Post Office Limited
Purpose
Post Office Limited provides mails, financial and Government services to consumers and small businesses through its network of around 11,500 branches.The network supports the Government’s social and economic policy objectives to support communities and vulnerable groups throughout the UK.
Legal status and ownership details
Post Office Ltd is a wholly owned subsidiary of Royal Mail Group Ltd, which in turn is a wholly owned subsidiary of Royal Mail Holdings plc.The Government owns 100% of Royal Mail Holdings plc. Details of Royal Mail Group are disclosed separately in this report.
Government's objectives
- a sustainable network of around 11,500 post offices providing reasonable access to users nationwide, in accordance with network access criteria set by Government
- provision of certain key services of general economic interest, including:
- processing of social benefit and tax credit payments to the public
- processing of national identity and licensing scheme applications
- universal cash payment facilities for public utility services
- universal postal service
- universal access to basic cash and banking facilities and Government instruments, especially for rural customers and those on social benefits.
- to maximise the return on taxpayer’s investment, within the constraints of the above objectives and the financial parameters of the Government’s £1.7bn funding package for the period 2006-11.
Financial performance
Turnover 1,261 1,269 1,216
| £m |
2009 |
2008 |
2007 |
| Operating Profit |
(92) |
(452) |
(214) |
| Profit/(Loss) for the year |
(52) |
(406) |
(159) |
| Net Cash Flow1 |
- |
- |
- |
| Net Operating Assets |
(1,122) |
(1,057) |
(981) |
| Shareholders’ Funds – Liabilities |
(361) |
(175) |
(206) |
| Dividend |
- |
- |
- |
Dividend policy
Post Office Limited does not pay dividends. It uses its commercial income to supplement direct Government funding to meet the costs of maintaining the Post Office network.
Performance targets
Performance is assessed against the Investment Case on which its funding package was based, involving targets on profits, new revenue streams, cost reductions, network coverage and the management of its transformation programme.
Notes
- No cash flow made available as Post Office is a subsidiary of Royal Mail.
Commentary
After taking into account the Government’s annual £150m network subsidy payment, Post Office Ltd made an operating profit of £7m compared with an operating loss of £70m the previous year.This is Post Office Ltd’s best financial performance since 2003-04 and third consecutive year of profitability improvement. Overall revenues were broadly stable at £1.26bn. Growth in income from financial services (up 3% on previous year) and telephony (up 22% on previous year) offset falls in revenue from Government services (down 13%), as more people have migrated towards receiving benefits directly into bank accounts, and mails (down 2%).
The improvement in profitability was therefore driven by Post Office Ltd’s transformation programme and other cost control measures, with expenditure significantly reduced (down by £85m, or 6% on previous year) in line with expectations.
The year saw significant upheaval in the network of post offices. Post Office Ltd largely completed the implementation of the Network Change Programme to improve the sustainability of the network. 42 local area consultations were completed in the year, leading to 2,435 compensated branch closures. These will be mitigated by the introduction of new Outreach services, of which 433 were in place by the end of the financial year and 500 are now in place.At the end of 2008-09, Post Office Ltd were exceeding all but one of the access criteria introduced by Government in May 2007 to ensure reasonable access for all to key services. Five out of 2,796 postcode districts did not at the time comply with the access criterion governing the proximity of Post Office branches to people in individual postcode districts. However, by 12 May 2009, Post Office Ltd had remedied the situation in these five areas.
On the governance side, the Government wishes to see Post Office Ltd’s Board strengthened to provide a new level of challenge and support to the management team.To that end, the Royal Mail Holdings’ Chair Donald Brydon joined the Board after the end of the financial year. In addition, Peter Corbett left the company and Mike Moores was appointed as the new Financial Director.
