29 November 1999

BYERS APPROVES POST OFFICE'S FIRST STRATEGIC PLAN

The Government has approved the Post Office's first Strategic Plan, Stephen Byers, Secretary of State for Trade and Industry, announced today.

The Post Office's five-year Strategic Plan is central to the new arms length commercial relationship between the Government and the Post Office and forms a key element of the reform package announced in the Government's White Paper in July.

In a written answer to a Parliamentary Question from Fiona Mactaggart, MP (Slough), Mr Byers said:
"I am pleased to announce Government approval of the Post Office's Strategic Plan for 1999/2004. This is a five year rolling Plan which will be updated annually. The Plan, as submitted by the Post Office Board meets the requirements set out in the Post Office White Paper (CM 4340) and represents a key element in the new arm's length relationship that the Government is now establishing with the Post Office in fulfilment of the reforms described in the White Paper. The Post Office will now be pursuing and developing their strategy and this will be reflected in the Plan for 2000/2005, which the Board will be presenting to me next Spring."

"For the Post Office both to modernise and improve services to customers in this country and to develop into a significant global player in distribution markets poses tough challenges, but exciting opportunities. In an increasingly competitive market place for postal services these challenges should not be underestimated as the Post Office itself fully recognises. This means that the Post Office must successfully build on current initiatives and seize commercial opportunities as they arise in the UK and internationally."

"The key features of the Strategic Plan are commercially confidential, and as such will not be published. However, on the basis of the Plan the Government has set a post-tax profit target of £350 million for the financial year 1999/2000. This figure excludes any exceptional provisions which may be made for the Horizon automation project. As already announced, the Government has set the external financing regime (excluding adjustments for Horizon and acquisitions) as 50% of the post-tax profits for this year, and therefore, if the Post Office achieves the profit target, this equivalent of a commercial dividend will be £175 million. In the unlikely event of the Post Office falling short of the profit target the minimum figure will be £140 million. The Post Office will not pay dividends until it becomes a plc but in the meantime will set aside the relevant amount in its reserves."

Notes for Editors:

1. The Strategic Plan sets out the high level strategic approach by which the Board will secure the commercial success of the Post Office in the UK and worldwide. As part of the reform package, the Government will set the Post Office a profit target for the whole of the Post Office business on the basis of the agreed Plan. The Post Office will also be expected to invest an equivalent of a commercial dividend each year. This will be set at 50 per cent of the Post Office's expected post-tax profits in 1999/2000, and thereafter the level will be 40 per cent of post- tax profits each year. This will in effect mean more than halving the rate at which profits are removed from the business.

2. The Government's White Paper - "Post Office Reform: A World Class Service for the 21st Century" - was published on 8 July 1999 (DTI News Release P/99/593). Details are available from the DTI website: http://www.dti.gov.uk/por