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DirMike Liston OBEectors, Officers and Advisors PHewitt, Bacon & Wension Advisorsoodrow Limited Board of Directors Non-Executive Chairman Actuaries and Consultants Jersey Post International Limited
Parkside House
Clive Spears ACIB MIS Ashley Road
Non-Executive Vice-Chairman and Epsom
Senior Independent Non-Executive Surrey
(Resigned 21 October 2009) KT18 5BS
Paul Jackson
Non-Executive
Bankers
Chris Evans
Non-Executive HSBC Bank plc (Appointed 25 June 2009) PO Box 14, St Helier
Jersey JE4 8NJ
[1] Mike Liston [2] Paul Jackson [3] Donal Duff
Donal Duff BAAF FCA AMCT
Non-Executive
(Appointed 1 January 2010) Registered Office
Gary Whipp Postal Headquarters
Executive Director and La Rue Grellier
Managing Director of Jersey Post La Rue des Pres Trading Estate International Development Limited St. Saviour
(Independent as at 31 December 2008; Jersey JE2 7QS non-independent from 25 June 2009 as
he assumed executive duties)
(Appointed 25 June 2009 resigned
12th May 2010)
Ian Carr
Senior Executive Director and
Managing Director Jersey Post Limited
John Pinel Contents
(Appointed 6 April 2009) [1] Mike Liston OBE
Chief Executive
(Resigned 26 February 2009)
01 Board of Directors
Ian Ridgway BSc MBA FCA
Finance Director 04 Chairman's Statement
[3] Donal Duff BAAF FCA AMCT
Andrew Starkey MILT MIDM 10 Business Review
Commercial Director
(Resigned 26 February 2009) 18 Statement of Corporate Governance
Julie Crabtree BA MSc FCIPD 26 Consolidated Profit and Loss Account
Director Human Resource Development
(Appointed 6 April 2009) 26 Consolidated Statement of Total Recognised
Gains and Losses
Company Secretary 27 Consolidated Balance Sheet
[2] Paul Jackson
Liz Vince BA CPFA CPD.cert 28 Consolidated Cash Flow Statement
Auditors of the full statutory annual
report and financial statements
Deloitte LLP
PO Box 403, St. Helier Jersey JE4 8WA
Together We Work. 1
Board of Directors
Jersey Post International Limited
[4] Chris Evans [5] Gary Whipp [6] Ian Carr [7] Ian Ridgway [8] Julie Crabtree
- Chris Evans [8] Julie Crabtree BA MSc FCIPD
Non-executive, Chris Evans (55 years) has worked in the Wireless, developing it for several years and then - with the development of a new pan Islands logistics Human Resource Development Director, Julie Crabtree information technology services sector for 26 years and divesting it to Carphone Warehouse in 2005. business, entry into the telecommunications sector, (45 years), joined Jersey Post in 2007, having held a has been involved in the formation and running of a and, a journey towards the virtual letter box of the future. directorship in NHS UK. Julie is a qualified HRD number of IT businesses. He is currently the Chief Gary and his family moved to Jersey in 2006. He was practitioner who has experience of working in large Executive of Foreshore, an Internet services business, the former Chief Executive of Newtel Solutions; a fully To date, he has successfully managed a transformation private businesses as well as the public sector, in promoting Jersey-based e-commerce to a global licensed Public Telecommunication Operator (PTO) in of the culture within the business, and secured the both unionised and non-unionised environments, customer base. both Jersey and Guernsey. Newtel recently sold their support of the political shareholder and main board for with responsibility for developing policy and delivering
Guernsey operation to Jersey Telecom. the group strategy and its delivery. change at strategic and operational levels.
Chris has served as a non-executive director on a
number of boards, most recently the Jersey Electricity This strategy will not only deliver a sustainable postal She has a special interest in organisation development, Company, from which he retired in 2010 after 12 years. [6] Ian Carr service for the future, but establish the group in particularly behavioural change, and is a qualified coach He understands how the disruptive nature of technology new markets, delivering a profitable business for and trainer.
can be used to drive business change and diversification Managing Director (Jersey Post Limited) Ian Carr's (52 the shareholder.
and has sat on a number of States of Jersey committees years) whole career has been with Jersey Post since
over the past 10 years, with the objective of finding new joining the organisation in 1975. Throughout that
economic opportunities for the Island. time he has developed a wealth of expertise in postal [7] Ian Ridgway BSc MBA FCA
operations generally, industrial relations, and overseen
the strategic development of Jersey Post as a group. Finance Director, Ian Ridgway (41 years), qualified as a
- Gary Whipp Chartered Accountant with Coopers & Lybrand Deloitte.
After securing the post of Operations Director in 1999, Immediately prior to joining Jersey Post in 1999, he was
Managing Director (Jersey Post International Ian successfully transformed the postal operations a partner in a Birmingham-based accountancy practice
Development Limited) Gary Whipp (48 years), originally to provide quality and efficient postal services to the and a founding Director of its consultancy company.
from the Isle of Man, provided significant entrepreneurial Island's residential and large business community,
and commercial expertise, particularly in sales and moving towards a more commercial model. At Jersey Post, Ian is responsible for Financial Control,
marketing. Gary's first venture into the UK was satellite Regulation and Legal & Compliance. He was awarded
television. In 1989, his company was one of eight As a result of his significant experience in the postal a Masters Degree in Business Administration in 2003
licensed by Rupert Murdoch's Sky Television to market sector, and the execution of a clear strategic vision for and became a Fellow of the Institute of Chartered
their products. the future of the business, Ian was appointed Managing Accountants in England and Wales in 2005.
Director of Postal Business for the group in April 2009.
More recently, his companies have been involved in the He is also a Non-Executive Director of Jersey Opera Telecommunications sector. In 1997, Gary marketed Since then, he has successfully developed a strategic House and a member of the Brig-y-don Children's Cable & Wireless Indirect Voice products to the business plan for the group, based on a major transformation of Home Committee.
sector, later acquiring that business from Cable & the current USO on the Island, entry into new markets
Rapidly Changing Market Places
"These are extraordinary times for postal operators everywhere,
as the impact of global recession and technological substitution threatens the sustainability of their existing business models."
