM
What is the scope of SPM? (1/3)
Core SPM Barta Out ot
Category Component scape scope SPH scope Notes
. placer * Slosest to Sks-for-lice
en re NEE ee _ feelacemeat
+ Horizon peripherals replacement v © EDs - eitede SPit
wn © Soales » reuse i possible
exceohons © All prters = part of SPM
Teehnelogy - -
ee * 4G connectnty for Postmastars wv » Yes. 9 principe
(waero r0t avallable)
«= Retaer Accompanimest Device (RAD) vv © See current hypothesis
- : . . ~ betow; only Payzone
+ Mais Automation Devices (Mail SSKs) v RADs tns'uded
Comat ranean.
> Priority tozus on.
+ [V)developing as quickly 3s teasibis the Express(Basics
techno'ogy (RAD) using of-tte-shelf Payzone devices
+ (2)developing as quickly a3 feasib'e the Full Counter technology
‘9 allew fer Herizon ext in 2024
® Secondary focus, not to risk delivery on the priorty focus, on:
(3) Mais SSK —ckely requires by late-2023 we cestnue te otter
(4) Smator. fuly integrated RAD — te replace Payzone deveos
a
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What is the scope of SPIM? (2/3}
Core SPM Out of
Category Component scope SPM scope Notes
© Herizon product ournays (*Custemar Journeys") v . orm ar ang
* Horizon IneBranch prosesses v See hypothesis below
aceernn ie? (Postmaster Jeumeys")
fibchanee ‘Must-doe' mosliy under BTU
tdoureys .
* POL“HO" processes ("POL Journeys") ya * Only touch’ Hf there are
direct plications from tea
Bare minimum (© 9. SPM work
Coraat hy catecis nd "Pastmastar leiiraya”
arts ef cash supply?
= Two Business Transformation Unit (BTU) cross-functional teams are locking at the main “Postmasters Journeys":
- Finamee Operations (‘Froject BAFTA") is looking at Brana Axzoun‘ing, Gas” Mam:, partly Stack ligt in cles# ccitaboration witk Finance and Service Ops
~ Branch Operations - ourrertiy being established; proposal is for this unit to serve as the coordinator for "Postmaster Jovmeys” and to provide resources in support
ofthe COO's team madernising key nex-inanzial joumeys {e.g ,Trarna, Onkonrang, User?
6 ancl Adrn}, thus eo-creating requirements to feed SPM / EHub
© SPI is developing specitic Postmaster Jcumeys that are closely inked with the core transactions ard counter operations (e.q., Trarsacticn Revieur ancl Avdk, or
ounces fi
‘Acce} wee taking input from Project BAFTA for Cash Management, Stock Management, Brasch Accounting and Transaction Corrections:
Branch Hub Is leag:ey cn all Postmaster Journeys that relate to fteportng of Branch Per‘ermance anc clier branch Menagemest Informaics. Branch Hub also 8 the
‘kely felure location fer onboarding and training materials, knowiedge-sharing and Postmaster comms. select branch operaticns (2.g.,.20ln ordering).
FIDEN TAL AND COMME!
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Whatis the scope of SPM? (3/3)
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core SPM Portal out ot
category Component scope scope SPH scope Notes
* Deployment planting / migraticn schedule y > With Input from Network.
Stategy (e.g, due to
contrasting)
* Comms, training, physicl roleal, post-ralieat care Vv
Eesennee = Netwerk planning (types of formats. velames. lecations) “
+ Postrraster contract replacement x
* Operating madsl for new formats, includieg castles
‘Guradh fa bathed: of Arcowotsnittian fanwesh the SEM shel Nanwntk Stata
SPM is acccustabie for the design and build of all technoiegy.
‘SPM inputs into-ané ultimately receives é:rection from the Network “central brain’ about vinat tectaslogy Is needed in which location. Tha Includes sew formats (e.g.
new Basics), nev technology (e.g...bMall Sel/-Serve. H avalabia, In current lozaticns). ané new epenings of tl’ branches with the new SPI counter tecknalegy.
SPM is thon accountable for planning. plotng ard executing the deploymant end-to-end.
Re-corasting with Postmastors and the asseziated negotations are part of the Network's team remit as a key input Into the decision what tectolegy goes where,
‘The cperating model for new formats Is aiso part of the Network's team remit. but dona in cataboraticn vith SPM as practically needed fe.g..to coordinate on how we
bud remungration prezesses for new formals)
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Appendix D: High-level delivery plan
SPMP will deliver the first new technology for use in new format branches in 2021, and
will migrate all users to the new platform by March 2024, allowing Horizon to be retired
Busi
enablement and
Presrimme
milestones
Strictly Confidential
‘tthe Express format offexBay Zeneretaiers the opportunity to a
Key network milestones enabled ty SPMP but out of SPMP scope — @ SPMP milestones:
May 2021 Jan 2022 van 2023 van 2024
rs mee ee
Sep 21 dan22 Mar 22 Jul 2022 Jan 2023 Mar 2024
Firs Exprosa’ Fint Basics? 400 Express Slim counter Deployment of full Deployment
branch Go Live branch GoLive branchesLive deployment begins counter actoss ‘complete:
Be) network begins: Horizon ready
tobe rotted
Sep 24 Dec 2024 Jan 2022 Jun 2022 Dec 2022
Tach infrastructure “Tach infrastructure “Prototype counter Slim counter. Full counter
for Exprossfonnat for Badieformat available eaproe! available availabie
available available of concept
& &> e © @ Traininghypercare and enranced spport
Sep 21 Jan 22 Jun 22 Sep 22 Dec 2022 Aselect subset of ley
Praliminary POL High level deployment Subset dim taining POL IT op mode Full raining —_milesiones and
iT op modet srategy defined materials ready ‘support defined materialsready activities are shown:
defined High fevel training bere; this plan is tar
srategy defined from exhausive
pt prpaid Mais (letters and parcels) using new software on theiPay Zone device 2 Basies tranches wil be
‘and vill be able to accept payment for Mails products:
- FOR Pi FICE INTES
VAL USE ONLY 6
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Appendix E: Horizon-replacement options considered z
Fl
Post Office has identified six options for the future of the core trading platform, é
assessed these against robust criteria, and identified a recommended option 3
Es
iW ObtOh 1S fo Yenlave tha Potizon platianl wit) a lew
+ Post Office has laid out six DA OUee
possible options for the
future of the core trading Extend the existing contract
platform : De nothing
Continue with
+ These options have been Horizon Bring Horizon In-house
assessed against five Whatare the
dba ions for the Commission a lew supplier
me oesieold slianmient uture of Post Continue with ta take over Horizon
— Value for money Gffice’s care Horizon under
— Post Office ownership and trading new ownership Purchase an existing off-the-
cae capability platform? shelf product
a eee ta eee Replace on Create a new platform with an
with a new col extemal partner
«This assessment has frading platfamm
identified a preferred
approach that delivers
against all criteria
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Appendix F: Tactical scope options
Our appreach enables significant optionality, with a range of ‘menu items’ that can be
added or removed from the currently proposed scope (1/3)
Potential additions to the agreaedscope
+ POLRADs + Add 1,500 POL RAD devices, including development and purchase of hardware, Cost
for adding 1,500 Payzone RADs is significantly tower and can fkely be absorbed in the
programme costs. particulary if those replace existing counters
+ Extended + Approximately doubling the cost of programmatic externa! assurance to provide for more
external frequent and deeper delivery assurance ("Have you really progressed as much as you
assurance say you have?’)
+ As a resui of the need to rol out the new IT system, each branch will be closed for
+ Provision for cD? approx 4 hours, These closures wil not ke all at the same time, but — effectively — FOL
al trading wil be suspended for 4 hours total over the course of 12-15 months
commercial
revenue + This funding is a provision to compensate POL forlost revenue due to that closure
I inorenies ane + (Don't add) Add an “enhanced” programme management and business transformation layer
Treversigta to the current resourcing plan Examples inclide adding a senior, veteran IT oversight layer
‘on top of POL's Branch and Digital Engineering team: adding 1 additional “Swiss Knife’
transformation team, adding additianal programmatic and technical assurance
2 AOST OFFICE INTERNAL USE ONLY © “0
7
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Our approach enables significant optionaiity, with a range of ‘menu Items’ that can be
added or removed from the currently proposed scope (2/3)
Potential reductions to the agreed scope
De-scope
deployment
and migration
De-scope
legal and
compliance
‘support
Reduced business
transformation
scope
Reduce counter
device
specifications
Remove ‘expensive
products’
CONFIDEN
Strictly Confidential
MERCIALLY Sk
Remove the “Enhanced” deployment, migration and Postmaster engagement package.
Exampies include shift of training partially to online and reductions in the scope of the
post-rollout support ("day after” end "week after’), the capacity of the Postmaster
engagement team and the budget for extemal comms associated with the migration
reduction in the capacity of the internal ousiness change team
Remove the provision for external Legal Counsel and Compllance FTEs: assumes no
further work required following the current contract review and no need forthe Data
Protection and Fraud Crimes compliance FTE's, Leaves ~iM in Legal and Compliance
budget
Reduce the scopes of the finance (Froject BAFTA) and ops process reviews: reduce the
funding for commercial resource beck-fil to focus on product journeys
Presume lower grade specifications forthe new counter, such as a smaller counter
screen and non-inlegvaled scale and printer (Le., net space-saving)
{Look at. APOP oniyi Do not migrate the “APOP Payout’ and “Postal Orders” products
from Horizon :
MSITIVE - FOR POST OFFICE INTERNAL
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Our approach enables significant optionality, with a range of ‘menu items’ that can be
added or removed from the currently proposed scape (3/3)
Potential reductions to the agreed scope
+ Expanded rim + An expanded, dedicated internal change management unit (6 FTEs) for the duration of
internal change the programme (3 years)
management
team . i
+ Remove 660 maits sell-serve machines, inciuding the development and purchase of
+ Mails Self- hardware. Installation costs, including removal of existing SSKS, is not included. but can
Service likely be absorbed, particulely if done in conjunction with broader rolout and if these
Devices devices replace existing counters. Must note that without this option, ail existing SSKS
must be decommissioned after Mar 2024 (1}
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Appendix G: Main risks to delivery
Given the size and complexity of the programme, a range of risks have been identified,
which willbe managed using standard programme risk management approaches
Risk management sppioach
+ Programme risks will be
managed using
‘established CEF risk
management framework
Risks will becaptured and
‘seoredin programme risk
register, withappropriate
mitigating actions
* Risks will be allocated a
single owner
Risks wilbe monitored
weeklybased on scoring
Risks will beesealated
through governance
forums as required
1 Change Excell
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Slibsetofceteal programme dakn tron rink reatstnr
Risk cateyory
Deilvery
Description
Late stakeholder identification of engagement
alfacting decisans and nocossitating swore
Delayed business engagement changing
agreed requirements, causing delay
Delayed build?ouy decision on EPOS system
atlecting timelines
Assumptions underpinning coxt estimates nay
‘change, affecting buitget
COVID restrictions delay implementation
Poor management at dependenciesen ser
programmes disrupts benefit reatisation
Poumasters are disappointed by programme,
‘output
Post Office lack technical capability to dativar
solution and support
fnadequate training provision atlecte
tation
santigations
arly takaholder analyss and mapping, with
frequent rawew
Early impact assesment, robust scopemgmntt
requirement and change canto! procosses.
Poratiel work on build and buy wosireams to
allay tacibased decision
‘Appropriate contingency in budget
Imolementation umelinesmvewed as
pandernic progiossos
Steering gioup representation to manage
dependencies: benefit plan management
‘Ongoing engagement of Posimasters, robust
‘eating. comprehensive training
‘Ongoing resource profiling 10 ensure internal
‘and extemal resources deliver capability
Training developed in parallel to solution,
nypor care provided
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Appendix H: Lessons Learned from the IBM Experience
Comparison and lessons learned from the IBM effort in 2016-18
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Branch Technology Transformation (with IM) —
approx. final cost estimate of £250m SPMP ~ approx. cost £174m
+ 2eronme + Bemonths (eta mronine eortingoney)
+ “Mery Big Bang” - ambition to replace hereware, rebuild softaare, + rerementel beratorration = get the minimum foundatior in place, before letcing
Frogremmehe \Wenstonn al processes in the seme Lire 19959 Tieng ‘oh larger technology ad bus hess tranalonmst'on ateenas
+ De-coupling ofthe hardware rout Fon the teshnology + All wisted actirtios fect bes, devices, doployirent, besinass Lerstonrstion
odrmisoton Eoth prograrmatzally and in fore of urs seer an0 0!
+ Assurgton Mat ourottrs box components are functionality can + Detailed consicerations on ‘bull vs. buy’ of indheval components
becesiayed cuicky, without custemseton 10 POL spectics ‘De-couping fam Horaon — so depandescy on the system or the supper
+ Ce-couping of he POS from irarch & back offce processes. inorementa: develaarrert of furchara‘ty ("als fst. Bankng secora’ aro
thus requinng comesterce wih Horzsn for many years syasval ployment (Basics fst, ote tomats ater)
Large depesency, bul ntew POL obit to fore ctasoraion + Agreter proportion he wack a e-hoee’ aed wih prirens end
between IBW and Fujitsu ‘conteastors)
Management + Limite POL abiity to oversee multe suppliers against + All supplier partosrs managed directly by POL centraly: ro direct
sometimes competing piers ‘whrdepernencae
The pogearere was bappering pare wit avery large Comparatively mate soble envsorerert, wth more senior management
organisational shif folosirg tre separation of RNG arc POL and ‘capacty, but stil very lmites by the insuiny ara the range cf cther ongoing
resuaing in serisr management ara crange capacty corstiair, programmes
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Tab 8 Financial Performance Report.
POST OFFICE LIMITED
BOARD REPORT
April 2021 (P1) - Performance
it 2 i a rd
I Title: Overview Meeting Date: I 3 June 2021
Author: Max Jacobi - Strategic Financial Sponsor: Al Cameron - Group Chief
. Planning & Analysis Director Ps . Finance Officer
Input Sought
Discussion & Noting of P1 performance.
Previous Governance Oversight
N/A
Executive Summary
The purpose of this paper is to summarise our Period 1 financial performance, with further
details and analysis provided in the accompanying reading room slide-deck.
Key items of note are:
Mails profits were (£3.0m) lower than budget, with trading down particularly in Labels
where the initial response to lockdown easing has been faster than we predicted. The
additional stretch in the labels budget contributed around £1m of this shortfall;
Banking deposits and withdrawal volumes have continued to grow broadly as predicted,
with a small but welcome improvement in business deposits now showing;
Postmaster remuneration is down on budget in period, predominantly due to the shortfall
in Mails. Year on year remuneration is flat, with last year including the impact of lower
trading but Covid top-ups;
FRES profit share made a slightly lower loss than expected, with additional stretch
phased from beginning of Q2, with travel volumes still too low to take a view on the peak
summer outlook;
Branch Numbers for P1 increased by 26 to 11,441 The current waiver of 11,250 expires
at the end June, which means we need to be above 11,500 for the July outturn;
Security Headroom increased more than forecasted to £249m, being boosted by lower
investment spend in month and higher banking volumes in the final week of the month
than predicted.
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Tab 8 Financial Performance Report.
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Report
1.
1.
Overview
Mails trading was adversely impacted by lockdown easing, particularly in Labels. Additional
budget stretch enhanced the adverse variance in period. Banking deposit and withdrawal
volumes were in line with budget and continue to grow. Credit Card volumes remained
strong. Postmaster remuneration is below budgeted levels due to the adverse Mails trading
performance. We have accrued c. £11m of costs centrally to reflect incomplete goods
receipting across the business.
Mails
Retail, Lottery & Gift Cards
Government Services
Banking Services & ATMs
Transactional! Financial Services
Payment Services
Poca
Mortgages, Savings & Loans
Credit Cards
PO insurance
identity Services
Supply Chain/Other
Total Revenue
Cost Of Sales
PM Rem - Variable
PIM Rem - Fixed & Other
FRES
Other Income
Gross Margin
Staff Cost
Non staff Cost
Total Overheads
Trading Profit
Network Subsidy Payment
EBITDA
Depreciation
interest
Change Spend
Profit On Asset Sales
Profit Before Tax
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(1.2)
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Actual Budget Variance ¥ YoY
35.0 39.7 i2.6)
3.2 3.0 0.2
17 pad
20.9 20:7
5.2 5.5
27 23
10 10
a2 at
OF os
2.0 15
ia
17
764
13.4
to.2)
13.4 56%
Tab 8 Financial Performance Report.
2. Highlights
UKG100041682
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2. Mails performance was below budget in P1. Trading revenue was down (£4.4m) to budget;
led by Labels and Special Delivery. The labels budget stretch accounts for c. £2m of this
revenue downside. The revenue performance has translated into a P1 trading profit of
£12.1m which is (£3.0m) lower than budget. The period had two weeks still in lockdown
with performance still strong in week 1. There was a slowdown in growth thereafter across
the product portfolio. Home Shopping Returns average weekly volumes were flat month
on month and have not been impacted as much by the lockdown lifting as the other
products.
