Without Comment ……

These are extracts from the annual reports of Post Office Limited over the last three years.

Annual Report 2015/16

Contingent liabilities: As a large, nationwide retailer operating in dynamic and competitive markets, we may be subject to regulatory investigations and may face damage to our reputation and legal claims. From time to time, we may be named as a defendant in legal claims or be required to respond to regulatory actions in connection with our activities. This may include claims for substantial or indeterminate amounts of damages from customers, employees, consultants and contractors, or may result in penalties, fines, or other results adverse to us. Like any large company, we may also be subject to the risk of potential employee or agent misconduct, including non-compliance with policies and improper use or disclosure of our assets or confidential information. A High Court claim has been issued on behalf of a number of postmasters against Post Office in relation to various legal, technical and operational matters. Full particulars of the claim (including as to quantum) have not yet been received by Post Office. The Directors do not consider the outcome of any current claim or action will have a material adverse impact on the consolidated position of the Group

Annual Report 2016/17

Contingent liabilities: As a large, nationwide retailer operating in dynamic and competitive markets, we may be subject to regulatory investigations and may face damage to our reputation and legal claims. From time to time, we may be named as a defendant in legal claims or be required to respond to regulatory actions in connection with our activities. This may include claims for substantial or indeterminate amounts of damages from customers, employees, consultants and contractors, or may result in penalties, fines, or other results adverse to us. Like any large company, we may also be subject to the risk of potential employee or agent misconduct, including non-compliance with policies and improper use or disclosure of our assets or confidential information. On 11 April 2016, a High Court claim was issued on behalf of a number of postmasters against Post Office in relation to various legal, technical and operational matters (“the Post Office Group Litigation”). The Generic Particulars of Claim does not quantify the value of the claims. Post Office is defending the claim, which is proceeding under a Group Litigation Order and is at a nascent stage. The Directors do not currently consider, but continue to keep under review whether, the outcome of any current claim or action will have a material adverse impact on the consolidated position of the Group.

Annual Report 2017/18

Contingent liabilities: As a large, nationwide retailer operating in dynamic and competitive markets, we may be subject to regulatory investigations and may face damage to our reputation and legal claims. From time to time, we may be named as a defendant in legal claims or be required to respond to regulatory actions in connection with our activities. This may include claims for substantial or indeterminate amounts of damages from customers, employees, consultants and contractors, or may result in penalties, fines, or other results adverse to us. Like any large company, we may also be subject to the risk of potential employee or postmaster misconduct, including non-compliance with policies and improper use or disclosure of our assets or confidential information. On 11 April 2016, a High Court claim was issued on behalf of a number of postmasters against Post Office in relation to various legal, technical and operational matters, many of which have been the subject of significant external focus for a number of years. Post Office is robustly defending the claim, believes it lacks merit, but welcomes the opportunity to have these matters resolved through the Court managed Group Litigation Order. The Court has ordered two trials to be heard in 2018-19 to determine a subset of the preliminary issues in dispute between the parties. The Court has not yet ordered a process for determining any issues of liability or quantum. To date, the Claimants have not asserted the aggregate value of their claims in any of the Particulars of Claim filed in the litigation. While the Directors recognise that an adverse outcome could be material, they are currently unable to determine whether the outcome of these proceedings would have a material adverse impact on the consolidated position of the Group, and are unlikely to be able to do so until the Court has made further determinations and the Claimants have provided the necessary information about the value of their claims. The Directors continue to keep this under close review. In 2017/18 the costs of £3 million included in operating exceptional items relate to Post Office defending the Post Office Group Litigation. These have been disclosed as operating exceptional items because we expect costs to be more significant in 2018/19 and 2019/20.

 

 

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Save our Post Offices

Post Office Ltd (POL) has only one shareholder, the Government.  In theory POL should be accountable for their actions to them but in practice they are accountable to no-one.  A single civil servant controls the golden share but his job would be toast if he decided the management and board of directors were not up to the job because he had basically appointed them.   The civil servant has no business background and relies totally on POL telling him that all is well.