Mike Liston
Chairman, Jersey Post Group
Sustainable Response
These are extraordinary times for postal operators everywhere, as the impact of global recession and technological substitution threaten the sustainability of their existing business models. Jersey Post's experience of this turbulence is typical of that elsewhere, suffering a 13% fall in traditional mail volumes this year – some 6 million items – following a 5% fall in the previous one. Profit before tax fell 79% to £0.9m (2008: £6m) on turnover of £65m.
The impact of reduced letter volumes has been compounded by a sudden slowdown of bulk mailings by businesses. This was particularly evident in the fulfilment industry, and prompted us to significantly reduce our margins to help preserve the competitiveness of this important sector and thus future income and local jobs.
The overall 4% decline in mail volumes contrasts with a well-established trend of double-digit growth throughout the past decade. The consensus among industry analysts is that the global financial crisis has accelerated the shift towards digital media and that there will be no recovery of traditional mail volumes. Like other postal operators, Jersey Post is having to adapt more rapidly and radically than expected to reduce costs and find new markets, products and services in the world of communications.
At the core of the challenge we face is the threat to our ability to continue funding the Island's core social postal provision (the Universal Service Obligation, or USO).
This obligation defines the geographic scope, range and prices of postal products and the shape and size of the network of outlets through which customers can access them. Originally, governments imposed Universal Service Obligations on national postal operators as the "quid pro quo" for the privilege of monopoly. But the progressive impact of postal competition and regulatory price control has made USOs an increasingly loss–making burden that national postal operators are struggling to sustain. Jersey Post's position is similar, but compounded by a 27%, £3m increase in Royal Mail's charges during the past 2 years, of which we have been able to pass on less than one-tenth. The £5m annual loss incurred by the USO can no longer be supported by earnings from the rest of our business going forward.
Determined to avoid the dependence on government postal subsidies seen in other jurisdictions, your Board has embarked on a strategy to diversify earnings opportunities to combat collapsing traditional mail volumes, and cut costs wherever it can.
"The overall 4% decline in mail volumes contrasts with a well-established trend of double-digit growth throughout the past decade."
Since incorporation in July 2006, the Board has focused the Communications Workers Union (CWU). Crucially, on eliminating loss-making activities and increasing this will further reduce our annual operating costs efficiency in both operational and support functions. by £0.7m.
Whilst this regrettably has led to job losses at all levels
of the organisation, the £2m total savings achieved A further agreement with the CWU recognises the prevented Jersey Post from sliding into what would unsustainably high cost of pension liabilities, which otherwise have been its first ever loss. incorporated entities everywhere have had to address
and, whilst less radical than some, our remedy of a Cost-reduction initiatives continued with renewed vigour in Defined Contribution Pension Scheme for the first five 2009, with the further restructuring of the group's executive years service of all new employees lessens the risk to function, and a new focus on operational and support costs our business whilst retaining our moral obligations for which led, in January 2010, to the public announcement of staff welfare.
a Voluntary Redundancy programme in partnership with
2009 Performance Overview
£65m
£64m
£59m
£54m
£5.1m £4.3m
£4.8m
£0.9m
2009 2008 2009 2008 2009 2008 2009 2008
Turnover Cost of Sales Administrative Expenses Operating Profit
"...in 2009, we established a new
operating entity, Jersey Post International Development Limited (JPID), to focus on business diversification and growth."
Stakeholder Relations
Recognising that the depth of the USO funding crisis cannot be resolved by efficiency measures alone, postal operators and regulators across the globe are recognising the need for more radical measures such as:
Introducing new services with customer choice of delivery standards;
Reducing the number of delivery and collection days; and
Changing the shape of the sub-post office network.
Jersey Post is no different. In January 2010, we requested approval from the Jersey Competition and Regulatory Authority (JCRA) for a new standard-class local service as part of the Size-based Pricing initiative needed to introduce fair and competitive prices. Approval for this proposal was given in April 2010 following a public consultation. A further request to reduce the number of delivery days will follow, and this too will be subject to public consultation. In the meantime, we continue to develop our retail transformation strategy to improve the cost efficiency and convenience of customer access to postal services. Halfway through 2009, we established a new operating entity, Jersey Post International Development Limited (JPID), to focus on business diversification and growth. Its strategy is to deliver new profitable products and services to an expanded customer base within the communication and logistics markets. Early initiatives include our new "me:mo" pre-pay mobile phone service and Ship2me - a goods delivery solution providing Channel Islanders with easy access to online retailers overseas.
Jersey Post's ability to respond to the threats it faces Distribution of Group Turnover, 2009
depends most heavily on the perspectives and actions of some key stakeholders. All share our overriding
commitment to the public interest, but inevitably some 8% Agency and 7% J Promail Services
have potentially conflicting priorities. Counter Services £4.5m Turnover
We are grateful for the comprehensive willingness we £5.7m Turnover
have observed this year amongst key stakeholders to
engage with us to mutually understand the implications
of the opportunities, threats, risks and rewards that we 2% Philatelic Services face in developing strategies to sustain an affordable £1.2m Turnover
postal service.
We intensified our dialogue with customers, staff and
suppliers in a year that started a period of significant 82% Postal Services 1% JPID change for the group as a whole. In addition:- £53.3m Turnover £0.2m Turnover
Owners
We welcome the closer engagement with the Treasury
Minister, at his own initiation since his employment. Regulators
This should facilitate an appropriate framework for the
strategic oversight he requires as the shareholder's More than 50% of our postal market is also served by our Competition licensing decisions for this market are representative, without the risk of confusing or competitors. We have no objection to further liberalisation, expected from the JCRA in Spring 2010 and will be undermining the responsibility and authority of the but remain deeply concerned by the JCRA's continuing crucial to our ability to fund the USO. Our money services Board of Directors. reluctance to adopt EU mandates that require regulators activities bring us under the regulatory supervision of
to undertake formal Risk Assessments ahead of their the Jersey Financial Services Commission (JFSC). The robustness of early discussions with the Minister decisions. Unintended consequences are therefore highly Jersey's diligent efforts in the global fight against money and the Treasurer of the States has led to a clear likely, and we are concerned that those might be laundering involve us in an increasingly onerous understanding of political and commercial imperatives profound if competition is introduced too suddenly in compliance regime in which our peers are major banks. for both parties, and the need for policy support in the bulk mail market, which is used to fund the Island's The risks, costs and benefits of continuing to provide key areas such as e-commerce and the Island's loss-making letters and post office networks. these services are constantly under review. fulfilment industry.