=m
Variance Yor %
Parcelforce 24 O41 22%
labels 148 {3.5} 60%
Home Shopping Return 25 cL 71%
nternationa! Priority & Standard 47 04 146%
Signed For oa {0.2} (92%)
Special Delivery 57 {0.3} 17 81%
Stamps {0.0} {0.03 (196)
Other Trading 28 O41 07 54%
Total Mails Trading 33.6 33.0 (g.4} 416 53%
3. Banking services performance in P1 was £0.2m favourable to budget. The strong recovery
continues into P1, with further growth in withdrawals and deposits. Business deposit
volumes and values are slightly adverse to budget, but this is offset by a reduction in the
Santander credit for corporate deposits (which we charge at a lower rate), showing £0.2m
favourable overall for deposits.
4. Bill Payments has seen upside in Energy £0.1m, Telecoms £0.1m and Resellers £0.2m in
P1. Energy has benefited from cooler than forecast temperatures in April and all sectors
have seen a greater than expected recovery since 12" April.
5. Credit Cards revenue in the period was £0.2m favourable to budget, driven by volumes
being 39% up against budget with income per policy in line. Strong volumes are due to
strong market demand, and the implementation of a new commission structure that enables
optimisation of channels (including higher cost channels).
6. Insurance has seen a good start to the year with Travel Insurance starting to show small
signs of recovery although from a low base (branch sales recommence in May). Motor and
Home are trading ahead of budget. Protection also had a good start to the year following
on from a successful Q4 campaign.
7. Cost of Sales was (£0.7m) adverse driven predominantly by increased Verify transactions,
with corresponding increased revenue within Identity Services.
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Tab 8 Financial Performance Report.
8. Postmaster Renumeration was below budget in period, predominantly from adverse
Mails trading performance, which drives the bulk of PM Rem.
P1PM Rem
Area i
Mails 38
Retail, Lottery & Gift Cards 0.6
Banking Services & ATMs 13
Transactional Financial Service 0.2
Payment Services 0.2
POCa (0.2)
Other (6.0)
Total (0.2)
9. Year on year total remuneration is broadly flat as increased trading in P1 has been offset
by the Covid top up payments made last year.
10. Total overheads are favourable to budget with c. £0.5m genuine savings and the
remainder timing related. As a result of goods receipting across the business not being fully
completed; we have accrued c. £5m of costs in overheads centrally, along with c. £3m in
cost of sales and c. £3m in Postmaster remuneration.
11. Security Headroom increased by £92m to £249m at the end of the Period 1, driven by
receipt of the £61m equity funding and the £52m term loan. This is offset by timing of
postmasters and salary payments. Security Headroom ended £31m above budget. We
remain in a net liability position.
12. Investment expenditure (excluding historical matters) of £6.6m was £3.9m lower than
the budget. This is predominantly from DMB strategy delayed announcement and delayed
spend in CIO and SPM programmes.
13. Network numbers closed on 11,441 at the end of P1, an increase of 26 from year end.
April represented the second consecutive month of network growth, with a cumulative
increase of 42 since February reflecting the continued easing of Covid restrictions across
the country. The current waiver, at 11,250, expires at the end of June, which means we
need to be above 11,500 for the July outturn. The plan remains very tight at this stage,
but we are monitoring the numbers closely and have identified contingency measures to
mitigate against any risks which materialise.
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Tab 9 Historical Matters Report
POST OFFICE LIMITED
BOARD REPORT
Title: Historical Matters Report Meeting Date: I 3 June 2021
Author: Declan Salter, HM Director Sponsor: Nick Read, Group CEO
June 2021
Input Sought: Noting
To note the Report, including the accompanying HM Finance Report and Shine-a-Light.
Executive Summary
I now attend Improvement Delivery Group (IDG) and it is really encouraging to see the progress
and change in attitude to resolving issues properly for Postmasters and accepting challenges
to the status quo. The Inquiry timescales has put focus on POL’s improvement timescales and
the change to a statutory inquiry will allow even more of this genuine progress to be
maintained.
Similarly, challenging KPMG on the holistic issues with Horizon whilst POL delivers the quick
win changes is delivering significant impact in our service to our Postmasters (see below) but
importantly these changes are now being designed in conjunction with a PM user forum.
Supply Chain is establishing an improvement programme to tackle the various issues raised
mainly from the internal reviews but also shine-a-light, and the initial focus is on delivering
significant changes quickly but with PMs engaged as they already do with the Cash Centres. I
have been asked to become involved to challenge their decisions and apply pressure to assist
prioritisation and urgency.
Programme Update- (Project Dashboards are in your Reading Room)
1. POHIT Inquiry - Following the announcement by Paul Scully in the House of Commons
on 19% May, the Post Office Horizon IT Inquiry will be converted to a statutory footing
from 1% June.
2. The Inquiry timeline has increased. Rather than completing in Summer 2021, it will
provide a progress report in August 2021 and is expected to deliver its conclusions in
Autumn 2022.
3. Sir Wyn Williams will remain as Chair of the Inquiry under an expanded Terms of Reference
that is expected to place more emphasis on the events and processes leading to historic
prosecutions. Sir Wyn is developing the detail for these terms of reference and will publish
a new Statement of Approach (004) in early June providing more information on scope
and any changes in approach that arise from its statutory powers. Further details will
follow in September to cover the Inquiry processes during the period October 2021 to
Autumn 2022.
4. Oral hearing sessions will not take place before October 2021.
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5. Sir Wyn has stated that he is grateful for the level of assistance that Post Office has
provided to the Inquiry to date. Because of this, we expect that relations with the
secretariat will remain supportive and collaborative. We will work closely with Sir Wyn and
his team in the coming weeks by continuing to host interactive Teach-In sessions and
provide supporting materials.
6. In parallel, we are working with our legal and consulting partners to understand the full
implications of these changes.
7. IJ / CIJ Operational Improvements - HM is tracking the actions from internal audit
from both GLO Common Issues and Horizon Issues judgments, and working closely with
BAU and IDG (Deloitte Postmaster Journey) and incorporating the queries from Shine-a-
Light. Rapid interventions have been planned to address issues identified from KPMG’s
Forensic IT work but both KPMG and Fujitsu need more focus to complete the audit of
Fujitsu’s controls before comfort can be provided.
8. At the request of the Improvement Delivery Group (IDG), a Sign-Off report is being
produced by solicitors Norton Rose Fulbright working with Deloitte / KPMG to provide a
legal view of GLO-compliance against the Court’s two judgments; this should be available
to submit to the Inquiry as evidence of the progress made.
9. Horizon Improvements that will be felt by the Postmaster include:
v Postmasters are now able to raise a dispute directly from the counter terminal;
v The end-to-end investigations process is more transparent to Postmasters,
following a standard methodology with measurable SLAs;
v 45 of 62 Known Error Logs (KELs) have been closed - improving the robustness
and reliability of Horizon
v Improvements have been made to make remote and privileged access of
Postmaster accounts more secure.
v the process for making reference data changes now takes account of Postmaster
impacts with greater functionality for PMs built into ServiceNow.
v setting up a Postmaster IT working group to engage Postmasters in the design of
changes and improvements to Horizon.
10. Historical Shortfall Scheme - A total of 421 shortfall-only offers have been made to
date as part of de minimis cohorts. Of these, 381 have accepted (as at 20" May 2021)
and 369 of these have been paid a total of £1.5m including tax.
11. A detailed re-plan is being undertaken with input from both UKGI and HSF to include the
new additional governance steps requested by UKGI. The “Operational Agreement” has
now been built on and a detailed process map of all integration and approval points
agreed. The impact of the POL Board decision that all claims should be fully investigated
is being assessed and a revised timeline is currently being drafted.
12. The independent panel is to start considering the precedent setting test cases at the end
of May, following review by POL, POL Board, UKGI and BEIS SteerCo.
13. Sadly, I report that a further claimant has died since submitting an application, bringing
the total of such cases to 9.
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14. ‘Stamps Scheme - This has closed with 226 applications; estimated total payments will
be c.£1m. This is considerably less than the initial estimate (£3.5m) and HM is currently
requesting authority to commence offers/payments which, when approved, should result
in the majority of eligible claimants receiving an offer by the end of June 2021.
15. Horizon modifications have been implemented (principally to replace “Ghost Sales” with
‘Stock Adjustments’) and other improvements enabling the finalisation and issue of a new
online Stamps and Stock Guide for Postmasters, similar in style to the Postmaster Support
Guide issued last summer. A Stock review update was carried out by Compliance and the
report on its findings is undergoing final review internally before wider circulation
Criminal Cases, Appeals
16. The total number of overturned historical convictions is now 47. This includes 39 that were
overturned by the CACD on 23 April 2021, 8 cases at Southwark Crown Court (2 on 14
May 2021 and 6 on 10 December 2020). POL successfully opposed 3 cases at the CACD.
17. The CACD has received a further 39 applications to appeal. Post Office will have to respond
to 30 of these by 30 June 2021.! A hearing in the CACD to set the directions for the
further conduct of the appeals is likely to be scheduled for July 2021.
Criminal Cases, Potential Future Appellants (PFAs)
18. The focus for this workstream is now to provide material to notify PFAs of their rights of
appeal, and to provide disclosure of material identified through the Post-Conviction
Disclosure Exercise to those who seek to engage the appeal processes.
19. There are currently 601 PFAs who have not yet started the formal appeals process, albeit
some have already engaged legal advisors. A mailing has been issued to the majority of
the non represented PFAs to advise them of our disclosure duties that may affect their
historical conviction. A number have already responded and are completing the initial
identification and verification process. There are a small number of letters still to be issued
pending verification of contact details. Peters & Peters are liaising with the solicitors for
the represented PFAs, and those PFAs who respond to the mailing.
Post-Conviction Civil Claims
20. Following the CACD Judgement, apology letters have been issued where a conviction has
been overturned.
21. To date, 6 claims have been received following the quashing of the historical convictions.
Herbert Smith Freehills has begun exploring with Hudgells, solicitors who represent 4 of
the claimants, the best way to manage these claims, and will look to open a similar
dialogue with Aliant, solicitors for the other two claimants. Hudgells has not yet quantified
their clients’ claims. Aliant has partially quantified their clients’ claims at £1.9m and £766k
respectively.”
Of the remaining nine cases, two were not prosecuted by Post Office so it will not be the Respondent, and the remaining seven
may need to be considered by the CCRC before they can be referred for appeal.
? Aliant has not yet quantified its clients’ claims for exemplary damages, increased costs of living, loss of business, loss of
pension contributions, and loss of future earnings.
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22. The Board has decided to offer interim payments to those whose appeals were successful,
excepting those where the appeal was unopposed solely on Public Interest grounds. HM
will manage this process in conjunction with HSF.
vernance
23. The Board has decided to establish a sub-committee (membership is to be confirmed),
whose remit will include monitoring progress of the operational improvements being
undertaken to conform with the GLO Common Issues and Horizon Issues judgments,
oversight of HSS claims, determining POL’s responses to future criminal appeal cases (in
both CACD and Crown Court appeals), and overseeing POL’s response to civil claims that
follow the overturning of convictions (including the funding for such compensatory
payments). Draft terms of reference for this sub-committee are now being prepared.
24. Report attached, broadly on budget for end of year (despite the increase in workstreams)
due to ongoing savings being made but the volume and complexity for next year is
affecting the future budget. Stringent challenge on all costs is underway, commencing
with understanding simpler ways of working (particularly with external lawyers) and not
reverting to external resources as a default. As an example, a plan for commoditising the
future CCRC/CACD is being prepared. A full paper will be brought to Board to report in
detail on the legal costs and improvements.
Significant 5
25. HSS
26. Crown Court Appeals (of Magistrate Court convictions) - As opposing these requires a
re-trial (which in itself is unlikely on Public Interest grounds) then the majority of these
292 historical cases might appeal; if the CCRC refers every historical appeal case
mentioning “Horizon” or suggesting POL coercion then the proportion of cases overturned
will be high.
Post-Conviction Civil Claims
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Shine a Light - (Project Dashboards are in your Reading Room)
28. Postmaster Detriment remediation This issue is the obligations we owe to current
Postmasters where Post Offices now recognises a detriment has, or could have occurred,
to advise them of this issue and remediate it and might also need to be applied to former
PMs in some instances.
29. This applies to new issues discovered and to other issues affecting our processes after the
introduction of HNG-A and before the problem has been stopped or fixed. The rationale
for this “gap” period is that all current PMs were notified of the HSS but only able to claim
for any loss that effected their branch before the current Horizon version was introduced.
Our obligations mean we must advise them of these issues and remediate their loss.
(Former PMs who suffered a loss in this period are not owed the same obligations but
could always claim for any loss if they chose to do so).
30. There are currently several issues that fall into this category; we have commenced work
to determine the quantum and effects of individual PMs (obviously more issues could be
discovered) and then we shall determine how best to communicate and remediate these:
« ATMs;
£150 ‘Make Good to Cash’ & “Settled Centrally”;
Postmaster Suspensions;
Forged Sterling Bank Notes;
Out of Date Foreign Currency;
Maintained Error Limit.
31. Postal Orders (New Issue). If a Postal Order is spoiled during the sale process it voids
the Postal Order for any further use, it does not cancel the sale (therefore Horizon still
expects payment). The sale will only be cancelled once an Existing Reversal is completed
using the transaction session ID. When this is not done there is a detriment to the PM
but no loss to POL. We are just scoping how this can be changed in Horizon, how the TCs
can be suspended for this whilst we do and scoping the remediation (quantum
~£300k/year).
Other points to note:
32. A review on HSF’s recent update on the claim against Fujitsu will be provided when
analysed fully internally;
33. A paper on Legal costs controls (for the HSS in particular) will be provided when Al
Cameron and I have held further discussions with HSF;
34. A further separate paper will be provided to Board on the necessary structure of the
project and resources to support a statutory inquiry.
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Historical Matters Business Unit - Actual Costs April 2021
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3
1zigoreo-1z0z eunr €0 - Suneayy p1e0g 10d
Tod Programme Cost Forecaat Summary Teli Settlement Gost Forecast Summary
y0z 40 SzL
Legal 399,383 73 0} 1080) ‘st Forecast Ayes aad oe BOP cee ag) 320
lother 10a) 168 73 50.5] 12+0 Forecast 1} 320) 437,233,880
Hota Curent Forecast (1442) soa) $30 293) 459 oF asa) Variance oI___97I_358]_2a7I_e7a)
Hotal Prior Forecast (1240) soa] 487 2} 159) 10} 14a
Wariance ooI (83) 00 (44) 611 Settlement Cost Forecast by Project
Historical Shortfall Scheme a) a) 8S) 320,
(Overturned Historical Convietons a) ° f) 0
‘Stamp Scheme 4I ° q 1
‘ERE Proeetions mai) ii) a3) 40 a5] I a7] I 02 a 23s) go) te) az
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OMIT inquiry osI 03 a7) I 45) I (02) 1611 Summary Notee
Aged Balances os osII oi! I (oa) .
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Historia Shortfall eheme x65) 218) 135) 23 sual] zal I a3)
Overture Hiterealconvitins I I 33] 48) 30I 50I 160) I 62] I 02 > HlJ Project costs increased by £1.9m based on current spend
Heron sues edgerent as) 77I s3I sa] soI 252) I 2aI I as] profile. Awaiting detailed project forecast
Stamps Scheme o7I 02 o3/I o9II oa .
Operationalimprovenents Phase2I 08] 06] 1s}I 15] I 00 HSS Scheme costs increase due to revised forecasts from HSF.
HV" Ops Remediation 07 07I I 06I I (oa) ‘Awaiting additional information
HSS Paster I 03 08 (08)
JI II 4 > Forecast excludes operational costs (£4.0m in 21/22)
[lass] s30[ m2] asa] oo) asr7) Casa} ea)
> OHC Settlement forecast removed until accurate assessment
fem [ss5I_se7] 22] 153]_00] 533) available
(rine ae Ce) ee ee > HSS Forecast increased to top end estimate of
Pos Oe*
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‘Actual v Forecast by Project.
Programme Costs (Em) ‘Actual I Budget Variance) Actual I Budget IVarianceI Notes
CCRC/Prosecution Activity Os 14 08 14 0.6 ILow P&P activity. Timing
Historical Shortfall Scheme 14 11 14 1a (0.3) I HSF London Costs -£0.2m_
Legal General Advice 03 I 02 I (01) 03 I 02 I (04)
POHIT Inquiry. 04 0.0 (0.3) 04 00 (0.3) IBeachcroft LLP redaction team. Additional Lexington/HSF Costs.
‘Aged Balances - . - - . .
Judicial Review On 0.0 (0.1) OL 0.0 (0.1)
Total 3.0 31 0.0 3.0 3.1 0.0
UKGI00041682
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Tab 9 Historical Matters Report
HM Director's report - Historical
Matters Historical Shortfall Scheme
Declan Salter, HM Director
34 June 2021
Nick Read, Group CEO
hr:
Inp ught: Decision
To Decide the Scope of Shortfall Loss
To Decide upon Late Applications to the scheme
REDACTION
‘Historical Shortfall Scheme, Consequential Loss Principles and Guidance
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REDACTION
REDACTION
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12.
REDACTION
13.
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Tab 10.1 External Auditor Fees & Scope of Engagement (2020/21)
POST OFFICE LIMITED
BOARD REPORT
. External Auditor Fees & Scope of Meeting
Title Engagement (2020/21) Date: 3 June 2021
Author: I Tom Lee (Financial Controller) Sponsors: Alisdair Cameron (Chief
Financial Officer)
Input Sought: Decision
The Board is requested to review and approve the scope and proposed fee structure for the
audit and assurance work to be performed by PriceWaterhouseCoopers (“PwC”) for the financial
year ended 31 March 2021 (“FY20/21”), being £100 per hour (estimated total at c.£870,000)
for audit fees and c.£140,000 for agreed upon procedures work plus possible fees for a further
piece of work on network numbers reporting to be agreed by Finance (with no further Board
approval required).
