Select Committee on Public Accounts Minutes of Evidence

Examination of Witnesses (Questions 400 - 419)



  400. The concept of an operating profit is different from net profit because there are overheads at the centre and various other things?
  (Ms Cassoni) I do not personally know where Postcomm drew that conclusion from.

  401. You do not know where they drew that conclusion from?
  (Ms Cassoni) No.

  402. You would dispute that conclusion?
  (Ms Cassoni) I would have to understand where the data came from but I think if you looked at—

  403. I am really just asking, you do not understand where it came from but is it factually correct or not, that rural and deep rural locations are both contributors to operating profit? Is that correct?
  (Ms Cassoni) It depends what they mean by it. They are providing some income is how I hear that, and that is correct. Are they profitable? It is not saying that.

  404. This is taken from the Postcomm Report itself and at paragraph 4.7 it states: "No individual product category was found to be `loss-making' in aggregate and no generic delivery density had a negative margin."
  (Ms Cassoni) If you look at our regulated accounts you can see that we do actually have loss-making products.

  405. Individual products, like second class letters less than 60 grams and in a format that cannot be processed by a machine?
  (Ms Cassoni) Yes.

  406. Broadly speaking it is true, is it, that no generic delivery density makes a loss in aggregate?
  (Ms Cassoni) No. I think it makes a contribution.

  407. They do make a profit?
  (Ms Cassoni) No. A contribution is not a profit. It makes a profit to the contribution but if you look at it on a fully absorbed basis it would be loss making.

  408. Is it correct that you are going to close 3,000 urban post offices?
  (Mr Roberts) No.

  409. That is not correct?
  (Mr Roberts) No.

  410. Are you going to close any?
  (Mr Roberts) Yes, we may well do.

  411. How many do you think that will be?
  (Mr Roberts) We do not know because until we know from the Government how much money they are going to fund for the retirement of sub-postmasters and the consultation process is taken forward with sub-postmasters we will not know.

  412. If you had been able to invest as much capital investment as you wanted over the last few years, how much more do you think you would have invested than you actually have?
  (Mr Roberts) We would have probably invested somewhere up towards a billion pounds in both automation and the infrastructure of the organisation, particularly delivery offices.

  413. How much capital investment do you need going forward, say in the next five years, and where would you get the capital from?
  (Ms Cassoni) The investment for the next five years I think is about 1.5 billion and we will get the capital from the assets of the business. Basically we have got a balance sheet that allows us to raise funds on the back of that. We have got 1.86 billion of investments which will allow us to raise borrowings.

  414. That is the gilts on the balance sheet?
  (Ms Cassoni) That is gilts. And we have got property of 1.2 billion.

  415. Would you consider borrowing against those gilts?
  (Ms Cassoni) We could borrow against those.

  416. But you do not?
  (Ms Cassoni) We do not currently.

  417. They are sitting there on the balance sheet. Are they in any real sense supporting the business or could you sell them and use the cash?
  (Ms Cassoni) The gilts that are sitting there are actually supporting some of the short-term cash flows that Post Office Counters requires.

  418. But financially, irrespective of whether you are allowed to or not, financially would it be possible for you to utilise the cash represented by those gilts?
  (Ms Cassoni) Yes.

  419. You would?
  (Ms Cassoni) Yes. That is a matter we still have to discuss with the shareholders how we restructure the—

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