"we have both the vision for a postal
market in Jersey that possesses all the attributes of a fully competitive, modern market, and the courage to take the often painful measures to achieve it."
Governance
Certain of Jersey Post's business activities fall by statute within the strict regulatory regimes of both the JCRA and the JFSC, and this, together with our commitment to conform to the Financial Reporting Council's Combined Code, brings an increasing burden of compliance to the work of the Board which, accordingly, has resourced capable Business Risk Assurance and Internal Audit functions within the executive structure of the company.
The work of the Audit Committee has become more complex in recent years, and I am grateful to Clive Spears for his work as its Chairman prior to his resignation from the Board in October. I am pleased that we were able to recruit a highly capable successor from the Island's accounting profession.
customer needs and our rapid development of additional Donal Duff's experience as Director of Finance and Chief earnings from which we can continue to subsidise it. This Operating Officer in the publicly quoted sector equips calls for some temporary respite from the risk of further him well to chair the Audit Committee and contribute to financial disruption, threatened by major new entrants the governance expertise on the Board. to the postal market, currently being considered by
the JCRA.
I also welcome to the Board Chris Evans, whose
entrepreneurial skills in the e-commerce sector align We have demonstrated since incorporation that we with our strategic aim to turn the threats of digital have both the vision for a postal market in Jersey that technologies into opportunities. possesses all the attributes of a fully competitive,
modern market, and the courage to take the often Chris has been appointed Chairman of our Remuneration painful measures to achieve it. We are blessed with staff Committee to succeed Gary Whipp, whose temporary and a trade union that recognises the imperatives for consultancy assignment as interim Managing Director change. However, we need two to three years of stability of our new Enterprise company Jersey Post International in the regulatory and political environments to complete Development Limited (JPID), made him insufficiently our programme of cost savings and new business independent for his role on the Board to be considered development, to sustainably fund the social postal non-executive during this period. network in the future.
"we continue to develop our retail transformation strategy to improve the cost efficiency and convenience of customer access to postal services."
"Jersey Post has demonstrated since incorporation that it has the vision for a postal market in Jersey which possesses all the attributes of a fully competitive, modern market."
We will review the need for a fifth non-executive director within the next 12 months, when Gary's executive assignment is completed.
Looking Ahead
The next three years will be critical for both Jersey Post and the postal service in the Island. Notwithstanding the finding of the JCRA's comprehensive Efficiency Review that we are an efficient postal operator, intense
competitive pressure in the bulk of our business makes Mike Liston it imperative that we continue to cut costs. Equally, the Chairman
urgency to address increasing £5m losses in the local 20th April 2010
postal network requires both its adaption to current
2009, a challenging year
"Letter mail volumes in the postal business saw a
significant overall downturn of 13% (6.1 million items)."
My first year as Managing Director of Jersey Post Limited (JPL) and Senior Executive Director of Jersey Post International (JPIL) has been an exceptional one with the business launching its new business structure in April 2009, which included the launch of our enterprise business, Jersey Post International Development (JPID), headed up by successful entrepreneur and businessman, Gary Whipp, as Managing Director.
Embarking on such a radical transformation has been an exciting challenge for the business and its stakeholders, and for Gary and myself in particular. At times it has been akin to a rollercoaster ride in bringing about the necessary change in stakeholder expectations and behaviour right through the business, from frontline employees to the main board, and ultimately to our shareholder.
Many of our customers, and their representative bodies, have indeed welcomed the change in attitude towards them, with a much more customer-led focus and the desire to work in unison to develop their businesses.
94.1m OVERALL VOLUME OF MAIL for 2009
3.6% (3.5 million items) down on 2008
The new dimension Gary has brought to the business, and the stakeholder support we have experienced along the way, has enabled us to make excellent progress with the transformation. Our new business model has become a reality, and we're progressing well on the journey towards an exciting future, embracing all of the opportunities that technology and competition present for our business.
A Changing Landscape
The traditional postal market is fast being subsumed into the broader communications sector, as consumers respond to the choices technology provides to communicate and do business in today's electronic age. With the speed, reliability and growing confidence in "e-solutions", and the impact of the global recession, customers have been forced to look again at the cost and appropriateness of traditional mail. In responding to that, we, along with our competitors, have been developing new products and solutions to increase customer choice, particularly through e-substitution and lower prices. Our postal business is now firmly placed at the centre of the communication and delivery market within the Island.
Postal operators across the globe believe that structural changes to the communications market and mail volumes are permanent, brought about by the recession and increasing customer choice as a result of alternative media and technology, and will not be reversed as the global recession subsides. In 2009, Jersey Post experienced a 13% decline in traditional mail volumes
and, whilst the rate of decline in traditional mailings is likely to slow down as the recession abates, the actual declining trend will nonetheless continue, driven by changing customer behaviour and the "e" revolution.
The upside of the "e" revolution for our business is of course the continuing explosion in consumers switching to online shopping and the resultant growth in the packet and parcel export and delivery markets on the Island.
Still at the core of growth in bulk export mail from the Island is the Low Value Consignment Relief (LVCR) for goods sold under £18 imported into the European Union. Whilst LVCR is a sensitive political issue in the UK, it is managed rigorously through government policy on the Island, and the locally-based online retail and fulfilment industry continues to grow with our support in providing competitive and quality delivery solutions in the UK and Europe. We are also working much closer with our customers supporting the diversification of their customer and product base, particularly into European markets.
Mail Volume Trends
Letter mail volumes in the postal business saw a significant overall downturn of 13% (6.1 million items). This included a 14.6% (3.1 million items) reduction in inbound volumes from the UK, a 17.3% (1.8 million items) reduction in volumes posted from Jersey to the UK and international destinations, and a 6.3% (743,000
items) reduction in volumes posted in Jersey for delivery in Jersey.
The picture was a little better in the bulk mail and packet export market, where overall volumes increased by 5.4% (2.8 million items), albeit in 2008 growth in this sector was over 40% (14.1 million items) compared to the previous year.
However, the impact is dramatic. Declining traditional mail volume increases the loss we make on our USO, and the pressures on the bulk export sector mean that
it can no longer be relied on to fund the USO, with its current scope as defined in the Class II Public Postal Operator's Licence issued by the JCRA. Unfortunately, we have very little resilience over these trends, while the increasing competitive pressure on the online retail and fulfilment sector from other jurisdictions remains a concern.