Previous Governance Oversight
« Approval received at Audit, Risk & Compliance Committee (ARC) on 18 May 2021.
Executive Summary
1. PwC have been the external auditors for the group of companies headed by Post Office
Limited (“POL”) since January 2019. During this period, and specifically for the financial
years ended 31 March 2019 and 31 March 2020 they have performed the following services:
a. External audit for the group, company and subsidiary financial statements.
b. Agreed upon procedure activities in relation to:
« Royal Mail Revenue
e DVLA activity
« BEIS facility reporting
« Bank of England Note Circulation Scheme controls
2. In March 2021, PwC were reappointed as external auditors by the ARC and Board for
FY20/21.
py20/t Scope:
The planned scope of work for FY20/21 is in line with that performed historically, with the
external audit services being in line with regulated requirements and the agreed upon
procedures following the third-party contractual terms to which they relate. Note, PwC have
already presented their detailed proposed external audit scope for FY20/21 to ARC during
FY20/21 for approval and therefore further details regarding scope and timings are not
presented here.
4. The only potential addition is a further agreed upon procedure in relation to SGEI / Network
Numbers reporting to the Department of Business, Energy & Industrial Strategy (BEIS).
The terms and scope of this additional item are currently being agreed between POL and
BEIS, along with a discussion as to whether PwC as external auditor should perform the
work or whether a tender exercise should be performed.
FY20/21 Fees:
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Tab 10.1 External Auditor Fees & Scope of Engagement (2020/21)
5. Fees for the agreed upon procedures will remain in line with historical rates, being c.
£140,000 (excluding the potential additional item).
6. Fees for the external audit have been subject to discussion between PwC and management.
When PwC tendered for the audit, the audit fee agreed was significantly less than that which
has subsequently been charged. POL have paid out a significant level of overrun fees due
to changes in scope and complexity within POL (acquisitions, sales, significant judgements
and estimates, going concern complexities, delays in signing etc) and increased regulatory
scrutiny within audit resulting in additional work required by PwC. PwC are also under
internal pressure to ensure the audit remains commercially viable for them and as such
their rate of return for the work is being scrutinised.
7. Given the historical experiences around agreeing an assumed fixed fee which subsequently
changes by up to c. 50%, a proposal has been set forward in FY20/21 to move away from
a fixed fee to one which is based on a fixed hourly rate and monitoring of hours. The
proposal is for POL to agree to a fixed rate per hour of £100 based on an estimated total
hours incurred by PwC (across all group companies) of c. 8700. Giving an estimated fee of
c. £870,000.
8. In order for POL to agree to this, it is suggested that PwC should bear some of the risk
around additional hours and therefore POL and PwC management will be monitoring the
hours, delays, reasons etc throughout the audit. Management and PwC will work closely on
monitoring the run rate of hours vs the estimated total and take action to try and mitigate
additional hours being incurred as needed.
Request:
9. The Board is requested to approve the approximated level of fees (c.£870,000) and the
basis of fees (£100 per hour) for the external audit and the agreed upon procedures fees
(c.£140,000 plus the additional item) for FY20/21 as set out above.
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Tab 10.2 Post Office Operating Model
POST OFFICE LIMITED
BOARD REPORT
Title: Post Office Operating Model (OD Meeting Date: 03 June 2021
and capability)
. Daisie Jope, Organisational . Angela Williams, Interim
Author: Design Director Sponsor: Group Chief People Officer
Input Sought: Decision (Funding Approval)
Following agreement with the Group CEO and GE, the Board is asked to approve an additional
£2.91m (exceptional spend) to progress the next phase of Organisational Design work and
strategic operating model review, in line with the newly launched seven strategic pillars,
through to December 2021. This next phase builds on the new GE and Senior Leadership Group
(SLG) structures to ensure we have (1) bedded the structures down fully, making any tweaks
where required (2) build capability in niche, skilled areas where we require greater talent, e.g.
leadership roles and IT/Data talent.
Previous Governance Oversight
September 2020: £11.8m to deliver Tranche 1 (T1) changes by December 2020. T1 stood up
the new functions, changed reporting lines to have clear functional accountabilities and stood
up the new Group Executive structure.
November 2020: Additional £0.6m required to continue to fund the Organisational Design
Programme Team costs until the end of March 2021. This was a short case to initiate the design
and preparation of a second phase of activity.
January 2021: Additional £5.94m to deliver Tranche 2 (T2) of reorganisation and plan FY21
approach.
Spend to date: Total POM spend to stand up new functions, Group Executive, SLG and below
layers across the business (via Tranche 1 and Tranche 2) is £18.34m.
Executive Summary
In the last three years, a variety of Post Office programmes have significantly reduced staff
cost, resulting in a total staff reduction of ~1900 FTE at Post Office. This was mainly achieved
through reducing the number of DMB branches and network transformation field teams
(~1160 FTE reduction due to DMB closures), in addition to reviewing the management
structure (which is scope of this programme).
In this time, the scope of this programme consolidated management activity across Post
Office and streamlined processes and activities, through finding clear efficiencies. The
organisation needed this - it was cost heavy and duplicative. Following this significant FTE
reduction, without future investment in technology, systems and data, we will struggle to
reduce staff numbers further. Structural “quick wins” are no longer an option to release
heads.
As part of the change of Group CEO, in FY19/20 and 20/21, in Tranche 1 and Tranche 2, we
established a new Post Office Operating Model, stood up a new Group Executive and aligned
the majority of SLG roles underneath. The Post Office now has a good structural template for
success, with capabilities grouped in functions around the customer, postmaster and
employee, ensuring that it’s very clear on who is responsible for decision making at Post
Office.
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Tab 10.2 Post Office Operating Mode!
POST
OFFIC!
Post Office has now launched a new purpose and a vision to 2025, all underpinned by seven
strategic priorities, with three Ways of Working to focus delivery.
To deliver this strategy, there are several clear enablers that need to be considered. One of
which is our new People Strategy, with a clear delivery roadmap, which has been created in
support of the above. Please see People Strategy on a page below:
People Strategy
in parmorship vith the Business, we will invest in amwacting, retaining and developing great
fe to ensure the organization has the capability ta be fit for tha Futura.
‘a pS
bi N
Rebuilding Relationships Data & Technology
’ be
Simplifying the Basics
For the Organisational Readiness pillar of the People Strategy, we have identified that Post
Office must now turn its attention to optimising capability and talent within our operating
model. This assumption was further compounded in discussions with Board members in
March Board where we discussed talent and capability gaps at leadership levels within our
new operating model.
Having completed Tranche 1 and Tranche 2 which stood up the new operating model, we
have agreed with the Group CEO and GE that the OD team now needs to focus on a
strategic organisational review to ensure the capabilities are in the right place to deliver
the Strategy on a Page. The scope of the review will identify and present recommendations
on how we must build a better organisation, with the right resources and capabilities in the
right places, so we’re set up for a sustainable, successful future.
As part of this strategic review, we also propose to widen the scope of the programme to
review overall cost reduction, identifying opportunities for entire workforce optimisation. This
pivots our measure of success from FTE reduction to overall “cost to serve.” In this way,
we believe we can achieve significant savings to the business through more effective
workforce planning - rightsizing our reliance on contractors, consultancies and suppliers.
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Tab 10.2 Post Office Operating Mode!
Proposed Deliverables
Scope of Next Phase of Activity:
POST
OFF
Please see below for an early assessment of whether our current operating model is fit to
deliver against the seven strategic pillars to meet our 2025 vision. This assessment is
reinforced through early scoping with the Group CEO and GE members, and it indicates that
we need to reinforce structures in the following areas:
Strategic Pillar
OD work to date in
Tranche 1 and 2
Strategic Review
Required in 21/22
Assumptions for 2025
1. We prioritise strong,
‘trusting and rewarding
relationships with all our
Postmasters.
T1: Network and
Postmaster Teams
SLG stood up
Build RACI across
Network and Postmaster
Teams
Ensure capability and
leadership is bolstered
and fit for postmasters.
Inquiry complete and outputs realised
Transition from DMB to franchise
complete
New formats for postmasters /
customers are defined - capability
required
Engagement plan with postmasters
prioritised
2. We will grow our
network, making sure we
have the right branches
in the right locations
nationwide.
3. We will innovate in
Mails, working with more
carriers and delivering
more of what customers
want and small
businesses need.
T1: Network and
Postmaster Teams
SLG stood up
Til and T2:
Commercial structure
complete with PUDO
capability built
Build RACI across
Network and Postmaster
Teams
Review Strategic
Partnerships and Network!
Propositions team to
ensure fit for future
Network strategy understood
Review talent and
individual capability in
roles
New Mails structure is fit for purpose
Ongoing build of new commercial
relationships
4. We will secure free,
convenient and
reliable access to cash in
every community.
Ti and T2:
Commercial structure
complete - Banking
team capability built
Review talent and
individual capability in
roles
New Banking structure is fit for
purpose
5. We will build
commercial partnerships,
to launch new products
and services in our
branches and online.
6. We will invest in new
branch technology for
Postmasters and online
for their customers.
7. We will create value
for our shareholder with
a successful, sustainable
and efficient business.
T1 and 72:
Commercial structure
complete -
Commercial SLG
engaged
Overall staff cost
significantly reduced
through T1 and T2
programmes
Finish and embed
Commercial structure by
building Digital, Customer
Contact Centre and
MI/Analytics common
capabilities
Commercial product set remains the
same, even if commercial partners /
contracts alter
Commercial digital growth capability
required
IT Target Operating
model worked through -
core IT vs historical IT vs
future of digital platforms
Exit Horizon
IT/Data/MI capability required in-house!
IT TOM predicated on ability to review
IT supplier model
Shift dial from FTE
reduction to overall
workforce optimisation -
reduce reliance on
contractors / suppliers /
consultants
Supply chain operations remain in-
house
Cultural change embedded
As above, the Seven Strategic Pillars will be underpinned by enablers, one of which is our
People Strategy:
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Tab 10.2 Post Office Operating Model
OD work to date in Strategic Review I
goad Tranche 1 and 2 Required in 21/22 etree 0 2
In partnership with the I T1 and T2: GE and Critical skills and talent I Cultural change embedded
business, we will invest ISLG stood up, with _ identification required _I Succession planning embedded
in attracting, retaining _ Iclear functional Clear corporate strategy embedded
and developing great accountabilities in Change and transformation
people to ensure the place streamlined
organisation has the IT capability fit for future
‘capability to be fit for the
future.
We therefore propose to start a third phase of Design work between July 2021 and December
2021 which delivers:
1) Strategic Review of robustness of talent and capability in the organisation to
deliver 2025 vision - the strategic review builds recommendations and next steps for
22/23 and beyond
« Work through proposed “end state” targets and the roadmap to get us there - shifting
emphasis from “FTE reduction” to overall “cost to serve”. How can we reduce
contractor/supplier/ consultancy spend, thus increasing our in-house capability?
« Begin ‘tagging’ work to align project / BAU resources working on Seven Strategic Pillars,
ensuring we have the right talent in the right places to deliver.
« Activity gap analysis of critical skills needed to deliver Seven Strategic Pillars.
e Put in place a clear organisational design strategy and plan, aligned to strategic plan to
2025.
When planning this strategic review, the team identified opportunities to deliver value early
and often throughout the roadmap to 2025, by working in partnership with the business
to agree any outputs that can be deployed earlier whilst also planning out a path to value for
more complex, longer term deliveries.
2) Implement backlog of “non-discretionary” 21/22 OD work agreed with GE
members:
Working with each GE member, being mindful of their limited capacity across 21/22, we
identified a “backlog” of “non-discretionary” organisational design work that they agreed they
need to complete in their functions in 21/22 to be able to deliver their individual targets. We
therefore propose to kick off design workstreams as follows:
e Commercial Team: Customer Experience (CX) is the final segment of the Commercial
structure to be completed. The CX team was set up to be a common capability for all
Commercial Products to draw down on. However, we don’t yet have a clear structure or
set of deliverables for the team. Instead, each area of CX has its own KPIs, measures of
success and way of reporting. Instead, we need to work through the design and bring
the teams together to ensure smooth trading.
« Network and Postmaster Teams: Embed the GE-2/3/4 structures and ensure they
are fit to deliver against Postmaster needs. Clear roles and responsibilities need to bed
in with a thorough RACI that flows from Commercial.
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Tab 10.2 Post Office Operating Model
e IT Target Operating Model (TOM): There is a fragmented approach to IT across the
organisation with partial capabilities spread across multiple GE responsibilities. We
Propose to design a clear IT TOM in order to enable the organisation to meet its
deliverables.
« Data TOM: There are no clear design principles for the Data Strategy at Post Office. A
piece of design work is required to identify which operating model we want to adopt -
centralised vs. Decentralised, etc.
« Support Functions: Some support functions haven’t been right-sized according to the
new GE accountabilities, and as per the T1 and T2 announcements. We therefore propose
some short sprint re-calibration design work to ensure they are lined up to support the
customer and postmaster facing areas of the business.
3) Delivery of Known Changes and Planned Team Closures (Tranche 3):
Whilst we are seeking funding, there are a suite of known and planned team changes that are
currently in Design as a result of T1 and T2 proposals. This roughly equates to two small key
workstreams for a Tranche 3 (T3) delivery:
1. Localised and targeted changes to teams, resulting in a reduction of 15 net roles at
£0.5m annualised saving, £0.2m FY21/22 saving.
2. Partial closure of the Historical Matters Business Unit (HMBU), following the completion
of part of their deliverables for FY21/22 Q3. Those in HMBU that are working on the finite
piece of work with regards to claimant resolve on HSS or HIJ will wind their work down
in Q3 (known to them) before entering a redundancy process. The OD Team will support
this partial closure owing to our expertise in this field. It should be noted that we plan
to retain any critical skills / legacy knowledge as part of this ‘closure’ - this will be built
into our design plans.
To note, these have been seen and approved by Group CEO and GE as they are limited “effort”
and require minimal business engagement, whilst bolstering how the T1 and T2 changes have
embedded. We therefore propose to just “complete” these small changes whilst we are
undertaking the wider strategic review. The proposals are low key and will not be considered
“large scale transformation” whilst the business is prioritising other urgent deliverables.
Measures of Success
Providing the Board agrees with the high-level deliverables as outlined above, we will now look
to define the measures of success for each OD workstream, complete the strategic review and
return with a recommendation on next steps for Organisational Design with an agenda item at
the July or September Board.
Please note: Receiving Group CEO and GE approval of scope on 19** May 2021, left insufficient
time to attend PRB and IC prior to this Board submission. The project team agreed with SPO
and Strategy + Transformation Director to submit this paper for June Board in order obtain
high level funding approval, thus avoiding delay to Organisational Design review start. Detailed
business case and updated benefits realisation plan will be provided to PRB and IC during June,
for final detailed scrutiny and approval. Details of the submission dates are shown below:
Board engagement is proposed as per below - articulating the Organisational Design review
within context of the wider People Strategy:
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Tab 10.2 Post Office Operating Mode!
f
OFFIC
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SPO Governance and funding approval: Final approvals for this funding (including T3 until
end December) - PRB (c15th June), IC (prior to end of June).
July - Sep 2021 - Informal meetings with the Board members to “kick the tyres” on the
Organisational Design review, ensuring we have your buy-in before sharing our findings
and recommendations.
28** September 2021 - Board discussion on OD Strategic Review Outputs and
Recommendations for implementation approach.
SPO Governance and Funding approval - informed by the proposed delivery approaches,
we will agree with SPO an appropriate date to return to board for funding approval in
November/December.
Cost and benefits will continue to be validated as we prepare these submissions and may
therefore increase/decrease to a variance of 20%. Following Investment Committee approval
standard Change Project tolerance policy will apply.
Financial Impact
Board is asked to approve an increase to the POM budget for the next phase of activity by
£2.91m. As we have some cost to return from our last phase of activity (£0.16m), we have
used part of this to offset our ask and to cost as efficiently as possible. To note, we have
significantly downsized the size of the OD team required to deliver the next phase of design
work - we no longer require a larger Implementation team like we have in T1 and T2.
Early estimate of cost as follows:
a “Approved
Expected costs
todate
Updated with
_ latest request
"Additional amount
required
_ Comments
3 VR cost (HMBU and other local tactical
VR Cost £16.03m £18.68m £2.65m changes)
Recruitment £0.54m £0.47m (€0.07)m Savings on T2 recruitment offsetting T3 costs
Programme costs to Jul 2021 £1.76m £1.67m (€0.09)m Savings on T2 delivery cost
Programme costs - Aug - Dec 21 5 £0.43m £0.43m Design Team costs 10.2
Expected costs. £18.34m £21,25m £2.91m .
