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POST OFFICE LIMITED (POL) - Q3 Review
Thursday 16 October 2014, 14:15-15:15 UG-H, 1 Victoria Street, London
Present
Roger Lowe Richard Callard
Rachel James Tim Mcinnes
Bhavya Sharma Peter Batten
Tobi Adetimilehin James Baugh
Rajesh Kedia
Jeremy Ankers
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Financial Performance
The panel queried whether Network Transformation (NT) was on track and, if
so, how that fed through to bonuses. The team explained that NT was indeed
on track, but that it was the only bonus metric that is currently being met. POL
has two key challenges in meeting its financial targets: firstly the targets
themselves are very ambitious, requiring an increase in revenue to £45m, and
secondly POL is facing pressures in a number of its markets (e.g. mails
market has dropped). Removal of tax discs will create challenges going
forward, reducing both revenue and footfall. Nevertheless, financial services
are doing well and there is also a move towards high value products such as
mortgages.
Relationship with Royal Mail
The panel queried whether the team had visibility on any future long-term
agreement with Royal Mail. The team explained that POL were looking to
raise this issue early as much of Network Development requires Royal Mail
involvement. The team felt POL were looking to be genuinely innovative with
regard to products and process in a way that Royal Mail are currently limited
(e.g. both culturally and by their agreement with the Unions). The relationship
with Royal Mail was feeling more positive overall, with examples of joint teams
working together in the same office. The panel acknowledged it was positive
that POL was looking to take the lead in the relationship.
Post Office Card Account (POCA)
The team explained that the POCA product offered an opportunity to receive
social security payments without holding a bank account. POCA brings in
£60m revenue per annum in addition to significant footfall. It represents POL’s
second biggest contract. The current contract expires in March 2015 with the
possibility of a 2 year extension. Extensive discussions are on-going with
DWP, who are maintaining a position of requiring a 10% saving on the
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baseline contract. POL are holding firm on 1-2%. The panel queried what
levers the team had with DWP. The team explained that there were none,
although POL was really the only viable option to deliver the contract. There
was a lack of alignment in Whitehall. It was agreed there was significant
political risk, however there has been a strong steer from HMT that there is
little appetite for political level engagement.
Management
The team explained that POL were in the process of appointing a CFO. A
submission has been put to the CST, however it is understood there is a
significant backlog. Nonetheless HMT officials are positive the appointment
will be approved. Appointment of a new CEO has been de-prioritised.
Issues to raise at Risk Committee
It was agreed that there were currently no risks to escalate to the Risk
Committee.
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