2009 Volume of Mail Overview
94.1m
2009
97.6m 2008
"An unprecedented decline in
traditional mail volumes and significantly lower growth in bulk packet mailings from the fulfilment sector"
During 2009, the overall volume of mail, letters, packets and parcels handled by Jersey Post was 94.1 million; 3.6% (3.5 million items) down on 2008 volumes.
Included in that overall volume was 30.3 million items delivered locally (18.5 million received from the UK, and 11.8 million posted locally) and 9 million items (non-bulk) dispatched to the UK and the rest of the world, through Postal Services based at Rue des Pres.
In addition, 54.2 million items were dispatched to the UK and rest of the world through our bulk export operation, J logistics, based at Elizabeth Harbour.
Financial Performance
In 2009, the group's profit before tax fell significantly to £0.9m (£6.0m in 2008). A number of different factors contributed to this dramatic reduction, the key ones being:
Profit margins were further eroded as competitive pressures increased. The choice was simple - retain the business for the Island's economy or see customers relocate their business and operations to other jurisdictions such as Switzerland;
Absorption of Royal Mail price increases of 15%;
An unprecedented decline in traditional mail volumes
and significantly lower growth in bulk packet mailings from the fulfilment sector;
£1.6 million investment in JPID for diversification and future business growth; and
Lower bank interest rates producing £1m less interest receivable than in 2008.
The profit after tax for the year ending December 2009 was £0.2m, (2008: £5.4m). Group cash balances are held with major banks and amounted to £23.7m at the year end, of which £9.2m was paid to Royal Mail on 31 March 2010 and a further £5m has been set aside to meet contingent pension commitments.
Postal prices were increased by 3% in 2009 - market pressure dictated the modest increases as trading conditions toughened in the face of competition from alternative technologies, and other jurisdictions, such as Switzerland, that are aggressively marketing third- party fulfilment services from the country. Our prices remain both competitive and well below the price control revenue cap imposed by the JCRA.
Universal Service Obligation
During 2009, the Universal Service Obligation (USO), which is set out in Jersey Post's Class II Public Postal Operator's Licence issued by the JCRA, made a net loss of £5m.
We were able, with difficulty, to fund this loss from profits generated by our competitive services, most notably from the bulk mail export business, which services the online retail and fulfilment sector on the Island.
Its licence requires Jersey Post to commit to certain levels and quality standards, in exchange for the "privilege" of having a degree of monopoly that is regulated by having a "licensable" area.
Price s are controlled within that area by the JCRA, which also has the freedom to issue licences to other operators, notwithstanding economic pressures within the postal market in Jersey changing fundamentally since the licence was first issued to Jersey Post in 2006.
The reality is that falling economies of scale in letter mail volumes, despite our achievement of year-on-year operational efficiencies, are turning what was once a profitable postal business into one that simply cannot sustain the existing scope of the USO and the continued growth on the Island in the number of delivery points it has to service.
Quality of Service
Our focus on the quality of services delivered to customers is an important one in a competitive environment, and one that our employees care passionately about. Improving that quality has been an annual objective for a number of years now, which is not just measured and monitored internally, but also measured by an independent UK-based research company against criteria set by the JCRA as part of its licensing regime. The key quality measures are time taken for a premium letter, from posting through to delivery, across five routes between Jersey, Guernsey and the UK. Internal efficiency is a key
control which also impacts on these results, as well as a number of other customer measures including the number and resolution of complaints and settlement of compensation.
Once again, 2009 saw already high standards maintained or improved in all areas and can be summarised below as:
End-to-end quality of service
Jersey Post met all of its new (more stretching) end-to- end targets set by the JCRA and reported its highest quality results to date against these measures.
Internal efficiency (inward clear floor)
Inward overall performance for 2009 was slightly above target, with overall achievement for the period of 98.39% against a target of 98%.
Internal efficiency (outward clear floor)
Outward overall performance for 2009 performed above target, with an overall result for the period of 99.20% against a target of 98%.
Customer measures
Across the three key areas measured - customer complaints, complaint resolution within a specified time, and settlement of compensation claims - performance was again ahead of targets. In addition, all internal targets in our customer services area were met.
Diversification into New Markets
"JPID launched its first new initiative in ship2me.co.uk.
This Web-based shopping portal enables Islanders to buy goods from UK-based online retailers."
Our Customers
The focus on customer service quality and interaction remains a key priority for the business. This has been underpinned with the interim appointment of a Service Delivery Director to ensure the focus and drive is at the necessary strategic level within the organisation. With the added complexity and diversity of products Jersey Post group is offering, it is also essential we organise ourselves internally with the appropriate structure and skill sets to effectively manage customer relationships, product development, and sales, across a wide customer base. The delivery of this is a key priority for the new Service Delivery Director.
We have to recognise that it is essential that the group develops its own alternative technology-based solutions, as customers migrate to this for their communication needs. To that end, the group has also strengthened its resources in the sphere of technology to ensure that it is well-equipped to lead its customers into the "e-world".
New Business -
Diversification into New Markets
A lower cost logistics and delivery network was established in the second half of 2009 to ensure we were able to offer cost-effective solutions to both new and existing customers. The migration of existing business to the new network in 2009 allowed us to make compensating reductions in manpower and costs in the core postal business. This was possible because these products fall outside of the regulated market.
JPID launched its first new initiative in ship2me.co.uk. This Web-based shopping portal enables Islanders to buy goods from UK-based online retailers, including those who do not "sell or ship" to the Channel Islands. It features a single UK delivery address and a new distribution network to deliver the goods to Islanders' homes and business. The initiative not only provides more choice to Islanders but also helps to grow new delivery volume across the business, and includes a network which extends our delivery capability into the Guernsey market.
Our entry into the telecommunications market at the end of 2009 began with the launch of me:mo, a pay-as-you- go service based on a Mobile Virtual Network Operator model, with our chosen supplier, Airtel-Vodafone.
For the group, entry into the telecommunications sector underpins its strategy to move into the wider communications market, managing the migration of physical communications from postal to alternative technologies.
"The group has strengthened
its resources in the sphere of technology."