Risk Assessment, Mitigations & Legal Implications
Careful consideration of risks alongside other priorities of the Post Office have been considered:
Risks
Issues /Constraints
e Risk of insufficient leadership resources to support organisational review given Inquiry
pressures. Mi
ation: the backlog of 21/22 OD work was proposed by GE members
taking this into account. They have identified resources to support on the organisational
review and have deemed the review an important piece of work to deliver on their
objectives.
e Internal capability might not be strong enough to deliver 2025 vision. Mitigation:
recruitment costs are built into our model to account for the buy up of niche external
skillsets.
e ITTOM heavily predicated on existing supplier contracts. This means that some structural
recommendations that are made (e.g. in-source) might not be possible without a long
lead time. Mitigation: our planning has taken this into account.
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Tab 10.2 Post Office Operating Model
~ ‘OD team are “programme funded “and current perception team redundancy
function. Mitigation: It is crucial that we re-focus the team on building a fit-for-purpose
organisation that is enabled in achieving its strategic priorities whilst transforming the
organisational culture, that we have clear management and board support for this and
that we communicate this well.
Other Options Considered
Stop the project - Not recommended
« From early assessment, we do not think that there is the right leadership capability,
niche skillset and succession plans in place to deliver our 2025 vision with our current
structure.
« Whilst undertaking the strategic review, we propose to also strengthen the structural
design of more short term work, e.g. customer contact centre. In the event that we do
not start this piece of work, the customer contact centre will remain in place as-is,
providing poor customer service and creating a greater pressure on our postmasters to
resolve customer product complaints.
« We would miss the opportunity to further embed and build upon T2 changes - especially
in the Commercial, Postmaster and Network and Support Function Teams where further
work is needed to embed the changes made in T1 and T2.
Next Steps & Timelines
From a programme perspective, we propose the following deliverables:
© 21/22 Q2:
o Build deliverables for each OD workstream on the backlog, agree scope, benefits
realisation plan and measures of success, including phasing and delivery.
o Build the overall strategic plan for OD to meet Seven Strategic Pillars
o 28" September Board - showcase strategic review recommendations and
roadmap.
« 21/22 Q3:
o Kick off strategic review recommendations.
o Commence implementation of Tranche 3 changes, e.g. consultation commences
for partial HMBU closure as follows:
= Start of consultation: early October
= End of consultation / benefits realised: end of December
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Tab 10.2 Post Office Operating Model
Appendix A - Breakdown of costs and benefits
Benefits delivered and costs to deliver Tranche 3 expected to be:
Strat Plan qanche 3 Benefits Net Roles
Commercial & Marketing 8 0.95
Network andPostmaster === si tstsé‘iYSC(‘C;C*‘#OOMAY
Finance - Core 2) (0.31)
_Suplycha
People - OD 2 0.29
Corporate Affairs and Comms — ee BES ae eee Oli:
HMBU (25) (1.60)
Strategy & Transformation 7 (0.04)
q esti mm
es Total
sean
aon
0.28 16.54 —
“Tranches 1 and2 167 18.49
Programme Team Aug to Dec 21 0.43 0.43
3 Delivery - Known and Planned Team Closures 0.19 2.14 2.33
Appendix B — Breakdown of Costs and benefits
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Tranche 3 is embedded in our overall Strat Plan submission, alongside the benefits delivered in Tranches
1 and 2. Further acti
ii ae a a ea aes
Tranche 1 & 2 - Existing Approval 0.87
Tranche 3-New Approval : ee re
Future tranches 0.84 4.03
[Total POM Strat Plan Costs 416 4.03 =
(other 0D D Projects 1.70
a a
EE
Tranche 1 & 2- Divert - 7 1034 10.34 10.94
Tranche 3 - Approval request : 047 047 OAT
Future tranches 3.53 4.30 4.30
[POM Strat Plan Benefits - Cost Reduction 14.33 15.14 161d)
Tranche 1 & 2- Delivered 2.05 2.05 2.05
Tranche 3 - Approval request 0.04
[POM Strat Plan Benefits - Reduced project/Capex costs 208 I
Other OD Projects:
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Tab 10.3 Matters Reserved and Terms of Reference changes
POST OFFICE LIMITED
BOARD REPOR
Matters Reserved to the Board &
Title: Committee Terms of Reference Meeting Date: I 3 June 2021
Author: Rebecca Whibley, Senior Assistant Sponsor: Veronica Branton, Group
Company Secretary Company Secretary
Input Sought: Decision
The Board is asked to approve:
1. the revised Matters Reserved to the Board;
2. the revised Audit, Risk & Compliance Committee Terms of Reference;
3. the revised Nominations Committee Terms of Reference; and
4. the Remuneration Committee Terms of Reference (no changes);
effective from 4 June 2021.
Previous Governance Oversight
« The Matters Reserved to the Board and Committee Terms of Reference were last
approved in 8 April 2020 by the Board. They are subject to annual review.
e The Annual Governance Report presented to the Board on 30 March 2021 included
changes the appendix 2 to Matters Reserved to the Board, which were approved. This
report outlined that there were no further change to the Matters Reserved to the Board.
e The Audit, Risk & Compliance Committee (ARC) reviewed and approved the changes to
its Terms of Reference on 30 March 2021, subject to approval by the Board.
« The Remuneration & Nominations Committees reviewed and confirmed their Terms of
Reference as drafted on 9 February 2021. The Board noted that the result of these
reviews required no changes to the Terms of Reference on 30 March 2021.
Executive Summary
1. In April 2020, the Board adopted revised Matters Reserved to the Board and Committee
Terms of Reference following the adoption of revised Articles of Association and the
Framework Document between Post Office Limited, UK Government Investments (UKGI)
and the Department of Business, Energy & Industrial Strategy (BEIS). The Matters
Reserved to the Board and Committee Terms of Reference all set out a requirement for
annual review.
2. This annual review has now been undertaken by each Committee and the Board also
considered various governance matters (delegated authorities, authorised signatories)
which are incorporated in the appendices to the Matters Reserved to the Board on 30
March 2021. Following these reviews, a consolidation exercise has been undertaken to
ensure the Matters Reserved to the Board have incorporated the changes and that any
changes proposed to the Committee Terms of Reference have been mirrored in the
Matters Reserved to the Board.
3. All documents have also been sense checked to ensure they reflect current practice and
any developments over the last financial year. This is particularly the case for the
Nominations Committee Terms of Reference, which have been amended after review by
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Tab 10.3 Matters Reserved and Terms of Reference changes
the Committee itself, to reflect the recent appointment of Tom Cooper to the Committee
and the oversight by the Committee of the appointment of the Post Office Limited
Shareholder Representative for the First Rate Exchange Services Joint Venture (which
has recently arisen due to the existing Shareholder Representative leaving the business).
Accordingly the following changes have been made to the following documents:
‘ The Committee's review concluded that it has met its responsibilities under the Terms of Reference and that no amendments
were required, however, the appointment and FRES Shareholder Representative matter arose after this review.
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ee
Change Document Reasoning/Comment
Revised list of authorised I Matters Reserved to the Board I This list was approved on 30 March 2021 by the Board.
natories (appendix 2)
Removal of reference to banking
policies
Matters Reserved the Board para 8
xiv & Delegated Authorities Table
para 3.6
ARC Terms of Reference para 7
‘Approved at the ARC as this Committee does not approve banking policies
as these do not exist. Treasury Policy is approved by the ARC.
Reference to the Board's role in
risk management and risk
appetite/policy approvals
Matters Reserved to the Board xi,
xii (footnote) & Delegated
Authorities Table para 3.8
ARC Terms of Reference para 13
and 16 (footnote)
Alignment of both documents to each other & the Risk Policy.
The Risk Policy was approved by the Board on 7 January 2021 via written
resolution. This policy includes the approach to risk appetite and with
separate statements being developed for different risk groupings. The Board
delegated authority to the ARC to approve each of these risk appetite
statements by its written resolution on 7 January 2021, Please note that the
revised Terms of Reference presented to the ARC did not include the change
to requiring approve of the risk appetite statements but this has been agreed
with the ARC Chair.
The policy also included a requirement for the Board to provide oversight of
(and direction on) the management on the key strategic business risks that
could threaten the delivery of the Post Office's strategic objectives with the
ARC advising the Board of the key strategic risks it should have regard to.
‘Addition of requirement for ARC
to approve Group Key Policies in
line with the Group Key Policy
Framework, including the Tax
Strategy and that the ARC can
amend this Framework from time
to time
Matters Reserved the Board para 8
xxxvill (new) & Delegated
Authorities Table para 3.10 (new)
(Tax Strategy) & 6.9 (Group
Policies) (new)
ARC Terms of Reference para 18
Alignment of all documents to each other.
In practice, the ARC approves most Group Key Policies, but this was not
formally in the Terms of Reference. The Group Key Policy Framework has
also recently been revised and was presented to the Committee for approval
on 18 May 2021 (to be subject to annual review moving forwards).
Some policies require Board approval under the Group Key Policy Framework.
but this was not in the Matters Reserved to the Board.
Revision to the current
composition of the Board
Matters Reserved the Board para
15
This change reflects the appointment of the two Postmaster Non-Executive
Directors and the new Non-Executive Director with legal expertise.
Review of Internal Audit
Function: removal of the word
‘ARC Terms of Reference para 35
This change was proposed by the ARC Chair and approved by the Committee.
It is in line with best practice and proportionate given existing oversight.
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annual and confirmation that this
review should be once every five
years
Addition of a flag to consult the I Board Delegated Authorities Table I This flag highlights the need to consult the Procurement Policy for the
relevant entity's Procurement I para 4 (footnote) relevant entity when any goods and services are procured and, particularly,
Policy the requirement under the Post Office Limited Procurement Policy to seek
approval for Procurement Risk Exception Notes from GE and Board in certain
circumstances.
Cross referencing to change I Board Delegated Authorities Table I Clarification of notes column to make more helpful for users.
spend approval and Shareholder
Consent requirements.
para 4.54.11
Numbering Nominations Committee para 30 I Renumbering as existing numbering was incorrect (missed out a number)
onwards
FRES Shareholder I Nominations Committee para 30 I It has been agreed that the appointment of the Shareholder Representative
Representative (new) for the First Rate Exchange Services Joint Venture shall be approved by the
Nominations Committee and an appointment was made in May 2021. This
change therefore reflects actual practice.
Amendment to number of
members
Confidential
Nominations Committee para 38
Following the appointment of Tom Cooper to the Committee the requirement
of the Terms of Reference for the Committee to consist of three members is
incorrect. This reference has therefore been removed to reflect that it shall
consist of at least two independent non-executive directors such that there
is no maximum number limitation.
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Tab 10.3 Matters Reserved and Terms of Reference changes
5. The Remuneration Committee has reviewed their Terms of Reference and concluded that
the Committee has satisfied that the responsibilities set out in the Terms of Reference
have been met during the 2020/21 financial year and that no changes were required to
the Terms of Reference. Given the requirement for annual review, the Board is simply
asked to re-approve these Terms of Reference as previously drafted.
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@
Appendices (available in the Reading Room)
aun
8.
9.
1. Revised Matters Reserved to the Board (clean)
2. Revised Maters Reserved to the Board (track changed)
3.
4. Revised Delegated Authorities Table (appendix to Matters Reserved) (track
Revised Delegated Authorities Table (appendix to Matters Reserved) (clean)
changed)
. Revised Audit, Risk & Compliance Committee Terms of Reference (clean)
. Revised Audit, Risk & Compliance Committee Terms of Reference (track changed)
7.
Audit, Risk & Compliance Committee Terms of Reference Review as presented to
the Committee (report and review table only)
Revised Nominations Committee Terms of Reference (track changed)
Revised Nominations Committee Terms of Reference (clean)
10.Remuneration Committee Terms of Reference (unchanged save for date of
approval amended)
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Tab 10.4 PUDO update
POST OFFICE LIMITED
BOARD REPOR
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Title: PUDO Update Meeting Date: I 3‘ June 2021
Author Mark Siviter, Mails and Retail Sponsor: Owen Woodley, Group Chief
Product Portfolio Director BP : Commercial Officer
Input Sought: Decision
Following Investment Committee approval, the Board is requested to please authorise a
further £2.41m (in addition to current approved spend of £2.86m) for FY21/22 to deliver
PUDO (Total project spend: £5.27m).
Previous Governance Oversight
ee ceee
July 2020 Board
January 2020 Board
March 2021 PRB
March 2021 Board
May 2021 GE
May 2021 Investment Committee
Executive Summary
Last July, the Board approved the decision to deliver our recommended Mails proposition,
PUDO. Following the Amazon trial launched in March 2021, Post Office is now at a pivotal
point in its implementation of PUDO and requires further investment to proceed.
Following Investment Committee approval, the PUDO business case submission requests
authorisation for a further £2.41m (in addition to current approved spend of £2.86m) for
FY21/22 to deliver PUDO (Total project spend: £5.27m). See Appendix 1 for the financial
breakdown. This will be used to deliver:
a) Commercial agreements with existing and new carriers;
b) Interim PUDO devices to support the growth of the Amazon operation;
c) Implementation of second carrier, DPD, and technical integration into Horizon;
d) Enhancements to in-branch journeys for customers and Postmasters, operational
improvements, branch support and training;
e) Back-office integration and automation of client billing and remuneration processes
f) Marketing and brand approach for multi carrier PUDO;
g) Income target FY21/22: This investment request offers an estimated revenue
growth opportunity of c.£1.5m for this financial year.
Questions addressed
AWNE
How will this investment be used?
How will this investment support the plans to implement further carriers?
What is the benefit for Postmasters?
What are the next steps for the implementation of PUDO?
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Tab 10.4 PUDO update
Question 1: How will this investment be used?
1. This business case will fund the technological and operational developments needed to
move our PUDO strategy from the current trial with Amazon, to an operation at scale
across the network, specifically:
e Horizon integration for DPD allowing Post Office to support customer pick-up and
drop-off services;
e Interim PUDO devices needed to support the expansion of Amazon across a wider
part of the network;
e Back-office integration enabling the automation of branch data, billing and
Postmaster remuneration;
e Development and deployment of in-branch operational processes, training
material and post-go-live branch support;
¢ External legal support for commercial contracts and changes to Postmaster
agreements;
« Marketing and promotional activity to increase consumer awareness and drive
customers into branch;
« Organisational capacity in the form of external strategy expertise and the project
resource needed to deliver the changes.
2. Without this investment, the PUDO initiative will remain limited to the current 200
branches until July 2021, after which, in the absence a clear route forward, it is expected
Amazon and DPD would withdraw interest in accessing Post Office branches.
Question 2: How will this investment support the plans to implement further carriers?
3. The majority of the requested investment is for infrastructure and organisational capability
which will facilitate the future onboarding of further carriers. This includes the Horizon
integration which, although tailored specifically for DPD, includes functionality that will be
reusable with future clients, subject to confirmation of their exact requirements and
testing.
4. The automation of back-office processes is a critical development to increase the speed,
flexibility and accuracy of integration with all carriers, while reducing the workload and
consequent cost of current manual alternatives.
5. The exception is £0.5m requested for interim PUDO devices required for the expansion of
Amazon into the network pending the availability of the final SPM Retailer Accompaniment
Device. This represents a sunk cost but is essential to sustain the relationship with Amazon
and facilitate the expansion of their services across more branches with the associated
financial and Postmaster benefits.
Question 3: What is the benefit for Postmasters?
6. The implementation of PUDO is a crucial step towards making Post Office the destination
for all mails, regardless of carrier. For Postmasters, this is a clear demonstration of Post
Office’s intention to capitalise on the non-exclusive nature of MDA2 and support their
creation of thriving businesses.
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7. Postmasters will recognise that customers choose to use Post Offices already as points of
delivery or for home shopping returns. Enhancing this customer proposition will increase
footfall for Postmasters, especially as more carriers are onboarded.
8. Postmaster remuneration is being aligned across carriers to avoid any incentivisation
towards one partner over another. This business case has assumed £39m (Total project
FY21/22 - FY24/25) but this assumption could change as a result of the wider Postmaster
remuneration review now underway.
9. In addition to the benefits PUDO offers to Postmasters listed above, in the form of
increased volume, footfall and income, this investment will provide the following specific
benefits:
« Simplified operational processes through familiarity of using Horizon and/or
simple handheld devices for Amazon
e Easier onboarding and enhanced training support
e Consistency and accuracy of remuneration from automated back-office processes
« Improved MI and support wrap from data collection, manipulation and reporting
Question 4: What are the next steps for the implementation of PUDO?
10. In order to demonstrate progress to our stakeholders, including Postmasters, and deliver
our financial benefits, our intention is to launch Amazon and DPD at scale (defined as >1k
branches each) in the network in time for Christmas peak 2021.
11. A mid-trial review with Amazon’s management took place on 19th May 2021, in which
they confirmed their satisfaction with trial performance. Post Office will work with Amazon
to finalise the specific number of branches, subject to agreement, in the coming weeks.
12. In parallel, we have commenced commercial negotiations and are finalising the technical
details needed to support DPD. This will include the addition of un-deliverables and home
shopping returns service options in addition to the existing click and collect currently being
trialled.
13. We expect commercials to be agreed with both partners by the end of June 2021, with
branch recruitment and training taking place throughout July and August. Due to the
number of branches involved we expect Postmaster onboarding to be undertaken in
tranches, resulting in a lead go-live during August and September 2021.