In such a situation critics of POL can be ignored and the truth hidden.   Incompetence can be tolerated and incompetent management can proliferate by employing similar types (the Peter Principle[i]). It beggars belief that a variety of government ministers over the years have not realised this situation and continue to fund a company run by a bunch of misfits.  In the last 8 years some £3 Billion has been provided to them yet no official audit of how that money was spent has ever been carried out.   Enquiries to the National Audit Office discovered that POL was outside their remit and FOI requests for details of how that money was spent found that the only information provided to government was contained on half a page of A4 paper[ii].

Examples of incompetence and complete lack of business acumen are widespread and occur almost on a daily basis and yesterday was no exception.   The decision to offer 70 plus Post Office Crown franchises to WH Smith’s is as close to commercial madness as you can get and the government would do well to note that it is also political madness.   The High St is in decline.  WHSmith’s High St business is in decline.  The prospect of WHSmith failing like the host of other big High St chains recently is more likely and they are already closing non profitable stores with more closures certain to follow.   When, not if, that happens the Post Office network will take a massive overnight hit.  The political ramifications will be huge and blame will fall on the shoulders of the politicians that failed to realise the unacceptable risk of yesterday’s announcement.

On a more practical note let’s examine what exactly POL are trying to achieve by moving a Crown Post Office into a WHSmith store and what WHSmith are trying to achieve by incorporating them.

The rational from a Post Office perspective is that the Crown Offices are unprofitable.  The lease costs of the buildings plus the wages of the staff that operate the branches are the main reasons plus of course the decline in usage of post office services.

From a WHSmith perspective, an in store Post Office brings footfall.  It is highly unlikely that even with reduced wages the branch would be profitable in its own right if fixed costs were allocated proportionally.  Footfall increases shop side spend hopefully and must have had some positive impact on their stores’ performance in the past given that they want to take on more.

The real trouble I have with POL management of Crown Offices is their abject failure to do exactly what WHSmith are attempting to do in using the footfall to increase retail sales.  The absurdity of it all increases when you find out that POL recently signed a supply contract with, of all companies, WHSmith for retail products.   The nature of this close relationship with Paula Vennells’ previous employer might well be worthy of closer inspection if it were not for the fact that, as already stated, POL are unaccountable to no-one.

Over the years I have visited many Crown Post Offices.  Impressive buildings in desirable locations in the High St with an amazing amount of space on the customer side, presumably a hangover from the days when long queues were prevalent.    Any entrepreneur worth their salt would have utilised this space long ago to establish a retail offering of keenly priced goods relevant to the footfall the Post Office side attracts.  Not so Post Office Ltd.  They consider they are doing a great job in retail with branded, expensive products in a very limited display.  No concept of offering what the typical Post Office customer wants and needs.   It is exasperating to note that when the network was at its peak and traditional post offices operated by successful independent business men and women were in the majority, the retail offering they provided to their customers was more or less the same – gifts, greeting  cards and stationery.

The amount of money that has been lost by Post Office Ltd in not offering a proper retail section to their customers must be staggering.  The fact that they have never attempted to exploit the commercial aspects and possible vertical integration of retail products within the largest network of outlets in the British Isles reminds me only of their true incompetence.   Could it also be arrogance that they think they know best?  Hardly justifiable considering that they depend on the business acumen and success of thousands of subpostmasters (SPMRs) to maintain their network and provide some profit as well yet they have NEVER sought to employ such a SPMR in a suitable management position.

The time is ripe for the government to sit up and take notice.   Two highly embarrassing trials concerning the unfair treatment of the very SPMRs who have successfully underpinned the Post Office network since its inception are imminent.   Heads will no doubt roll in the aftermath and what better time to replace them with the competence and commercial acumen of successful businessmen and women that value the Post Office network more than the current management team.   They are the very people who can turn around the Crown Offices into successful retail operations and secure the future of hundreds of highly skilled post office workers.

[i] https://en.wikipedia.org/wiki/Peter_principle

[ii] https://www.whatdotheyknow.com/request/283704/response/725434/attach/html/5/Post%20Office%20State%20Aid%20Report%20190913%20Redacted.pdf.html