Jersey Post Group – In the Community
Acknowledging our
responsibility to the
community and the Charitable Support environment in which we Jersey Hospice Care operate, with particular Mencap South Coast Challenge emphasis on families, The Brook
youth, education and Headway
development, we endeavour Help a Jersey Child
to support local, charities Jersey Cheshire HomeComic Relief
and events, and do what Holidays for Heroes
we can to protect the future Variety Club
environment through our Mission for Seafarers "green" policies Jersey Kidney Patients
Itex Walk
Sponsorship
Island Games
Rock in the Park
Sark to Jersey Rowing Race Environment
Portuguese Food Fair We recycled ¾ tonne of cans Introduced energy saving
Young Enterprise light bulbs
Prison! Me! No! Way! Sourced "green" materials
Art in the Frame Trialled environmentally
Société Jersiaise friendly diesel
"Key to successfully achieving that
has been the development of a partnership model between the business and the Communication Workers Union (CWU)."
The Community, Businesses and Consumers Cultural Shift
As a government-owned business, it is essential that, in deploying our strategy, we recognise the need to deliver value to the community in the broadest sense. We therefore seek to do so by:
Fulfilling an important social responsibility by providing a sustainable postal infrastructure designed to ensure social inclusion for traditional mail users in an ever-expanding digital world;
Providing healthy competition in local growth markets by diversifying into new business sectors, providing consumer choice and value; and
Starting the less "e" enabled citizens on a journey toward the inevitable "e" communications world of the future.
In the longer term, with traditional communication channels and customer habits being transformed as the "e" revolution continues, the creation of the virtual' letter box and the need to develop access channels of the future to replace what is currently delivered through physical letter boxes is an essential one. If Jersey Post is to remain in the communications business of the future, it has to move into the "virtual", or "e" space as businesses and consumers start to migrate from the use
of traditional physical invoices, credit card statements, utility bills, appointments and greetings cards.
In our very dynamic marketplace, the only real future certainty is that the group's identity and business model
will be very different to that of the past, as our customers embrace new technologies and the different ways of communicating and doing business. Part of our journey will inevitably lead to significant changes to the traditional postal model, which has historically been maintained in the absence of any real competition in the letter market from alternative communication solutions, or other operators.
Our People and Culture
In an organisation with over 400 employees, undergoing a transformation on the scale that Jersey Post has embarked on, it is essential that our people and the trade union that represents them join us on the journey. Key to successfully achieving that has been the development of a partnership model between the business and the Communication Workers Union (CWU).
"The changes facing us
impact directly on people, whether we are changing roles or requiring new skills, or simply asking something different of individuals."
This model is based on involvement and joint problem solving, from the development of strategic objectives and policy for the business, right through to operational process changes and redesign. The approach is supported with a defined set of principles and behaviours as a framework to work within.
During 2009, whilst the focus on establishing a new organisational structure and new set of behaviours to underpin it continued, other fundamental policy decisions necessary to secure the future of the business were also put in place. As a result of the prevailing economic climate and changes within our own business environment, the decision to control pay increases across the group for 2009 was taken.
To support the planned implementation of the "voluntary redundancy project" (VR project), which had been developed in partnership with the CWU, negotiations on a new Jersey Post group redundancy, early retirement and severance agreements were successfully concluded. The primary objectives of the VR project itself is to lower a very high fixed cost base through job redesign and the introduction of flexible working and the re-alignment of pay to market rates for particular skill sets and activities. This is aimed at keeping future prices competitive and retaining our market share of traditional letter mail business for as long as possible. These objectives will help protect the jobs associated with that business, and the Island's postal service for the future, ensuring that both remain commercially viable and do not become a burden for the shareholder.
Culture and identity are an equal challenge facing the business. Transformation of our corporate world requires us to shape the relationships between the existing culture and structure and those of the new businesses. Employer branding is key to supporting the success of this transformation. Whilst a culture encouraging risk- taking and the development of entrepreneurial flair needed to be supported, we have had to be alert to the group impact, as it is here that dysfunctions between practices and traditional values could be most evident and therefore have the potential to negatively impact on employees, customers and shareholder.
The changes facing us impact directly on people, whether we are modifying roles, requiring new skills or simply asking something different of individuals. This puts pressure on the morale within the organisation at a time when we require maximum focus and performance. It is therefore true to say that the biggest challenge has been, and continues to be, to try and align the change initiatives in the context of an overall workforce plan over a period of time, dealing with it as expediently as possible whilst minimising the negative impact on our people.
Ian Carr
Managing Director Jersey Post Ltd 20th April 2010
Statement of Corporate Governance
"The Directors are committed to maintaining a high
standard of Corporate Governance in accordance with the principles laid down in the Code."
Introduction*
Jersey Post International Limited has a Memorandum of Understanding with the Treasury & Resources Minister. This requires the group to produce Financial Statements which include disclosures in accordance with the Combined Code of Corporate Governance issued by the Financial Reporting Council ("the Code"). The Directors are committed to maintaining a high standard of Corporate Governance in accordance with the principles laid down in the Code. The Board considers that it has complied with the relevant provisions of the Code during the financial year ended 31 December 2009, except for instances of non- compliance declared as part of this report.
The Board
The Board is chaired by Mike Liston who was appointed as Chairman on 12 June 2006 and reappointed for a further three-year term at the Company's AGM held on 25 June 2009. During 2009, there were a number of changes to the Company's Directors:
Clive Spears, who was appointed on 12 June 2006, resigned from the Board with effect from 21 October 2009. Clive Spears was the Senior Independent Non- Executive Director. The shareholder has immediate access to the Chairman, and in his absence, either of the two Managing Directors, and therefore the appointment of a new Senior Independent Non-Executive Director was not considered an immediate priority by the Board. This matter will be kept under review but we note that this is a requirement of the Combined Code.
On the recommendation of the Nomination Committee, the Board appointed two new Non-Executive Directors during the year: Chris Evans was appointed on 25 June 2009 and Donal Duff was appointed at the Board meeting on 27 November 2009, with his appointment commencing on 1 January 2010. Both new Non-Executive Directors have received a comprehensive induction programme.