14. As a result of the high profile of this operation for clients, Postmasters and Post Office, a
close support wrap will be in place over Peak to ensure operational reliability. The support
wrap is the MI and operational team in place to monitor network performance. This will
support branches if they experience technical or operational issues such as excess capacity
or broken hardware and identify and investigate missing scans or items for carriers to
ensure maximum service levels for customers. Each item is scanned and monitored by the
carriers to an exceptionally high standard, so they can recognise where in the pipeline
failures occur and expect immediate resolution. This support wrap is being built with BSC,
and the new MI is funded by this business case.
15. Initial discussions have already started with the next wave of potential clients, with the
intention of onboarding them from Q4 2021, using the capabilities delivered through this
investment.
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APPENDIX 1: INVESTMENT REQUEST By
* Investment request for this Business Case phase 2: £2.41m
* Existing approved funding: £2.86m
© Total funding for 20/21 and 21/22: £5.27m
Breakdown of £5.27m funding for project FY20/21 Fy2i/22 Total I Total Total
Numbers shown in £k Spend Type a 2 a3 Cv) vi ET 3 aa I rvao/2a I ry2a/22 I
Project resources OpexiCapex I 9.24 I 8794 I 46.70 I 90.72 I 26190 I 26190 I 177.90 I 177.90 [ 234.607 879.60, 1114.20,
Software development scaling Amazon Capex 15,00 I 127.53 I 13.90 15.007 141.43, 156.43
Software development: Branch Location Data I
Service Capex 32.00 I 278.80 I 143.20 32.00, 422.00 454,00)
Carrer 2 Integration Capex 279.00 I 162.00 0.00 441.00] 441.00]
IThardware Capex 130.00_I 390.00 0.00, $20.00] $20.00]
Consultancy Exceptional 1155.00 I 105.00 115.007 105.00 __1260.00
Deployment Capex 140 [200 I 600 1.40) 8.00) 9.40)
Legal Opex 13.20 1800 {80.00 I 20.00 31.207 100.00] 131.20)
Marketing Capex 0.00 [12.00 I 15.00 —000f 27.00] 27.00)
Support model Capex Capex 800 I 800 I 0.00 0.00 0.00 16.00) 16.00
‘Support model Opex Opex 22.50 54.00 54.00 54.00 0.00) 184.50) 184.50)
Marketing Opex 200.00 0.00, 200.00 200.00
Expenses and SPO levy Opex 40.00 I 3260 I 2141 I 534 5.34 40.007 64.68] 104.68)
Reoccuring Opex Staff costs Opex 163.13 I 16313 I 163.13 I 163.13 0.00) 652.50I 652.50)
Total 924] 101.4] 46.70] 1352.12] 3702.45 1258.54] 400.36] 400.36) 1509.20, 3761.71] 5270.92
* Future years beyond 21/22 up to 25/26:
© £8.8m further Capex spend
© £5.3m further Opex spend (BAU staff costs over 5 years + onboarding costs for new carriers)
4
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APPENDIX 2: BUSINESS OBJECTIVES
formation
Se
E
eee
“Size of the opportunity
This strategy offers cumulative income opportunity of c.£59.9m p.a. by 2025/26 at an estimated DPC PC of 50%
Deadline
carriers.
This business case is requesting for funding until the end of March 2022; in order for Post Office to onboard the first two
Post Office has no direct relationship with retailers
or parcel carriers other than RM
Secure a direct relationship with the largest carrier
in the UK market outside of Royal Mail, and other
carriers
Trading relationship with other carriers to build
relationships with multiple carriers in the PUDO
market
Post Office and our agents only have operational
experience of handling Royal Mail parcels
To prove the viability of opening network access to
third party operators.
Ability to work with and operationally deliver non-
RM items and PUDO propositions in the network.
We are reliant on Royal Mail volume for all our
PUDO income.
Secure incremental income from the second
biggest carrier in the parcel market, and other
carriers
Overall income from 3” parties over 5 years:
Incremental income opportunity of c.£59.9m p.a.
by 2025/26 at an estimated DPC of 50%
Current in-branch process/experience only
supports one carrier partner
Informs the business on operating changes that
are needed to be made or factored into the new
network design in order to succeed in PUDO
Operational CSFs met without deterioration in
service quality to customers or existing RM
processes
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erepdn oan v'0b GL,
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Tab 10.4 PUDO update
Prior i al New
et ae Bene
Opex = 0.3) - - = (0.8) 0.8)
Exceptional ESE 42) (0:1) z 13) 11.263)
Capex 0.1 25) 46) 29) 0) (41.0) G10)
‘Total Funding = f Tz 1 CY Gey ay TO) say asiy
“Impact on EBMTDAS = Cc 05. 26. 48. oa 37.0 37.0
Including
Intangble Tangbe Benet ts
au Benet, on
1 ia
40 40
30% 30%
173 173
166.1%
54.0 540
Bree veate 20/21 21/22 22/23 23/24 24/25 Total Project
Gross Income : 15 11.0 17.6 29.8 59.9
Revenue Growth = = 1s 11.0 176 29.8 59.9
Revenue Retention rn
‘cost of Sales = z Z Z z 2 z
“tal Drect Contrbution = = 75 Tio 176 29.8 39.9
‘Operating Expenses (OpEY) =] ae 115) (ay 42.8) (20.8) (43.7)
[Project Related. = 0.3) (05) = = = 0.8)
Recurring Increase = - : 72) a) aa 4.0)
Recurring Decrease = = : : : =
‘Agents Pa = = Ta) Ty TLS) 3.4) 3.0)
‘Avoidance ~ 5 - - -
Trading Profit = 0.3) 00, 26 48 3a 16.2
Frading Profit [9] z 1 tt 0.0 0.2 03 03 03
‘(Copral Bepenaieure (capex) ay oH (eX) Be SCE) 23) Gay Gi)
Project Related = Ont 25) (4.8) (28) (G.0) (41.0)
Avordance =e : : 2
‘Exceptional Expenditure = 12 (1) = : = 13
Project Related : 42) @1) = = 13)
cahrow = m5 Gay oy is oa ao.
‘Cumulative FC = 15 (1) (6.1) (4:1) 4.0 4.0
{ECE without Avoiance’ = Gs) 12.6) (2.0) 18 BA 40)
‘Cumulative FCF w/o Avoidance: 15 ay (6.1) “0 4.0 4.0.
culations 20/24 21/22 22/23 23/24 24/25 NPV,
‘Decount Rate 120%] [100 oss. 80. Oi Tea
“Quantity of year to include 1.00 100. I 100 1.00 1.00
[Mid-period discounting factor i z 1,00 2.00 3.00 4.00.
Discounted Cashflow with Intangible Berefis 5) 23) (1.6) 14 SA i
‘Discounted Cashfiow with Tangle Benefits is) (23) 6) 14 SA 44
[Software - Internaty Developed 3 (1,987.9),
[Sottware - Purchased 3 -
TT Hardware 5 (9345.0)
Motor Vehicle 5 =
Plant & Equipment Ft) [oonaoas
Fostures & Equipment U S
Land 10
Intangibles 10 =
lOpex. CEC}
6
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Cost Type
Other
= Resource
= IT Hardware
= Software
Orga
Other
(blank)
POL - Contractors
POL- Permanent
Accenture
Atos
(blank)
cc
cc
= Support / Maintenanc POL - Contractors
= Exceptional = Other
= Resource
~ One time Opex = Other
= Resource
= (blank)
POL- Permanent
Other
(blank)
Consultancy
Other
(blank)
POL - Contractors
POL- Permanent
POL Permanent
(blank)
= Support / Maintenance POL - Permanent
= Infrastructure
= Legal
= Communication
= Recurring Opex Increa ~ Resource
Grand Total
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POL
Other
POL- Contractors
POL- Permanent
Legal External
Legal POL
Other
Communication POL
POL- Permanent
FY20/21 FY21/22
(€0.1m)
(£0.0m)
(€0.0m)
(1.2m)
(£0.1m)
(0.1m)
(£0.0m)
(0.0m)
(£0.0m)
(0.0m)
(£0.0m)
(£0.0m)
(£0.0m)
(£1.1m)
(£0.5m)
(£0.2m)
(£0.1m)
(£0.5m)
(£0.0m)
(£0.0m)
(£0,0m)
(£0,0m)
(£0.0m)
(£0.1m)
(£0.0m)
(£0.2m)
(£0.0m)
(£0.0m)
(£0.1m)
(£0.1m)
(£0.0m)
(£0.2m)
(£0.7m)
(£3.8m) (£4.
POL Board Meeting - 03 June 2021-03/06/21
FY22/2 FY23/
3 4
FY24/25
(£0.0m) (£0.0m) (£0.0m)
(€4.6m) (£2.9m) (£1.0m)
6m) (£2.9m) (£1.0m)
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Tab 11.1 Health & Safety Report
POST OFFICE LIMITED
BOARD REPORT
Title: Health & Safety Monthly Report I Meeting Date: I 3 June 2021
Martin Hopcroft,
Director of Health & Safety,
Environment and Business
Continuity
Al Cameron,
Author: Group Chief Finance Officer
Sponsor:
Input Sought: Noting
The Board is asked to note the contents of the report.
Previous Governance Oversight
* GE Safety Board 12‘ May 2021, next meeting scheduled 23" June 2021
Executive Summary
In Appendix A we summarise the Key Performance Indicators over the last few years. We have
included a comparison for Period 1 (April) with last year and this shows a return to a pre-Covid
level of incidents. During lockdown, incidents reached the lowest level on record and our
assumption is that people were more thoughtful about their behaviour. Safety Board agreed
safety campaigns should be supported in Supply Chain and Directly Managed Branch (DMB) by
safety champions.
We continue to respond to the risk due to Covid-19, taking appropriate action to ensure the
health and safety of employees and postmasters whilst delivering key services to customers
and we monitor and respond to the most recent Government guidance and lockdown
restrictions across the UK.
We have updated our advice and risk assessments, communicating to our people and sharing
with Postmasters to remind them that social distancing, managing queues and use of PPE will
be critical to ensure branches remain open. We have supported the return to work of essential
field roles, continue to consult with Unions and review risk assessments.
The current level of employees who have tested positive or are required to self-isolate has
reduced during that last quarter in both Supply Chain and DMBs from the peak level seen in
January. There have only been 13 positive results reported for POL employees since February,
compared to 90 reported in January alone.
Following recent publication of Government roadmaps for relaxing restrictions, we have re-
assessed PPE requirements to ensure there is sufficient supply and have supported the return
of clinically extremely vulnerable employees.
The Department for Business, Energy & Industrial Strategy (BEIS) and Department of Health
and Social Care (DHSC) recently encouraged employers to set up workplace Lateral Flow Test
stations or provide kits for home use. We registered Post Office onto the scheme following
assurances from the DHSC regarding liability and data protection and we ordered and received
a supply of 35,000 free kits at the Swindon Stock Centre for employee use. We are currently
piloting the process in Supply Chain, in DMBs and across the field teams. The DHSC are
1
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continuing t to develop : a 5 distribution model for franchise retailers and we await new Tacs and
information for that model. In the meantime, Postmasters have been encouraged to signpost
to the Universal local order scheme for the public and smaller retailers.
Whilst we have paused a short term return to the Office (Finsbury Dials, Future Walk, Bolton),
we are continuing to offer our Covid-secure workplaces to those with exceptional circumstances
and are piloting a small number of ‘essential’ meetings during May and June. We have taken
the view that our colleagues should not be required to return to office until late Summer and
we will monitor Government guidance whilst preparing for a gradual voluntary return.
The number of attacks and robberies remain low, however, we are preparing for this to change
across the industry when we emerge from lockdown due to increasing levels of cash and an
increase in unemployment. We have updated our risk profile for branches and Cash Vans in
Transit (CViT) routes and implemented mitigating intervention, including cash destruction (glue
and ink) and ‘tracker’ devices in carry cases and body cameras across 35 high risk routes, as
advised by Security. We are also scoping an alternative Cennox ‘lighter’ weight carry case with
cash destruction technology.
Following successful trials, we have supplied a new preferred helmet and a supply of body
armour (stab vests). We have made stab vests compulsory on high risk CViT routes (they are
voluntary otherwise) and have issued a joint statement.
We have reviewed the findings from the independent investigation of the AEI (Identity Services
Kiosk) machine fire at Port Glasgow. Whilst the cause of the fire remains inconclusive, we have
agreed to progress mitigating action. Area Managers have undertaking telephone and site
surveys to check machines are being switched off overnight and to check the environment
around the machine, fire-fighting equipment and smoke detectors are present and a visual
check of the condition of the electrical cable to the machine. The manufacturer’s maintenance
provider is also undertaking additional checks when servicing machines. We have received a
quote from Thales to replace the privacy curtain with a fire-retardant version which we will
consider exceptionally for higher risk locations. CBRE have installed a timer switch at approx.
170 branches where it is difficult to switch off the machine at the socket due to limited access.
Whilst undertaking these checks, concern has been raised of messy cables and wiring which
looks unsafe. Property and CBRE have attended 10 branches to test the wiring and have fed
back their findings to Safety Board. It has been agreed for Property to complete a programme
for PAT testing counter cables and equipment at all branches in 21/22.
Questions addressed
1. What are the trends on accidents and violence across Post Office?
2. Are there any significant risks emerging and what are we doing to mitigate?
Report
3. To mitigate risk from Covid-19, we continue to communicate with employees, Postmasters
and our customers, providing guidance on following good hygiene principles and raising
awareness by displaying posters. We continue to monitor Government guidance and
receive regular updates from our Chief Medical Officer at Optima Health and we are
providing PPE to colleagues, reiterating safe hand hygiene and social distancing. We have
provided hand sanitiser stations for customers and have installed perspex screens in
smaller DMB branches to protect colleagues and enable the opening of additional counters.
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4, We review and update Covid-Secure risk assessments and continue to supply Personal
Protective Equipment (PPE) to DMBs, Supply Chain, essential field teams and Mobile PO
operators. We provide anti bacteria soap to Postmasters together with guidance on social
distancing and a supply of posters and floor decals to all branches. Postmasters are also
able to order PPE directly from our supplier Banner. We continue to provide enhanced
monthly clean in DMBs, Supply Chain (including vehicle cabs) and Support Centres using
an anti-pathogen product that is applied through fogging which will continue until Covid
transmission rates have reduced and employees are vaccinated. We will review this
position in line with Gov advice as lockdown is relaxed in June and the Gov review of social
distancing and use of PPE in the workplace. In the meantime we will pilot some limited
‘essential’ meetings and use of hot desks in Finsbury Dials and Future Walk.
5. There have been 13 positive cases in DMBs and Supply Chain in the last 4 months and no
multiple positive cases of Covid-19 reported. Feedback from the NHS Health protection
teams has been that they are happy with our controls and what we are doing in branch.
6. We are supporting the Government’s Employer Workplace Collect Lateral Flow test
programme. Kits have been received at the Swindon Stock Centre for distribution to
employees. We are required to follow strict rules for distribution of the kits and complete
issue logs. We are currently testing the process at 3 Supply Chain Centres and 6 DMBs
as well as offering to 270 field colleagues who may visit multiple branches. This is a
voluntary programme and employees are being encouraged to ‘opt in’. The DHSC have
advised us to signpost Postmasters to the Universal local order scheme for the public and
smaller retailers whilst the consider whether to launch a ‘franchise’ distribution model.
7. We continue to provide wellbeing support to our colleagues, including those who continue
to work from home and are raising awareness of the support available through our
channels. Refresher training has been provided to our Mental Health First Aiders and
training for new DMB MHFAs has helped to increase the overall number available to
support colleagues. A number of campaigns are planned to raise awareness of our
Wellbeing resources and the MHFA network over the coming months.
8. Robberies remain low and whilst they slightly increased over Q4 there have been 24
incidents compared to 42 over the same period in 19/20 with a similar favourable trend
in weapons, including blades, down to 21 during the last 3 months to P12 compared to 35
in the same period in 19/20. Work continues on combating verbal abuse and violence and
the level reported over the past month has reduced to 8 compared to the average of 28
per month. The Security team has focused on both security health checks and branches
with high levels of cash over the period with a combination of 173 branch visits and
telephone conversations and 8 engagement events. We also have 6675 Branches and
15161 individuals in branch are registered for Grapevine text alerts.
9. In P12(Mar) there were 8 robberies (12), 4 successful (3) and 8 involving weapons (7)
with 2 minor injuries (1). There were 0 CViT incidents (1) and 0 ATM attacks (4).
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10. There were 0 ATM 1 attacks in P12, compared I to 4 last year. No ATM 1 attacks this month
Industry noted increased on previous month, albeit average for year. The majority were
physical attacks i.e. cutting. Industry ATM attacks are quite geographically spread.
11. Following a successful pilot, a preferred design of stab vest has also been selected by
Supply Chain crew. We have made stab vests compulsory on 35 high risk CViT routes
(they are voluntary otherwise). We are monitoring closely and are insisting that stab vests
are issued with reminders to our people not to fight back.
12. There were 6 accidents in P1 (compared to 0 in 20/21), and 2 lost time accidents of 22
days, both in Supply Chain. Accidents/1000 employees are at 1.82 P1 YTD (0.0 P1 YTD
20/21). During 20/21 we believe there was more focus and control implemented across
DMBs and Supply Chain environment during Covid-19 restrictions, leading to a reduction
of incidents. However, the number of incidents appears to be returning to pre-Covid
levels. This was discussed at Safety Board and the successful Supply Chain ‘hearts and
minds’ initiatives will be stepped up and shared with DMBs.
