Select Committee on Trade and Industry First Special Report



Profit, dividend and results
(b)We expect the Post Office's next Annual Report to provide indications of the financial results for each business unit (paragraph 7).
The internal reorganisation of the Post Office into 19 business units was done to sharpen market focus and improve the performance of the PO as a whole: the units are not autonomous and depend heavily on internal trading amongst themselves. Given these interdependencies, the external publication of individual business unit results would be at best misleading, and at worst commercially damaging as information would be divulged to a far greater degree of detail compared with our competitors' R&As.
The contents of our R&A are determined by accounting regulations and the requirements of the DTI as sponsor department. The Post Office currently complies with company law in the production of its accounts. From next year The Post Office will need to comply with the law as a result of its status as a plc.
(Note: The Post Office fully complies with SSAP 25, which covers Segmental Reporting. Note 1 to the annual accounts discloses turnover, profit before tax, and net assets between Mails and distribution, Counter Services, and Other, and also by geographic area of origin between the UK and the Rest of the World.)
Vacant properties
(c)Now that the Post Office property function has been separated out as a business unit, we expect a vigorous and focussed approach to be taken to disposing of vacant properties (paragraph 8).
This is precisely the approach being adopted by Property Holdings.
The rental value of all vacant property as a percentage of the rental value of the entire estate for the last period was 1.5%, which compares very favourably with external benchmarks.
The Post Office informed the Committee in mid-September of the size of its vacant property portfolio. The current (8 December 2000) position shows that the portfolio has been reduced considerably over the past two months - by nearly one half in number, and some 20% in value, compared with the September report.
(d)We continue to regard the ability of the Post Office management to make Parcelforce a real success as a test of their entitlement to the commercial freedoms they now enjoy (paragraph 12).
The PO Board is firmly behind the great efforts currently being made to turn round the performance of Parcelforce, and it was heartening to see the Committee's recognition of the considerable strides forward which have been and are being made. But commercial freedom should not be seen as a discretionary reward for good management performance - it is an essential pre-requisite to enabling the Post Office to succeed in an increasingly competitive world, where the Post Office's main competitors have enjoyed greater freedoms for some time.
Industrial relations
(e)We remain concerned at the work which remains to be done to produce an improvement in industrial relations in the Post Office, although we recognise that all concerned are pursuing this end with vigour (paragraph 16).
This is also a major concern for the Post Office, who are treating the improvement in industrial relations as a top priority. Substantial progress is being made in implementing the new restructuring deal for Royal Mail staff, and it was encouraging that staff recently voted overwhelmingly in favour of a major reorganisation of international work in London, affecting thousands of jobs (WAND). But unofficial industrial action is still far too prevalent - a concern not only for the Post Office but also the CWU leadership - and there remains much to be done to ensure that staff throughout the Post Office fully recognise that poor industrial relations will greatly hamper our future commercial prospects.

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Prepared 22 January 2001