The fourth Non-Executive Director is Paul Jackson , who was originally appointed on 12 June 2006 and reappointed for a further three-year term at the company's AGM held on 19 June 2008. In accordance with the company's Articles of Association, one Non- Executive Director is required to retire by rotation each year. The Articles state that the director to retire by rotation shall be he who has been the longest in office since their last appointment or re-appointment. Accordingly Paul Jackson will retire by rotation and stand for re-election at the AGM on 12 May 2010. The Board considered this matter at its meeting on 20 April 2010 and agreed to recommend the re-appointment of Paul Jackson to the shareholder at the AGM. Paul Jackson has many years experience of the Postal industry and brings valuable knowledge and a UK/international dimension to the Board. The Chairman has confirmed to the Board that Paul Jackson 's performance continues
to be effective and that he continues to demonstrate the commitment to the role which is required. The Executive Directors as at 31 December 2009 were Ian Carr (Managing Director, Postal Business – appointed to the Board on 6 April 2009), Gary Whipp (Managing Director, Jersey Post International Development Limited – appointed 24 August 2007 as a Non-Executive Director,
entered into a Contract for Consultancy Services with effect from 15 December 2008, and was formally transferred into his Executive Director role on 25 June 2009), Ian Ridgway (Finance Director – appointed 16 December 2005) and Julie Crabtree (HRD Director – appointed to the Board 6 April 2009).
John Pinel, (the previous Chief Executive) resigned with effect from 26 February 2009. Andrew Starkey (the previous Commercial Director) resigned with effect from 26 February 2009. The posts of Chief Executive and Commercial Director are no longer in place following the restructure of the Jersey Post group in April 2009.
The main role of the Board is to:
Set the overall strategy of the group;
Approve the annual business plan, budget and annual
report and accounts;
Monitor performance against plans;
Ensure the maintenance of a sound system of internal
control and risk management;
Ensure compliance with Anti Money Laundering Orders and other regulations issued by the Jersey Financial Services Commission (JFSC);
Ensure obligations to the shareholder (the States of Jersey) are understood and met;
Oversee the activities of the Executive Directors; and Ensure compliance with the Postal Services (Jersey)
Law 2004.
The Board has delegated the day-to-day operation of the activities of the group to the Executive Directors. There is a clear division of responsibility between the Chairman and the Managing Directors which is set out in writing as well as a Schedule of Matters Reserved for the Board. Both documents are reviewed by the Board annually and updated if necessary. The last review was carried out at the Board's meeting on 5 February 2010.
The Chairman is responsible for leadership of the Board and monitoring its effectiveness. He ensures effective communication with the shareholder and that the shareholder's views and interests are considered when making key decisions. He also facilitates the contribution of the Non-Executive Directors and promotes a constructive relationship between Executive and Non-Executive Directors. The Managing Directors are responsible for formulating strategy and for its delivery once agreed by the Board. The Managing Directors, together with the other Executive Directors, create the framework of strategy, values, organisation and objectives which ensures the successful delivery of key targets, and allocate decision making and responsibilities to senior managers accordingly.
The Board held eight scheduled, minuted meetings during the financial year ending 31 December 2009. In addition, an informal Strategic Review workshop was held on
* Information in this report is based on the full statutory annual report and financial statements
Number of Meetings Attended
| 8 meetings | 3 meetings | 2 meetings | 2 meetings |
M Liston | 8/8 (Chairman) | 3/3 | 2/2 | 2/2 (Chairman) |
C Spears (resigned 21.10.09) | 6/6 | 2/2 (Chairman) | 1/2 | 1/1 |
P Jackson | 6/8 | – | – | 1/2 |
C Evans (appointed 25.06.09) | 2/3 | – | 1/1 (Chairman from 25.06.09) | 1/1 |
I Carr (appointed 06.04.09)* | 8/8 | – | – | – |
G Whipp | 8/8 | – | 1/1 (Chairman up to 25.06.09) | – |
I Ridgway | 7/8 | – | – | – |
J Crabtree (appointed 06.04.09)* | 7/8 | – | – | – |
J Pinel (resigned 26.02.09) | 1/1 | – | – | – |
A Starkey (resigned 26.02.09) | 1/1 | – | – | – |
[3]3 April 2009 at which the future structure of the group was discussed and agreed. An informal telephone meeting was held on 2 December 2009 to review the 2010-2012 group financial forecast. Agendas and supporting papers are circulated to Board members one week in advance of the meeting date. Records of meetings and the decisions of the Board are maintained by the Company Secretary and are approved by the Board at the following meeting.
The Company also has an Investment Committee that meets on an ad hoc basis, often via telephone meetings. In 2009, the Investment Committee only held one formal meeting, on 10 August 2009, which was attended by Mike Liston (Chairman), Clive Spears, Paul Jackson , and Ian Carr.
Director Independence
The Board considered that all the Non-Executive Directors were independent during the financial year ending 31 December 2009, with the exception of Gary Whipp between the period 1 January 2009 and 25 June 2009 due to the consultancy services he provided to the Company. With effect from 25 June 2009, Gary Whipp became an Executive Director.
The results of this questionnaire were summarised in a written report which was reviewed by the Board at an informal workshop held on 4 February 2010. The Chairman and the Non-Executive Directors hold informal meetings without the Executive Directors being present.
The performance of the Executive Directors is assessed by the Remuneration Committee. During 2009, the Non- Executive Directors did not meet without the Chairman present to appraise his performance as this was addressed via the Board self-assessment questionnaire considered by the full Board at its informal meeting on 4 February 2010.
Audit Committee
The Audit Committee is appointed by the Board from the Non-Executive Directors. In 2009, prior to his resignation on 21 October 2009, the Audit Committee was chaired
by Clive Spears with Mike Liston as a member. [4]From 1 January 2010 Donal Duff, a qualified Chartered Accountant and experienced ex Director of Finance, has been appointed as the Chairman of the Audit Committee.
"The Audit Committee
has terms of reference which include all matters indicated by the Combined Code and are subject to annual review."
Responsibilities re External Audit
The Audit Committee's agenda is linked to events in the company's financial calendar. The agenda for each Audit Committee meeting is agreed with the Chairman at least four weeks prior to the meeting.
New Audit Committee members are provided with induction training and all Committee members receive ongoing training on at least an annual basis. Ongoing training can comprise of attendance at formal conferences or courses but more likely internal company seminars and briefings by the external auditors.
The Audit Committee reviewed its performance via a self assessment questionnaire which was discussed at its meeting on 6 November 2009. In addition, the Committee has an Action Plan which records the tasks it needs to complete during the year, including those to ensure compliance with the Code.
Progress against the Action Plan is reviewed at each Committee meeting. The Committee is charged by the Board with responsibility for reviewing the strategic processes for risk, control and governance throughout the group.