13. The Post Office Lost Time Incident Frequency rate (LTIFR - accidents per 100,000hrs) is
at 0.451 YTD P1, compared to an outturn of 0.083 in 20/21 and 0.150 in 19/20. Total
lost days per 100,000hrs (LTR) is 4.96 at P1 compared to an out turn of 0.465 at P12 YTD
in 20/21 and 3.22 in 19/20.
14. Post Office property is statutory compliant and overall risk is low. All statutory and non-
statutory inspections are being undertaken and remedials are on track.
15. A serious near miss involving a trunking driver has been investigated by Supply Chain
Fleet and Operations, including whether fatigue was a factor. Improvements have been
made to the speed of the investigation process including swifter access to CCTV footage
and learning opportunities identified. We will engage with our Occupational Health
provider and push forward with training to raise awareness and other mitigation.
16. The retender for facilities contracts, which includes safety and compliance is now live and
will be concluded by Sept 2021. The number and quality of respondents has been high.
17. We have scoped a new 3” Party audit in Q4 and agreed at Safety Board that this should
focus on our response to the threat of violence, robbery and abuse. The Health & Safety
Executive are particularly keen to support and have provided a proposal to complete the
work in Q2. This work was delayed due to HSE Covid-19 priorities for Inspectors.
18. Priorities and targets include;
a. Focusing resources to the Covid-19 response and work collaboratively to ensure risks
are controlled and a return to work plan implemented, supported by the Alert Level
Matrix, risk assessments and social distancing.
b. Following a successful pilot of a digital accident investigation and reporting tool in
Supply Chain we have rolled out to DMBs plan further roll out to all business areas.
c. The Supply Chain Safety Plan is progressing well with safety champions sharing best
practice and improvement opportunities at safety forums. We will extend the successful
Supply Chain Hearts and Minds Safety campaign as best practice across the business.
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d. Robbery Risk A Assessment will be reviewed d quarterly rather than annually to inform
decisions regarding mitigation, including iBox technology and Body Armour Stab Vests.
e. Local risk assessments, safe systems of work and training continue to be reviewed and
strengthened. Induction H&S checklists reviewed and updated.
f. Arranged an audit with HSE, scope includes our response to violence and abuse and
personal safety and security. HSE will progress in Q2.
g. An Occupational Health MSK expert has reviewed coin and manual handling activity in
Supply Chain to identify initiatives to reduce risks facing the ageing workforce eg
equipment, training, process improvement. A plan has been drawn up to progress.
h. Continue analysing Supply Chain ‘commercial driver’ telemetry data and driving
behaviour and improvement through 121 discussions and coaching. New modular
training for business drivers is being trialled, inc guidance to mitigate risk from fatigue.
i. Continue developing our team of Mental Health First Aiders and raise awareness of the
webinars for all colleagues and managers to provide guidance on coping with anxiety
Financial Impact
19. The financial impact of the above initiatives has been evaluated / budgets confirmed
Risk Assessment, Mitigations & Legal Implications
20. Our highest risks include; violence and abuse aimed at Postmasters and Supply Chain
crew. The Security team will continue to strengthen and invest in mitigation. We continue
to monitor carefully during lockdown. We have received the conclusions of our appointed
forensic fire investigator and the AEI machine manufacturer Thales and reviewed the risk
to the whole AEI Network following a fire involving the Port Glasgow AEI. To make the
network safer, we have instructed all branches to switch off the machines overnight. Area
Managers have completed site surveys to assess any hazards in the environment around
the machines. 15% branches were unable to switch off the machine due to wiring or
access issues. CBRE engineers have assessed wiring and installed timer switches.
Stakeholder Implications
21. Training should be provided to new directors and where required, to Group subsidiary
directors, management and colleagues.
22. Information - directors should consider the Health & Safety information that flows to the
Board to support directors, subsidiary directors and management teams carrying out
their duties.
Next Steps & Timeline
Safety Board is held 6 weekly with the next meeting scheduled 23 June 2021. PO Board and
GE reports will include updates, recommendations and decisions made by Safety Board.
Strictly Confidential
POL Board Meeting - 03 June 2021-03/06/21 157 of 204
Tab 11.1 Health & Safety Report
@
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Appendix A - Safety Board Dashboard — P1 2021/22
Health & Safety 4 year Performance
Year/KPI 18/19 19/20 20/21 20/21 21/22
pizvto I Pizvto I Pi2vt> I piyTD I P1YTD
All accidents 81 70 40 0 6
All accidents / 1000 employees 16.9 18.6 118 0.0 18
omB 16.7 21.0 22.7 0.0 34
‘Support 3.4 75 07 0.0 0.0
Supply Chain 42.0 33.8 15.3 0.0 2.6
Lost Time related accidents 15 10 5 0 2
Lost Time related accidents / 1000 31 26 15 0.0 06
employees
LTIFR (lost time accidents/100,000hrs) 0.184 0.150 0.083 0.000 I 0.451
Days lost due to accidents 245 214 28 0 22
Days lost / 1000 employees 51 57 8 0 7
LTR (Accident days lost/100,000 hrs) 3.0 32 05 0.0 5.0
Bays lost due to robbery (assault and 280 105 16 A 0
LTR (Total days lost/100,000hrs inc. trauma) 6.4 48 07 0.0 5.0
RIDDORS (Employee) 7 2 3 0 1
Strictly Confidential
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Tab 11.1 Health & Safety Report
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25
20 I
1s
10
Pi
Security Safety Perfor:
TICVIT Attacks = CVIT Physical Injuries
fos a ona
P2 P3 P4 PS PE P7 PB PO P1O P1l P12
Physical lost time [Trauma lost time
Rolling Robbery Incidents
PL
P2 P38 PA OPS PG OPT
Pe Po
P10
[LS ccurrent Rolling 12 Months B Last Rolling 12 Months
Rolling ATM Incidents
oHNwWeuane
P2 PB PH PS PGP PROP
Pio Pil PZ
W@Current Rolling 12 Months — [Last Rolling 12 Months
CViT Commentary
P12 (Mar) 0 CVIT incidents
compared to 1 last year, 1
successful (0) with loss of £0k
(£22k last year). YTD 6 CViT
incidents YTD (compares to 16 last
year), with losses of £37k (£159k
last yr). CViT crime remains low,
with 6 incidents since P1 (April).
Crews are embracing the support.
Providing routing alternatives in 10
higher risk routes by Cash
Management, driven by dynamic
risk modelling, and also ensuring
best use of security equipment is
being made. No incidents this
month. 29 Cross pavement
observations & 6 Premises Attack
Plans have taken place.
Industry has a seen a 3 month fall
in incidents, 2 in P12, both CIT
focused. This follows a monthly av.
of 9 in Q3.
Robbery Commentary
P12 (Mar) - 8 robberies compared
to 12 last yr, 4 successful (3) with
losses of £37k (£1k last yr). 8
involved weapons (7) including 5
blades (4).
YTD - 72 robberies YTD (130)
with losses of £266k (£652k). 66
involved weapons (112), including
40 blades (65).
733 fogging kits successfully
installed via upgrade programme in
high and very high risk branches.
Current activity includes 173 branch
support calls & and visits and 8
engagement events conducted in
month. Marginal reduction in retail
focused robberies, 2 vs monthly.
average of 3
ATM Commentary
P12 (Mar)-0 ATM attacks compared
to 4 last year, 0 successful (0).
YTD - 11 ATM attacks YTD
(compares to 35 last year), & losses
of £102k vs £175k last yr.
No ATM attacks this month
Industry noted increased on
previous month, albeit average for
year. The majority were physical
attacks i.e. cutting.
Industry ATM attacks are quite
geographically spread
Strictly Confidential
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‘Tab 11.2 Improvement Delivery Group Report
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Exec Summary
We continue to make strong progress against planned improvements. The vast majority are being completed as
planned, and for those that are experiencing problems, the IDG is actively engaged to resolve. In addition, Internal
Audit are assuring each delivery and this too is progressing well, with only a few minor areas requiring additional
work.
The main primary issue currently blocking the progress relates to the scope of the HSS, and whether it should be
expanded to include additional items. This is preventing the finalisation of a number of treatment strategies. A
separate paper is being prepared to provide the details and seek a Board level decision on the way forward. The delay
to the treatment strategy is not expected to delay the resolution of the detriment.
Since the last Board update, the status of the Inquiry has changed to Statutory. We await guidance from the Inquiry
team on the next steps (both until the interim report, and then beyond) and hope to receive this within the next two
weeks. Using this guidance we will then update our preparation plans, including the associated timelines. The change
to the Inquiry does not change our improvement plans, nor our close focus on maintaining progress.
REDACTION
The corresponding HIJ conformance review has taken a little longer due to NRF not being as familiar with the Horizon
improvement work. We expect this to complete in June 2021.
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Progress update on full range of
improvements
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71% of our identified improvements have been completed, and of those 67% have been tested
as effective by Internal Audit
Good progress continues to be made on getting improvements delivered. We're also maintaining pace on completing the audits to demonstrate
successful delivery.
From the audits, we have identified five improvements where further work is required, and these are (or have been) resolved.
Where we identify additional improvements, they have been added to our tracker and hence the totals below reflect these additions.
Improvement Status
Improvements by PM Impact
Previous update
16/05/24
37
Previous update
16/05/21
‘Activity complete but awaiting Internal audit
assurance review
Activity and subsequent internal audit
assurance complete
Activity is either inflight or planned
we 6
Impact Rating
Orenge I
Non-compliance with the outcomes of the
CUI ruling and / or where there is a
detrimental impact on PMs, where
detrimental means any form of PM harm
There is potential detriment to Postmasters,
or a reputational risk to POL
This change would significantly improve the
Postmaster experience
Total
112 24
92 2:
188
392 109
100,
Yellow
Beneficial to make this change to improve
the Postmaster experience
aL
‘Note: Data presented in these slides is as of 24/05.
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Improvements in phase I are being delivered, with 92% on track to meet end of May target
date
As the end of May approaches, the vast majority of the planned improvements have been delivered as intended. A short summary of those
outstanding is contained on the next slide
Of note, a number of the red RAG items relate to resolving historic detriment and share the same root cause for delay - a decision needs to
be made on the scope of the Historical Shortfalls Scheme. Once this decision is made, the red items will rapidly clear and return back to
making good progress. Despite the delay, the team are still forecasting that the next phase (repayment of detriment) will not be delayed.
Postmaster Impact
9
Current
4
t delivery status
6
9
Impact Ratings
Non-compliance with the outcomes of the
CUI ruling and / or where there is a
detrimental impact on PMs, where
detrimental means any form of PM harm
There is potential detriment to
Postmasters, or a reputational risk to POL
Previous update Previous update
06/05/21 06/05/21 This change would significantly improve
. 0 i the Postmaster experience
El Beneficial to make this change to improve
Yellow
the Postmaster experience
Eee EL 6s I Ganatom BE -
: Delivery Status
o a 2 o 2. a ! Off track against agreed dates
4 5 oE e a I Amber I At risk agai
‘At risk against agreed dati
brange ° 3 16 21 40 36 against agreed dates
sical i a = 3 75 a ‘Qn track against agreed dates
otal 6 9 ry 48 u12 100 Not Started I Activities have not yet started
Pe fs g 44 43. 100
Note: Data presented in these slides is as of 21/05,
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Progress on May deliverables is being maint
managed by IDG
ed, with the three red status item being closely
Postmaster balance uncertainty is linked to the HSS scope decision mentioned on previous slide {note, this slide only focusses on deliveries to end
May}
Appeals and Disputes is flagged red below due to Post Office taking additional time to create and agreed the right format and style for the appeals
panel. This is an important improvement and hence the additional time is felt appropriate. This action is expected to complete within the first 2
weeks of June.
yodey dnag Aienyag juawenouduy} Z°L1 qe.
Memoview has been largely completed but is currently being held at red due to an ongoing piece of work looking at a resolution for those
postmasters where we do not have an email address or other contact details. There are a range of reasons why POL does not have this information.
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Note: Data presented in these sides is as of 21/05.
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Look forward
June — August 2021
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Forward view to August, at which point 85% of all currently tracked improvements will be
complete
The table below captures the improvements that are scheduled to deliver between June and August 21. Some have already
started, but others are not due to commence until a little later. For those which are showing as amber, IDG is already
actively monitoring and assisting where required to facilitate progress.
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PPR
Note: Data presented in these slides is as of 21/05.
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Some notable Improvements planned for delivery June-August ‘2 I
oe
A range of improvements is being
implemented to improve Potential New
Postmaster experience reduce drop-outs
during the process and reduce the time
taken to onboard a Postmaster. (ON2, ON3,
ON7)
Implementation of a Cross-functional
Training forum to improve Postmaster
training (ON6)
Resolve use of inconsistent terminology
including using the same term for different
purposes (BI9)
Implement offboarding enhancements to
ensure the efforts of Outgoing Postmasters
are recognised and their feedback is
recorded and acted upon (OF4 and OF6)
+ Simplified Financial Assessment including giving a provisional June 21
approval so that the suitability assessment (interview) can be
carried out in parallel
+ Change in support team KPIs to measure satisfaction and
Postmaster Experience
Extended support hours to enable support out of normal business
hours
+ Ashorter more easily understandable welcome e-mail
Implementation of a cross-functional training review forum (with August 21
representation from training schedulers, classroom trainers, Quality
Assurance Training Leads, on-site trainers, Branch Support Managers)
to gather feedback on training provision and recommend
improvements
Definition, agreement and publication of a consistent glossary for use July 21
by all Postmaster facing teams to eliminate the current inconsistencies
and support the exercise to harmonise content
Exit interviews are now carried out for all outgoing Postmasters and Complete early
there is a process in place to thank them for their service (was due August 21)
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Board Actions Update
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Board Action Tracking
Board
Meeting
May 21
May 21
May 21
To consider having
half a dozen
Postmaster
champions who
could help validate
the changes made
from their
perspective.
To consider and
confirm how we
were remediating
complaints in a
timely fashion.
To provide an
example of the
Branch Trading
Statement
Owner
The Postmaster engagement team is in the process of pulling a list together of around 40 key
PM Influencers.
Regional Manager Forums are held monthly to actively facilitate direct feedback.
Co-creation sessions with PMs, following the consultation, have already worked with
postmasters to generate improvements to the Drop & Go services from the initial sign up
process, to providing better information and support in how to use the service
Complaints were expected to rise initially as we encourage Postmasters to voice issues and
complaints, and new initiative were introduced to gather additional feedback.
In progress Complaints now steady at around 300 at any given time, but many of the items
captured under the complaints process are feedback and observations, particularly from
‘Adopt-an-Area. Team are reviewing whether we can separate to allow more fidelity on
tracking and action (this doesn’t change importance or commitment to resolve, but does
allow items intended as complaints to be highlighted)
Annex C contains some additional detail on complaints
Examples of the trading statement, along with all the surrounding documents are covered in
Annex A. Alongside there is a flowchart detailing the Postmaster discrepancy decision tree.
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RAG
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Board Action Tracking
Board Update Owner &
Meeting RAG
May 21
May 21
May 21
DZ invited board directors to send
any questions they had following :
further reflection [on the briefing. No further feedback received following the board session
material to support Inquiry] to .
him, Gareth Clark and Jeff Smyth. . process for settle centrally has been included in Annex xxx and is part of the
The team would come back with explanation for the earlier action around the branch trading statement.
some examples of what settling
centrally looked like now.
For the IDG Inquiry support
material to show the historical. Format for these slides has been update, with the new and old formats shown
position and the current position together in Annex B.
side-by-side.
To have a decision tree approach * Decision trees are still being created and the first example is shown for
with examples at each point of the _ disputes and settle centrally in line with the actions above.
decision tree.
To produce a succinct overview of
the issues that had attracted most I
criticism in the Horizon system and
the changes that had been
made. The draft would be shared
with Ken McCall and Tom Cooper.
The materials are being prepared and are being used in parallel to support the
NRF appraisal of legal conformance. We will provide supporting materials and aI
further implementation progress update at the July Board.
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Board Action Tracking
Board I Action Owner &
Meeting RAG
May 21
May 21
May 21
To include the “top of the
pyramid" headline issues
where we needed to
explain how the most
egregious failings of the
historical prosecutions had
been rectified,
To arrange for the Board to
see some of the systems
actually running, for
example, what happened
at a month end now
compared with what used
to happen.
To commission external
assurance on the key
systems and processes in
addition to the assurance
we had already sought on
conformance with the
Judgments.
Progress has been made against both of these actions (draft pyramid created
and options identified for Board to see systems), but the recent announcement
around the Inquiry means we may need to reassess timings.
We want to ensure the Board has the most up-to-date and appropriate
preparation for the Inquiry. Given our sustained progress with improvements,
our story will change (and improve) over time, so timeliness of activity will
ensure we can support the Inquiry in the best way.
The Inquiry team will provide some additional guidance within the next two
weeks and have Indicated that they hope to set out if/how evidence provision
and oral sessions may change. This may therefore change our current
preparations.
The timing and nature of the additional assurance activity is closely aligned
with the Inquiry timescales. We already use our own Internal Audit team
(supported by Deloitte) to review all completed improvements and will setout a
a plan for any required additional assurance to meet the new Inquiry Dan Zinner/ Gareth
timescales in the coming month. el Clarkes hye
Of note, the GLO conformance work is also underpinning the overall assurance
of completed actions and is due to complete in June 21.
