More rises likely as Guernsey Post losses continue

Managing director Mike Hall said that the commercialised utility expected to record another loss this year.
And postal charges are likely to increase again within 18 months.
The company last week revealed that it turned a £1.6m. profit in its first year of freedom from States control into a loss of more than £800,000 in the year to the end of September 2003.
But Mr Hall said that the utility, which was battling against rising costs passed on from the Royal Mail, should break even in 2005.
‘We have been making savings where we can in the retail and postal businesses but that is insufficient to overcome the Royal Mail price hikes of April 2004, so I think the loss-making will continue into this year,’ said Mr Hall, who came to the company in March 2003 in the aftermath of the 2002 Christmas crisis.
‘The tariff rises for our customers, in the eyes of the regulator, should bring us back into profitability and in 2004-2005 at the very minimum reaching the break-even point should be achievable.’
He said that the loss of the Royal Mail subsidy had cost the company more than £1m. in 2002-2003. This was £3m. in 2003-2004 and would be £4.6m. in 2004-2005.
Costs are expected to continue to rise and tariff changes will be needed to keep the company in the black.
‘We believe that Royal Mail will ask for a further increase in April 2006 and, while the tariff arrangements have accounted for some increases in costs, we cannot continue to absorb such rising levels and therefore in 18 months there is likely to be a price rise,’ said Mr Hall.
He said that the £800,000 loss for 2003 was mainly due to the company having to absorb initial Royal Mail price rises without being able to increase its charges.
Another factor was taking on more staff to meet the licence requirement to provide a universal service and to prepare to meet service targets set by the regulator.
‘The big thing we had to tackle was not the finance side, but the quality of service following Christmas 2002,’ said Mr Hall.
‘The fact that we had to meet 10 directions and now have met 19 of the 23 quality of service agreements shows the progress we have made and, with the improvements Royal Mail have made now, we are looking to keep the high level while becoming more efficient.’
An Office of Utility Regulation spokesman said that the timing of the Guernsey Post submission for changes was up to the utility. He added that the company clearly had to work to improve its quality of service, including recovering from problems at Christmas 2002.
Treasury and Resources minister Lyndon Trott said: ‘Mistakes have been made in the past and those were dealt with by the former Advisory and Finance Committee.
‘Treasury and Resources is working with the board and the new management and both parties are committed to delivering the benefit that a commercially-run States-owned postal service should provide. We are confident that those benefits will shortly materialise.’
Of the £800,000 loss, the Guernsey Post retail network lost almost £600,000 and a raft of proposals is being considered in an effort to cut costs, including the closure of the L’Islet office and reducing the size of the Smith Street, St Peter Port, premises.
Dave Inglis, chairman of Postwatch Guernsey, was disappointed with the figures and the possible knock-on effect on users.
‘We have requested an explanation and Mike Hall is going to give us a presentation outlining the financial report and retail approach,’ said Mr Inglis.
‘We are concerned about the retail loss that is being considered. Naturally for them to make a loss has an impact on how they look at all the services.
‘We are concerned about the loss as well, but we need to know exactly how this is going to impact on the user.’
Mr Hall said that part of the problem was that the retail network could not be cross-subsidised by the postal network.
An OUR spokesman said that, as in other jurisdictions, it was felt that one set of customers should not have to pay for services it did not use.