The Audit Committee has terms of reference which include all matters indicated by the Combined Code and are subject to annual review. The Audit Committee gains its assurance about the effectiveness of internal controls from both the external auditors and Business Risk Assurance Manager via the following specific responsibilities:
Recommend the appointment of the external auditors, the audit fee and any questions of resignation or dismissal of the external auditors. To make appropriate recommendations through the Board to the shareholder to consider at the AGM.
Discuss with the external auditors each year, in advance of the audit commencing, the nature and scope of the work they propose to undertake and ensure co-ordination with Internal Audit.
Discuss with the external auditor their quality control procedures and steps taken by the auditor to respond to changes in regulatory and other requirements.
Review the independence and objectivity of the external auditors, ensuring that key audit personnel are rotated at appropriate intervals. The external auditors' independence is reviewed both at the presentation of their annual plan to the Audit Committee in the autumn and as part of the Audit Committee's review of the Management Letter in the Spring. The Audit Committee has an approved, documented policy on the provision and approval of non-audit services provided by the external auditor. Compliance with this policy is continuously reviewed and the nature of any non-audit assignments are challenged to ensure that independence is not compromised.
Review the effectiveness of the audit process.
Approve and oversee compliance with the policy
for the external auditor undertaking any non-audit
"The Committee is charged
with responsibility for reviewing strategic processes."
engagement and the associated fees for such assignments to ensure the non-audit services will not impair the external auditors' independence or objectivity.
Review the annual financial statements, based on information supplied by the Executive Directors and the external auditors, before submission to the Board, reviewing and challenging particularly:
>> Critical accounting policies and practices and any
changes in them.
>> Decisions requiring a major element of judgment.
>> The extent to which the financial statements are
affected by any unusual transactions in the year and how they are disclosed.
>> The clarity of disclosures.
>> Significant adjustments resulting from the audit.
>> The going concern assumption.
>> Compliance with accounting standards.
>> Compliance with legal, regulatory and Corporate
Governance requirements.
>> Reviewing the Statement of Corporate Governance
prior to endorsement by the Board and the policies and process for identifying and assessing business risks and the management of those risks by the company.
>> To consider other topics, as defined by the Board.
Discuss any problems and/or reservations arising
from interim and final audits and any matters the external auditor may wish to discuss, in the absence of the Executive where necessary.
Review the external auditor's management letter of recommendation and management's response.
Responsibilities re Internal Audit2
To receive and approve Internal Audit's annual Audit Plan and satisfy itself that Internal Audit is properly resourced and skilled to implement the plan.
To receive progress reports detailing internal audits undertaken during the period under review, progress against the plan and any concerns that Internal Audit wishes to bring to the attention of the Audit Committee.
To satisfy itself that where control weaknesses are identified by Internal Audit, appropriate remedial action is undertaken by management in a timely manner.
To consider management's response to any major internal audit recommendations.
2 Internal Audit is directed and provided by the Business Risk Assurance Manager.
To commission Internal Audit to undertake specific assignments where deemed necessary by the Committee.
To approve the appointment or dismissal of the Business Risk Assurance Manager.
To review management's and the internal auditor's reports on the effectiveness of systems for internal control, financial reporting and risk management.
The Audit Committee undertakes an annual review of the group's risk management policy and in particular the financial thresholds used to evaluate the impact of risks to ensure these remain appropriate.
The Audit Committee also reviews the company's procedures for handling reports from whistleblowers. The Committee will receive annual reports on any concerns which are raised and the action taken to address these. In the case of any serious issues of financial impropriety, the Audit Committee will be briefed as soon as possible following the reporting of the concern and will review the action management is taking to investigate the issue.
The Company also has a Notifiable Events reporting process to ensure that any significant compliance breaches or incidents (including Anti Money Laundering) are reported to the Audit Committee Chairman as well as the relevant Executive Directors.
Nomination Committee
The Nomination Committee is chaired by Mike Liston. Until his resignation on 21 October 2009, Clive Spears was a member together with Paul Jackson . John Pinel was also a member until his resignation on 26 February 2009. Clive Spears was replaced by Chris Evans with effect from 21 October 2009 and Donal Duff joined the Committee from 1 January 2010.
The Nomination Committee met twice during 2009 in order to consider the appointments of the two new Non-Executive Directors. Recruitment consultants were used to facilitate the appointment of Donal Duff, with interviews of prospective candidates being held by the Nomination Committee with the Managing Director – Postal Business also in attendance.
Chris Evans was identified by the Chairman as having a skills set required by the Board, in particular with his extensive knowledge and experience of Information Technology solutions. The Nomination Committee were unanimously in support of the appointments of both Chris Evans and Donal Duff. The terms of reference of the Nomination Committee are approved by the Board and reviewed annually.
The last reviews were undertaken at the Board's meetings on 29 May 2009 and more recently on 5 February 2010. The terms of reference of the Nomination Committee are available upon request. The Nomination Committee has not carried out a performance evaluation for 2009 as this was not considered necessary. The performance evaluation questionnaire for the board addressed issues of board skills, experience and future requirements.
Remuneration Committee
In 2009, the Remuneration Committee was chaired by Gary Whipp up to 25 June 2009 and following this by Chris Evans. Mike Liston has been a member throughout the year and Clive Spears was a member until his resignation on 21 October 2009. Donal Duff joined the Committee from 1 January 2010. During the financial year ending 31 December 2009 the Remuneration Committee met twice. The Remuneration Committee has responsibility for setting remuneration for the Executive Directors of the Company which is sufficient to attract, retain and motivate people of the quality required. No Director plays any role in the determination of his/her own remuneration. The Memorandum of Understanding with the Treasury and Resources Minister requires any changes to the level of remuneration paid to Non- Executive Directors to be agreed, in advance, by the Minister. The Committee also monitors the levels of remuneration for senior management, including the Company Secretary.
The Committee has an Action Plan which records the tasks it needs to complete during the year, including those to ensure compliance with the Code. Progress against the Action Plan is reviewed at each Committee meeting. The Committee's terms of reference are reviewed annually. The Remuneration Committee undertook a self assessment exercise via the use of a questionnaire which was reviewed at its meeting on 4 February 2010.