3B
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Reminder of Intent for GLO Conformance work
* Post Office has started a process to formally review the actions and improvements delivered, comparing them to the
requirements of the judgements and hence determining whether POL is now, or will be at a defined future point, fully
GLO conformant.
° Board will be aware that over the course of the last few years there have been many reviews conducted, each rightly
building on the last and drawing on improved Post Office understanding in the intervening time. Whilst each of these has
delivered recommendations and reassurance on progress, none have formally compared changes with the original
judgement to formally assess conformance.
* Following this short package of work, Post Office will :
+ Be able to make a determination on its current conformance position
» Understand any remaining legal conformance gaps
* Have the reassurance that plans are in place to close those gaps.
* For those at the Inquiry, this work will enable confidence in articulating our current position and clarity on the specific
areas which are still in-flight to finalise conformance.
* The work focussed on the two judgements (CIJ and HIJ) and there are two parallel but closely couple workstreams
delivering an overall view on GLO conformance
* The determination of GLO conformance will be made by POL staff. Whilst three external companies have been asked to
support this work, they will not make the decision. They will only collate the required evidence and analysis upon which
a decision can be taken.
1s
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Cl] Conformance Progress update
« The draft CI) report, which provides a view on legal conformance, is on track to be circulated to SteerCo for review by w/c
7 June 21.
« The report will provide an assessment of legal conformance against each of the CIJ themes and an overall view of
conformance. The following ratings have been agreed by Steerco:
(@)Eull conformance: It appears that POL has fully remediated the underlying reasons for an adverse C1J finding
such that the criticism no longer applies;
(») Substantive conformance: It appears that POL has remediated the underlying reasons for the adverse finding
subject to relatively minor deficiencies (i.e. which do not go to the root of the relevant criticism) which may be
addressed to ensure ‘full’ conformance;
(©) On the path to substantive conformance: It appears POL is in the process of altering its practices to remediate
the underlying reasons for an adverse CIJ finding, where: 1)the pending changes will, once implemented,
achieve substantive conformance; and 2)substantive conformance will be achieved in a well-defined period of
time;
(d) Need to develop a path to substantive conformance: It appears that POL has not remediated the reasons for the
relevant criticism in the CIJ, and there is no evidence which suggests substantive conformance is likely to be
achieved in a well-defined period of time, based on the information provided.
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Expected outcome from NRF Cl] report
2
8
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Annex A
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Introduction
° The material on the following slides has been provided by Post Office internal teams,
and contains details around the full process that we follow.
° Given that the teams use this to guide their activities day to day, it is necessarily
detailed and in places complex, using specific language and terms.
° The material has therefore been provided to Board to give an insight and the
appropriate internal teams would welcome an opportunity to spend some time with
Board to walk through any or all of these items to provide clarity and answer any
questions.
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Postmaster Discrepancy Decision Tree
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Review/Dispute Process Flow
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Currently in development, but when live
will provide an option to log directly,
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Poninster press
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I. Transaction Correction Evidence Letter - ATM
0
Linda weight
Bank of Ireland ATM Team
"4 Floor West
Not Future Watk
Wrest Bars
Chesterfield
$49 PF
Postmistress/Postmaster
ear Sir/Madam 26 Apri 2021
Please see the attached evidence to suoport the credit gain Tvansaction Correction for £8,560
that was Issued to your office on 26.04.2021 rolating to
The attached list only shows days that do not meatch your horizon figures to Bank of Irelonds
figures. all other days match and so are not shown
Reference Key 1 Dot. Date” «Anum in eal currency Test
2002202) 413,316.00- B01 FLE 2603/2021
ason.anizs + 13,310.00
28.02.2021 11,096.00- B01 Five 7803/2001
aeona021 2s 11,060.00:
9.02200) 32,708.09 noRIZoN ENTRY
20.02.2001 32,700.00
16309:00- B01 FALE oypAane1
16,800,00-
2,4¢0.00- 801 FILE 12/04/2021
2,440.00
$,430.00- Bol FILE I yoar2071
430.00
'8,720.00- 80) FILE 14904/2021
8,720.00
16,300.00 HORLZCN ENTRY
150020214, 16,500.00
4,560.00.
Page 1
£6,330 entered ree, on 2603.21 snd 29.03.21
£16:800 not exteed for O1 04.21
£90 madersate ca 1504.21
JOTA DISCREPANCY OF £6,560 UNDERSTATED ON HORIZON
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1. Teasasion
corect
idence Leer
teceived
loess chack your figures from your dally lip (this 's your 16:30 to. 16:20 Figure} against the
‘try yeu have enaee on Horizon, to vey this iflerencs.
you do not ares you have a enbulance to ewer this TC, please contact
Fane on 0253 348 5507 and aa to speck To sre hp wth your A Dolo.
Thank you
a Sab.
Page 2
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I. Transaction Correction Evidence Letter -Bill Payment
Reference: €AS- 1695277
FAO: The Postmaster
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2. Branch Trading Statement
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3. Letter sent if ‘Review & Dispute’ Button is selected
19 Apri 20zt
Private and Confidentiat
BRANCH CODE: 297205
CUSTOMER ACCOUNT: 1037563
Bear
Discrepancy identified for
Tm weting to soe we can help you resclye a ciscrepancy of £33.05 whch hos been
‘ogistered on your latest iading statement. Plaasa Gnd encosed a statement shown
{eta amount of the eiserepancy and a breakdown of how we Believe the total has been
roacned,
faa ot tach eth soy calig ny tc ot. 1 start by avieg
cu the ates on your stakeniant ane Should you requare further
Hab‘tno bupran welt make sure tok tis w mad aval fo You
rwestigating the ciscropancy
1 you don't understand the eeason for this dscrepancy, 82 can help you to establish the
key couse oF.
Please follow ether of We apuons besow, depanding on whether we believe it 3 Branch
ney oF 9 Tansaclon Ceerectin.
2}, Iovestigating or disauting a branch discrepancy
Your Bravch Suppart Cuntre. on
Ineo fur co eleeity on
, Den2en vs, we can't agree on the reason why ths discrepancy happened, your
Bionsh Suppor Gente wt te oble to vase» Sapute for you
8) Investigating oF disauting 2 transac
Wan you recaived your transaction correction, the team that sant it wil have provided
jou with thar telephone number. if you Mave 2 query about the transaction corecton,
Page 1
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If you have alrezdy done this, and wich to dispute the transaction correction, the
‘Transaction Con (6s Team will be able to Nelp. Plaasa coqtact them at
iapadestenmesescsices= o& cad Grom on
‘Accepting the discrepancy
1 bemeves, roy undentand an senate. gna pleas coat ny emo
“br at poctmasteraccount@4 16 discuss the best course of
‘# arranging payment, ora refund, of the amount;
© Grranging a deduction from your remunarabon/fees to cover the amounts
© arranging an anstalment plan.
Remember, we're hare to help. Contacting us as soon as possible makes It much easier
for us to support you with your discrepancy, so please gat in touch as saon as you can,
‘and ideally wuttan the next seven days.
Yours sinczrely,
Michelle Stevens
Postmaster Account Support Manager
Enclosures:
Statement
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4. Dispute Acknowledgments Letter Templates (1)
Chestertc
‘Your eferance: FAD
Name and address ue reference: CAS REP
Date
ene Name
Product - EAmount
‘Thank you for contacting us regarding tie Branch Discrepancy, which was caused by
the secoptance of the debi loss Transaction Correction listed above.
‘whist your dispute is being Investigated, we will not contact you regarding the
armount on yaur account.
‘we't aim respond te you within 14 days, bur iitlooks si we may ved more te I
Jet you tr
‘Yours sincerely
Dispute
acknowledgement a result
of Accepting a TC
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Tounvciry
Postcode
Date
eae xan
Product - Amount
‘Thank you for contacting ws regarding the Tranesction Correction above
‘Wiel! ain respond to you within 4 dors, ba if ooksa f we may need more time, wel
let you tno
‘Yours sincerely
Nome Dispute
Traneaction Cortection Disputes Tears
dispunesten
pectothen
‘acknowledgement due to
{a Transaction correction
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4. Dispute Acknowledgments Letter Templates (2)
1 Foture Wie
Cheetos
0302 665 1019
‘Yur reference fea ode
Recaient name ‘Our reference: case ref
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‘adios tre 2
vey
Pontende
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Product - £Amount
“Thani: yu for contacting us for alp regarding the Trancaction Correction above,
lhe we investigate, Ihave arranged for cad aai wraresctin corettin to bs
ue to your branch to compensate the Cebit os ansachon crrecton tat
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acknowledgement while
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ame it is
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Dear mx
Product - Amount
‘Thank you for contacting us regarding the Transaction Correction above,
‘Whilst your dispute & being investigated, we il not contact you regarding the
‘smount on your account
‘Well aim respond to you within 14 days, beriftooks as we may need mare ine, we"t
let you kno.
‘Yours sincerely
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acknowledgement while
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Neme
‘Transadtion Correction Disputes Team
lcutaram snoseticn.c. oh
‘tpestafiecena
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Annex B
Side-by-side versions of Inquiry supporting narratives
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Introduction
° At the last Board session, we agreed to reformat the narrative slides to consider a
side-by-side layout. Accordingly, we’ve amended the slides and an example for the
Area Managers is provided on the next slides
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Area Managers
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The C1) implied a term obliging POL to provide adequate training and support to Operators.
The Judge also highlighted the need for POL support for Operators throughout the life of the contract, with reference in particular to when new working practices are
implemented, and new systems adopted.
What
iS it -like before
Previously, we only supported the top c3500 branches, typically Mains branches
via support from an Area Sales Manager or Mains Sales Manager. This was
further supported by a team of Telephone Support Advisors who made
‘outbound calls to branches in-between visits. Most of the network received no
face-to-face support from Post Office and had no dedicated contact when they
needed help or support; other than the Network Business Support Centre (now
BSC),
This led to a poor relationship/experience between Postmaster and Post Office,
and often Postmasters would fee! isolated and unsupported. There was no POL
support around business development, growing the Postmasters business, retail
support, advice on branch standards and customer experience; or support when
things go wrong. Postmasters didn’t like the fact that some branches had a
dedicated support from Post Office and others didn't, it almost felt elitist based
on the type of branch they operated (i.e., Mains).
In contrast, the larger branches that did get face to face support (typically
Mains) would get a monthly visit from an Area Manager, and the smaller
branches a quarterly visit from a Mains Sales Manger. The roles would very
‘much focus on supporting their business in relation to Mails, Travel, Banking,
Financial Services and Telecoms. In addition to in branch support, these
branches would also be invited to regional and area training events to further
support capability development of Postmasters and their teams.
So as far as a postmaster was concerned the support, they received was a bit
of a lottery depending on the size of the branch and their appetite to promote
mainly telephony and financial services (this was the emphasis at the time).
‘Area Manager team increased 94 in April 2019. Every Postmaster now has an Area
Manager dedicated to their branch. In addition, a Business Support Manager role has been
created to provide early days support for the first 6 months after they are on-boarded,
‘A partnership approach in ways of working has been adopted between Area Managers and
Postmaster with Postmasters driving a large part of the agenda, and activities they wish to
cover in session. ‘We're Listening’ events have been introduced with area networking
‘evenings, where Postmasters are invited for dinner alongside other Postmasters, Area
managers, Regional Manager and senior POL leaders to proactively discuss and listen to
challenge face, which also enables peer-to-peer networking.
Different methods of communication has been actively encouraged between AMs and
Postmasters including the use of WhatsApp, Facebook etc.
For any new ways of working or changes to products, transaction and remuneration the
field teams now work together to communicate to all postmaster in the way and time that
best suits them either face-to-face or using Microsoft Teams.
All field teams are now informed of all operational changes in advance and are routinely
included and asked to provide feedback on the nature of the change and what support will
be required to fully embed.
How has it changed?
31
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Area Managers
Further ch.
the heart of e
nges planned ” to put postmasters at
erything we do”
Develop AM/BSMs retail development skills further in order to
ensure that we continue to provide best in class support to the
Whole of the Postmasters business, not just Post Office,
‘An improved CRM system detailing all Postmaster touch points,
allowing for an even greater Postmaster experience.
Being more data driven to target the right level of support at the
fight time, to ensure that we pre-empt any potential issues.
Further evolve the ‘Playbook’, to ensure that all field teams have the
right tools needed to support all Post masters to thrive,
Horizon training and annual refresher training for all Area Managers,
ensuring that we are always able to offer technical support in person
where needed,
Postmaster Support Guide under refresh to ensure its relevant and
up to date.
Going forward, we will continue to evolve ways of working by
learning from other franchise businesses to understand best practice
in terms of how other franchisees are supported to succeed.
We will continue to understand the needs and demands of
Postmasters to endure that we are adapting to meet this in terms of
our team structures and deployment.
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The Postmaster Experience - Now (and to be)
Overwhelmingly, Postmasters value the support provided by their Area Manager. They have
someone to support them to grow and drive their business forward. Provide support with their
retail proposition and overall customer experience, as well as someone to turn to when they need
help or support working in the true spirit or partnership.
‘Area Managers also support Postmasters to get things right first time when it comes to
conformance, ensuring that we always trade in a compliant and customer centric way.
‘Area Managers are data driven to ensure that Postmasters have the right support at the right
time, e.g, if indicators show that a Postmaster needs additional support when it comes to cash
management, the Area Manager can target support quickly and in a proactive fashion.
Within the regional structures, we now have the ability to deploy additional resource based on
Postmaster need, e.g. BSM/Onsite Trainer
Postmaster Consultation 2021
One of the most positive feedback in the survey was the strong support provided by Area Managers
Over half have expressed an interest in being more involved in decision making via working groups
or local engagement with Area Managers. Half want ‘human’ contact (phone or f2F) when they have
‘an urgent issue
The graph below shows the important
Part that Area Managers played in
‘supporting Postmasters to keep their
branches open during the CV-19
Pandemic.
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Area Managers - Before
Relevant Judgement Narrative What was it like before
The CL) implied a term obliging POL to provide adequate Previously, we only supported the top c3500 branches, typically Mains branches via support from an Area Sales
training and support to Operators. ‘Manager or Mains Sales Manager. This was further supported by a team of Telephone Support Advisors who made
‘outbound calls to branches in-between visits. The vast majority of the network received no face to face support
The Judge also highlighted the need for POL support for _from Post Office and had no dedicated contact when they needed help or support; other than the Network
Operators throughout the life of the contract, with Business Support Centre (now BSC).
reference in particular to when new working practices are
implemented and new systems adopted. This led to a poor relationship/experience between Postmaster and Post Office, and often Postmasters would feel
isolated and unsupported. There was no POL support around business development, growing the Postmasters
business, retail support, advice on branch standards and customer experience; or support when things go wrong.
Postmasters didn’t like the fact that some branches had a dedicated support from Post Office and others didn‘, it
almost felt elitist based on the type of branch they operated (i.e, Mains).
In contrast, the larger branches that did get face to face support (typically Mains) would get a monthly visit from
‘an Area Manager, and the smaller branches a quarterly visit from @ Mains Sales Manger. The roles would very
‘much focus on supporting their business in relation to Mails, Travel, Banking, Financial Services and Telecoms. In
addition to in branch support, these branches would also be invited to regional and area training events to further
support capability development of Postmasters and their teams.
So as far as a postmaster was concerned the support they received was a bit of a lottery depending on the size of
the branch and their appetite to promote mainly telephony and financial services (this was the emphasis at the
time).
33
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Area Managers - After
‘Area Manager team increased to 94 Area Managers in April 2019. Every
Postmaster now has an Area Manager dedicated to their branch.
BSM role created to provide early days support (6 months post go live)
Partnership approach adopted in terms of ways of working with Postmasters
driving a large part of the agenda
Adopted an approach of ‘We're Listening’ via area networking evenings,
where Postmasters would be invited for dinner alongside other PMs, AM, RM
‘and senior POL leaders to listen to challenge, but also allowing for peer to
peer networking.
New ways of encouraging multi level communication between AMs and
postmasters have been actively implemented, these include tools like
WhatsApp, Facebook etc
When we have new ways of working or changes to products, transaction and
‘temuneration the field teams now work together to communicate to all
postmaster in the way and time that best suits them (i.e. f2f, teams etc)
Field teams are now informed of all operational changes in advance
The Postmaster Experience = Now (and to be) Metric/Data/Surveys
+ Qverwhelmingly, Postmasters value the support provided by their Area
Manager. They have someone to support them to grow and drive their
business forward. Provide support with their retail proposition and overall
customer experience, as well as someone to turn to when they need help or
support working in the true spirit or partnership.
‘Area Managers also support Postmaster to get things right first time when it
comes to conformance, ensuring that we always trade in a compliant and
customer centric way.
Area Managers are data driven to ensure that Postmasters have the right
support at the right time, e.g. if indicators show that a Postmaster needs
additional support when it comes to cash management, the Area Manager
can target support quickly and in a proactive fashion.
Within the regional structures, we now have the ability to deploy additional
resource based on Postmaster need, ¢.g. BSM/Onsite Trainer
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Develop AM/BSMs retail development skills further in order to ensure that we continue to
provide best in class support to the whole of the Postmasters business, not just Post
Office.
‘An improved CRM system detailing all Postmaster touch points, allowing for an even
greater Postmaster experience.
Being more data driven to target the right level of support at the right time, to ensure
that we pre-empt any potential issues.
Further evolve the ‘Playbook’, to ensure that all field teams have the right tools needed
to all Post masters to thrive.
Horizon training and annual refresher training for all Area Managers, ensuring that we are
always able to offer technical support in person where needed.
Postmaster Support Guide under refresh to ensure its relevant and up to date.
Going forward, we will continue to evolve ways of working by learning from other
franchise businesses to understand best practice in terms of how other franchisees are
supported to succeed,
‘We will continue to understand the needs and demands of Postmasters to endure that we
are adapting to meet this in terms of our team structures and deployment.
Postmaster Consultation 2021
One of the most positive feedback in the survey was the strong support provided by Area
Managers
Over half have expressed an interest in being more involved in decision making via working
groups or local engagement with Area Managers. Half want human’ contact (phone or £2F)
When they have an urgent Issue
‘The graph below shows the important
Part that Area Managers played in
supporting Postmasters to keep their
branches open during the CV-19
Pandemic.
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Annex C
Complaints Update
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More detail around postmaster complaint handling
We are taking a number of actions to support our postmasters with their complaints:
+ Anew postmaster compliant handling policy has been created. A copy is available to all Post Office employees and training has
been provided to all teams who handle complaints
+ We are encouraging postmasters to raise their complaints with us through regular comms therefore we have ensured we have the
right resource in place to handle any volume increases
What happens with the feedback?
+ Data from the case management tool is extracted to produce a live Postmaster Issues and Complaints dashboard
+ Each business area has access to the dashboard and can drill into their area of accountability
+ Service levels are closely monitored along with complaint volumes
+ Each area of the business is being held to account to ensure they are giving best possible service to postmasters
+ Trends are discussed at the monthly Voice of the Postmaster meeting and opportunities identified to fix root causes of issues
Key metrics:
+ In P1, 85% of complaints resolved were resolved within the 10-business day SLA (vs. target 80%)
+ There are 209 complaints currently open which are over SLA!
+ The majority over SLA are due to the nature of the enquiries coming through the Adopt an Area (AaA) channel - some of
these are not complaints but requests or suggestions, e.g., asking to be able to track letters and parcels on Horizon for
customers, asking to be able to sell special stamps (in an outreach branch)
+ We are considering how we can separate complaints from AaA vs suggestions to ensure feedback is handled through the most
effective channel and to avoid distorting complaints reporting
1. As of date of analysis: 17/05/21
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Actions from Insight Review at Voice of the Postmaster Session
Area Key Insights: Actions assigned
RMG/PF SLAs and contractual obligations to be reviewed if meeting obligations
product peatare Royal Mallor f Weekly communteaton with RM Complaints link now issued
Parceltorcs flied Reinstate Power BI missed collections log to validate agalnst RM/PF view
Service Management meeting with RMG to be held (including complaint review).
RMG have agreed to make changes to reduce dust and debris when manufacturing and packaging the Queens Head
Label
New counter printer QR code deployed which takes postmaster straight tothe printer cleaning video. Data to be
>40% Printer issues of analysed to see if this reduces incident volumes.
hich 66% causes by Addltional counter printers to be supplied to Remote, Rural and Outreach branches as part of our remote spare plan
is just & debris. Historical Engineering supplier to carry out proactive maintenance
ata inleates these wil f Specialist cleaning swabs are being plated
tinue to rise To explore whether SPM device strategy can be accelerated
Confirm likely requirements of new printing devices and assess impact of integrating with Horizon with F) to bring
Implementation forward
Explore options to design out printing with Product owners e.g., email receipts (in Horizon Improvements phase 2).
Work is underway to reduce lead-times between branch ordering and receiving stock, target to reduce by 1 day for all
branch types.
20% YTD relate to Stock Bank holiday ordering trial underway, previously branches that routine order day fll on a bank holiday, orders were
‘Supply chain ordering of which 35% rolled over to the next scheduled day, therefore missing an ordering period.
emergency orders Adeitonal comms tobe proviged to Pils when stack delivery dates change
Better forecasting of spikes in emergency orders e.9 Stamp price increase.
Christmas Planning underway.
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POL Board Meeting - 03 June 2021-03/06/21
11.2
Tab 11.3 Sealings
@
POST OFFICE LIMITED
BOARD REPORT
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Title: Sealings Report Meeting Date: I 03" June 2021
Author: Rubia Khanom, Company Sponsor: Veronica Branton, Company
Secretariat Apprentice Secretary
Input Sought: Approval
The Directors are invited to consider the Register of Sealings and to approve the affixing of
the Common Seal of the Company to the documents set out against items number 2057 to
2070 inclusive in the Register of Sealings.
Executive Summary
For the Directors to resolve that the affixing of the Common Seal of the Company to the
documents set out against items numbered 2057 to 2070 inclusive in the Sealings Register is
hereby confirmed.
Strictly Confidential
POL Board Meeting - 03 June 2021-03/06/21
199 of 204
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SELL GEL
Date Created Post Office Limited Company Number
26/05/2021 Register of Sealings 2154540
Seal Nomber Date of Date of Persons Atesting ‘Destination oF
File Ref. Sealing Authority I Description of Document To Document Document
2057 / Power of I 1203/2021 7210312021 I Power of Allomey granted by Post Offce Limited under UK aw as @ “Sarah Koniarski Senior Assistant Web3 C100960
‘Altomey deed, entrusting Bejing Sunhope Iniellectual Property Limited to act as its I Company Secretary
agent in relation to trademark number 7207238 for renewal of registration
and recordal of modification oficensorficensee. This Power of Atorney
allows an Agent to act on our behalf in renewing a registered trademark in
China ~ this isnot a licence to use our brand. Authonsed in eCAF1276.
Web3 reference: 100960. Exccuted as a deed under the common seal
of Post Office Limited - this is a Power of Attorney so no counter signature
roquird.
20587 Transfer I 2570872021 7210372021 Transfer in respect of Sale of Freehold - Ammanford Post Ofice, 4A ‘Veronica Branton (Company ‘Womble Bond Dickinson
of title Queen Street SA18 3DE between Post Office Limited (Transferor) and__I Secretary) and Alisdair Cameron
‘Sumankaran Suntharamoorthy (Transferee). Executed under electronic I (Director)
signature coordinated by Womble Bond Dickinson due to Covid-18
pandemic.
20597 ‘PSI03I202T 77/03/2027 Leasehold Surrender relating fo 67-70 North Hil Colchester, Essex COT I Veronica Branion, Compai Womble Bond Dickinson
Leasehold 1PX between Post Ofice Limited (Tenant tle number FXB38549) and I Secretary and Alisdair Cameron,
Surrender Firouzi investments Limited (Landlord TITLE NUMBER EX587025). ‘Company Director
Executed under electronic signature coordinated by Womble Bond
Dickinson due to Govid-19 pandemic.
‘2607 Deed I 2aF0R2027 ZARB I Agreement to surrender a lease of premises at Post Offce premises at I Sarah Koniarski Senior ASSilant I WBD— Returned Direct
Crown Street, Darington, DL1 1AB between Newriver Retail (Dariingion) I Company Secretary
Limited (Landlord) and Post Office Limited (Tenant). Executed via e=
signature during Covid-19 pandemic and returned direct to WBD. Note
lelier of non-crystalisation relating to the same.
2061 Transfer I 24/03/2021 24/03/2021 Transter of title relating to Head Post Office, Crown Street, Darlington, I Sarah Koniarski, Senior Assistant I WBD ~ Returned Direct
Lt TAB. Executed via e-signature during Govid-19 pandemic and. Company Secretary
relumed direct to WBD.
‘20627 Licence to I 3170872021 (20372021 I Licence to occupy on shor farm basis - relating To The Area Known As I Rebecca Whibley, Senior Assistant I WSO
occupy 38-40 West Street Rochford Essex SS4 1AJ between ROCHFORD Company Secretary
FINANCIAL HUB COMMUNITY INTEREST COMPANY (licensor) and
POST OFFICE LIMITED (icensee), Executed using DocuSign
Coordinated by WED during the pandemic.
20637 Transfer I 2570872021 ZAOSROA I Transfer of ttle - TR1: Surrender of Leasehold Property - Units 9 and 10 I Veronica Branton, Company ‘Karima Karger, Legal
of ttle (Postal Nos 45-46) Queens Arcade, Quoen Street, Cardiff CF 10 2BY - I Secretary and Alisdair Cameron,
between POL (Transferor) and Sapphire QAC Holding S.E.N.C. a society I Director
fen nom collet constituted under the laws of the Grand Duchy of
Luxembourg with number 8159592 whose registered adress is 1 Ale
Sheffer, L-2520, Luxembourg . Executed under e-signature during Covid
49 pandemic.
20687 5I04TZ02t 20S I DISPOSITION by POST OFFICE LIMITED in favour of 83 S LTD ‘Sarah Koniarski, Senior Assistant I Karima Karger. Legal
Disposition incorporated in Seotland (Registered Number SC105694) and having their I Company Secretary
Gale) Registered Office at 28 Melvile Street, Edinburgh, EH3 7HA (Purchaser)
In respect of 265 Momingside Road, Edinburgh, in the County of
‘Midlothian. (Recorded under seal entry 2068.) Executed under signature
cof an authorised signatory and witnessed. Note: Letter of non-
Strictly Confidential
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a
‘Seal Number Date of Date of Persons Atesting Destination of @
[File Ref. Sealing Authority __I Description of Document To Document Document a
‘rystalsation regarding POL debentures in favour of BEIS and Santander
‘accompanying disposition. a
20647 2910472021 20/04/2021 Agreement for the Sale of Leasehold Land with vacant possession I ‘Veronica Branton (Company Karina Karger, Legal
‘Agreement for Relating to Post Office Premises at 1 Church Street, Exmouth EX8 1AA I Secretary) and Alisdair Cameron
‘Sale between Post Office Limited (Seller) and Wolfhead Limited (Buyer). (Director)
Executed under e-signature during the Covid.19 Pandemic.
2085) Transfer I 29/08/2027 20/04/2021 Transfer of Tite for Post Office Premises at 1 Church Street, Exmouth I Veronica Branton (Company Karima Karger, Legal
‘of ttle EX® 1AA between POL (Transfaror) and Wolfhead Limited (Transferee) I Secretary) and Alisdair Cameron
‘Seal 2065 (Note: Capital Allowances Election also provided.) Executed I (Director)
Under e-signature during the Covid-19 Pandemic.
20687 Para 27IOAT2O21— Undertoase relating to part of the land known as Unit 20 Nursling ‘Veronica Branton (Company Karima Karger, Legal
Underlease Industrial Estate, Majestic Road, Nursling, Southampton S016 OYT Secretary) and Alisdair Cameron
between Loomis UK Limited (Landlord) and Post Office Limited (Tenant) I (Director)
‘Seal 2066. Executed under e-signature during the Covid-18 Pandemic.
‘20677/Licence to I 20/04/2021 2TIOA72021 Licence to underlet relating to Part of Unit 20 Nursing Industral Est Veronica Branton (Company Karima Karger, Legal
Underiet Southampton $016 OYT between AVIVA LIFE & PENSIONS UK LIMITED I Secretary) and Alisdair Cameron
(Landlord) LOOMIS UK LIMITED (Tenant) and POST OFFICE LIMITED — I (Director)
(Undertenant) Seal 2067 Executed under e-signature during the Covid-19
Pandemic.
2068 /Transter I 20/04/2027 27IOAT2O21 Transfer of whole registered tte with limited tile guarantee relating to I Veronica Branton (Company Korma Karger, Legal
of Titke Post Office Promises at 117 West Strect, Secretary) and Alisdair Cameron
Post Office Limited (Transferor) and City Centric Limited (Transferee) I (Director)
‘Seal 2068. Executed under e-signature during the Covid-19 Pandemic.
20707 Lease I 2870472027 28/04/2021 Underlease of whole untl 2026 in respoct of 117 Stockport Road Veronica Branton (Company Karima Karger, Legal
Manchester M12 6AB between Post Office Limited (Landlord) and Arif
‘Matadar (Tenant) Executed under e-signature during the Covid-19
Pandemic.
Secretary) and Alisdair Cameron
(Director)
Strictly Confidential
Tab 11.4 Future Meeting Dates
Si
OFFICE
POST OFFICE LIMITED
BOARD REPORT
UKG1I00041682
UKGI00041682
Title:
Future Meeting Dates
Meeting Date:
03" June 2021
Author:
Rubia Khanom, Company
Secretariat Apprentice
Sponsor:
Veronica Branton, Company
Secretary
Input Sought: Noting
The Directors are requested to note the future meetings dates scheduled in respect of Post
Office Limited Board and Committee meetings.
2021
Date) Time) Meeting)
Thursday 03 June 2021I 10.05-11.50 I Board (Part 1)
Thursday 03 June 2021I 14.15-17.15 I Board (Part 2)
Thursday 10 June 2021] 15.00 - 16.30 I Weekly CCRC Board Call*
Tuesday 29 June 2021I 10.00- 12.00 I Additional ARC (for ARA)
Thursday 01 July 2021 15:00 -18:00 Remuneration Committee
Monday 26 July 2021 I 09.00- 11.30 I ARC
Tuesday 27 July 2021 I 09.30- 13.00 I Board
Tuesday 27 July 2021 I 13.30- 18.00 I Board Strategy Away Day - 1
Wednesday 28 July 2021I 08.30 - 16.30 I Board Strategy Away Day - 2
Tuesday 28 September 2021I 09.00- 11.30 I ARC
Tuesday 28 September 2021I 11.45- 16.15 I Board
Tuesday 28 September 2021I 16.15- 16.45 I Nominations Committee
Tuesday 28 September 2021I 16.45- 17.30 I Remuneration Committee
Tuesday 26 October 2021 I 09.00- 14.00 I Board
Tuesday 30 November 2021 I 09.00- 11.30 I ARC
Tuesday 30 November 2021I 11.45-16.15 I Board
Tuesday 30 November 2021I 16.15-16.45 I Nominations Committee
Tuesday 30 November 2021I 16.45- 17.30 I Remuneration Committee
*As agreed at the CCRC Meeting on 02 April 2020, this Board call is being set up as a
reoccurring meeting every Thursday at 15.00hrs.
Strictly Confidential
202 of 204
POL Board Meeting - 03 June 2021-03/06/21
Tab 11.4 Future Meeting Dates
PO
OFF
UKG1I00041682
UKGI00041682
2022
ate! Time) Meeting)
Monday 24 January 2022 15.00 - 17.30 I ARC
Tuesday 25 January 2022I 12.30- 17.00 I Board
Tuesday 15 February 2022I 10.00- 11.00 I Nominations Committee
Tuesday 15 February 2022) 11.00- 12.00 I Remuneration Committee
Tuesday 29 March 2022/ 09.00- 11.30 I ARC
Tuesday 29 March 2022I 11.45-17.00 I Board
Strictly Confidential
POL Board Meeting - 03 June 2021-03/06/21
203 of 204
70Z 40 voz
1zigoreo-1z0z eunr €0 - Suneayy p1e0g 10d
UKGI00041682
UKG100041682
Board Meeting Table 2021,
Now executive Meeting
2021-24)
26 lanuary 2021 “30 March 2031 08 June 2023,
= ORepot © EO Resort + CEO Report
‘Financial Performance Report ‘+ Finance: Solvency, Budget 2021/22, Finaneal Performance Report + Financial Performance Report
= Sowvency Paper Network strategy update + Strategic Plan
‘Draft Budget 2021/22 ‘+ Fostmaster Programme update/ Postmaster Journey Project + Wanking Framework 3 Pricing Framework
sem ‘+ Mails Regulation cscussion pager SPM Multi-Year Business Case
‘Network stratery update ‘+ Stating update + Stating update
= puDO. ‘+ People Usdate Historical Matter Business Unit report
+ Postmaster Experience '+ Independently faciitated Board Evaluation Report + Approvals: External Ausitor Fees & Scope of Engagement (2020/21); Post
+ Heakh & Safety Report including securty/ safety review ‘+ Historical Waiter Business Unit report Office Operating Model Funcing: PUDO funding: Matters Reservec and
‘+ Notingané Governance tems Annual Governance Report Tors
‘+ Noting ane!Governance tems (ie Microsoft Erterorise Agreement I * Noting and Governance items
27 uly 2023
‘Strategy sessions -27 & 28 July 2021
28 September 2021
+ CEOReport
‘© Financial Performance Report
‘Independently facilitates Board review actions
*PUDO integration
© PUDO update
‘© Beifast Ext Plan: external consultancy
‘Historical Matter Business Unit report
1 Modern Slavery Statement
‘© Noting and Governance items
Non Executive meeting
> Digitalidentty
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‘rarsformation anc Strategy Dractor
+ CEO Report
+ Financial Performance Report
Belfast Exit Plan: delivery progress and next steps
+ Historical Matter Business Unit report
+ Noting and Governance items
Non Executive meeting
‘Nom Executive meeting
26 October 2021 30 Novernber 2021 25" January 2022
+ CEO Report + CEO Report = EO Report
‘© Financial Performance Report ‘+ Financial Performance Report ‘Financial Performance Report
‘© Historical Matter Business Unit report ‘© Historical Matter Business Unit report ‘© Historical Matter Business Unit report
‘© Noting and Governance tems # Noting and Governance items Noting and Governance tems
‘+ Abril Resort and Accounts 2080721 + Approval: Code of Business Standards
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