The remuneration of the Directors of the JPIL group of companies for the financial year ended 31 December 2009 is set out opposite. Gary Whipp was a Non- Exectutive director up to the 25 June 2009 and received fees of £7,000 (2008: £15,000). During 2009 he also received consultancy fees of £177,000 (2008: £nil), Gary Whipp ceased his consultancy arrangements with the Group on the 3 June 2010, following his resignation as an interim Executive Director on 12 May 2010.
The Board has not complied with Principle B1.4 of the Code as the remuneration received by Gary Whipp in his role as Director on the Boards of various other companies has not been declared. The Board is satisfied that all its Directors have declared all their business interests, that no conflicts of interest have arisen and that the additional positions held by Gary Whipp have not impacted on his ability to perform his role as an interim Executive Director of the company. During 2008 and 2009 Gary Whipp received consultancy and other fees.
Internal Controls
The Board is responsible for ensuring that there are effective systems of internal control in place to reduce the risk of misstatement or loss and to ensure that business objectives are met. These systems are designed to manage rather than to eliminate the risk of failure to achieve business objectives and can only provide reasonable and not absolute assurance against material misstatement or loss.
The Board is responsible for reviewing the effectiveness Business Risk Assurance
of the systems of internal control across the group. The
Board acknowledges that a system of internal control The Business Risk Assurance Manager co-ordinates is designed to manage rather than eliminate the risk and facilitates the risk management processes, of failure to achieve business objectives, and can only compiles the risk reports for the Board and Executive provide reasonable and not absolute assurance against Directors and undertakes internal audits to provide material misstatement or loss. The Board has conducted independent assurance to the Board via the Audit a review of the effectiveness of the group's system of Committee that risk is being adequately managed. internal control in 2009 via the following key procedures:
Board Reports
Risk Management
Key strategic decisions are taken at Board meetings The group has a Risk Register which details and following due debate and with the benefit of Board
assesses all the significant risks facing the group. papers circulated in advance. The risks associated Risk reports are submitted to each meeting of the with decisions are a primary consideration in the Board. Management is responsible for identifying information presented and discussed by the Board. the key risks to achieving their business objectives The Board discusses and approves the group's and ensuring that there are adequate controls in strategic direction, plans, objectives, annual budgets place to manage these in line with the risk appetite and financial forecasts.
set by the Board and contained in the company's Risk
Management Policy. Management Structure
The Risk Management Policy is subject to annual review Responsibility for operating the systems of internal to ensure that the group's risk management processes control is delegated to management and directed are in line with best practice. There is an ongoing and overseen by the Executive Directors who hold process for identifying, evaluating and managing regular (at least monthly) Executive Management the significant risks faced by the group and this Team meetings.
is facilitated by the Business Risk Assurance
Manager working with the Executive Directors. Human Resources
This process of continual review has been in
place for the duration of 2009 and the period up The group endeavours to ensure that its employees to the date of the approval of the annual report and are able to carry out their duties in a competent and accounts. These significant, strategic risks, are professional manner through its commitment to staff reported to each formal meeting of the Board and training and development.
the Board reviews the action which is being taken to
manage these risks. This is wholly in accordance with
the group's Risk Management Policy.
Salaried Directors' Remuneration 2009
Salary/Fees £'000 | Bonuses £'000 | Benefit in Kind £'000 | 2009 Total £'000 | 2008 Total £'000 |
|
| Executive Directors |
|
|
133 | 29 | 17 | 179 | 153 |
128 | 15 | 19 | 162 | 154 |
123 | 25 | 17 | 165 | 140 |
123 | – | 17 | 140 | 185 |
47 | – | 2 | 49 | 112 |
Non-Executives
M Liston 40 – – 40 36 P Jackson 21 – – 21 23 C Evans (from 25.06.09) 6 – – 6 – C Spears (to 21.10.09) 17 – – 17 20
Consolidated Profit and Loss Account Consolidated Balance Sheet
Year Ended 31 December 2009 As at 31 December 2009
2009 2008 2009 2008 £'000 £'000 £'000 £'000
Turnover 64,930 63,753 Fixed assets
Cost of sales (59,222) (54,292) Tangible assets 8,958 8,702 Gross profit 5,708 9,461
Current assets
Administrative expenses
Deferred tax – 1,688 Redundancy costs (254) –
Stock 260 192 Other administration expenses (4,524) (5,124)
Debtors 9,679 11,393 Operating profit 930 4,337
Cash at bank and in hand 23,719 13,099 33,658 26,372
Interest receivable 187 1,251
Finance (expense)/income (166) 375 Creditors
Profit before taxation 951 5,963 Amounts falling due within one year (20,563) (11,109)
Net current assets 13,095 15,263 Taxation (720) (523)
Total assets less current liabilities 22,053 23,965 Profit after taxation 231 5,440
Pension Deficit (4,057) (3,373) The above results are derived from continuing activities. Net assets 17,996 20,592
Consolidated Statement of Total Recognised Gains and Losses Represented by:
Ordinary share capital 5,000 5,000 Year Ended 31 December 2009 Profit and loss account reserve 12,996 15,592
2009 2008
£'000 £'000 Shareholder's funds 17,996 20,592
Profit for the year 231 5,440 The financial statements were approved by the Board of Directors of Jersey Post International Limited on Actuarial gain/(loss) in respect of the pension schemes 421 (4,703) 20 April 2010 and were signed on their behalf by:
Reduction in pension surplus due to amendment to FRS 17 – (50)
Deferred tax asset de-recognised/movement in deferred tax (1,468) 951
Total recognised losses and gains for the year (816) 1,638
Ian Carr Ian Ridgway Managing Director Finance Director (Postal Business)
Consolidated Cash Flow Statement
Year Ended 31 December 2009
2009 2008 £'000 £'000
Net cash inflow/(outflow) from operating activities 13,856 (714) Returns on investments and servicing of finance
Interest payable – (82) Interest received 187 1,251
Net cash inflow from returns on investments and servicing of finance 187 1,169 Taxation (334) (926) Capital expenditure
Net purchase of tangible fixed assets (1,304) (815) Net cash outflow from capital expenditure (1,304) (815) Net cash inflow/(outflow) before management of liquid resources & financing 12,405 (1,286) Management of liquid resources – 13,723
Financing
Repayment of loan from States of Jersey – (3,200) Dividends paid (1,780) – Increase in cash in the year 10,625 9,237
Increase in cash 10,620 9,231 Decrease in overdraft 5 6 Cash movement 10,625 9,237
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