Post offices face rising losses of around £82m in five years

Modest was something of an understatement. Revenue at An Post grew by
£26 million (#33 million) to £451.2 million but operating profits fell (pounds) 2.8 million to (pounds) 7.7 million.
This meant profit margins fell to 1.7 per cent from 2.5 per cent in
1999. A year ago, the group’s chief executive, Mr John Hynes,
described the 1999 margin as “completely inadequate”.
But the bad news did not stop there. As expected, An Post reported
a loss on its post office business “for the first time in many
years”. The exact loss was not revealed in its 70-page annual report,
though it is believed to be about (pounds) 3 million. An earlier
forecast by the company of an (pounds) 8.9 million loss proved wrong.
If the group’s forecasts for the 2000-2004 period are correct, the
deficit will grow to more than (pounds) 13 million this year with
mounting losses accumulating to (pounds) 82 million in five years.
It is a grave situation. The group held an extraordinary general
meeting with senior officials from the Department of Public
Enterprise and Department of Finance yesterday to inform them of its
increasingly difficult position.
Returns from core activities are increasingly inadequate, An Post
said. Citing high inflation and an increasing wage bill, the group’s
chairman Mr Stephen O’Connor warned that “cost increases which
outstrip the growth in revenue cannot be sustained and are seriously
detrimental to the future of An Post”.
Letter post price increases can no longer be avoided, he added.
Pointing out that the cost of a stamp has not increased since 1990,
An Post has submitted an application for a price rise on
international mail to the Director of Telecommunications Regulation,
Ms Etain Doyle, who now overseas its business. When that process is
ended, it will seek a price rise for domestic post.
Inflation has risen 29 per cent since 1990, but senior managers
said at a briefing that the group would not seek an increase of that
scale from Ms Doyle. Mr Hynes declined to reveal the precise rise the
company has sought.
Ms Doyle’s regulation of the business is a new departure and her
decision will have a crucial bearing on An Post’s viability going
forward.
Of more immediate importance, however, will be the Government’s
decision on the future funding of the post office network.
Described as technically insolvent in a study by the industrial
relations consultant, Mr Phil Flynn, that business is now the subject
of a separate analysis by an Inter-Departmental group of civil
servants appointed by the Minister for Public Enterprise, Ms
O’Rourke. An Post said yesterday that it expected that group to
report to Ms O’Rourke by the end of this month.
Yet the reality is that senior Government figures are already
familiar with Mr Flynn’s report and, as such, they are fully aware of
the group’s position. Mr Flynn said the cash crisis was not confined
to the rural network and his overall assessment was that An Post
cannot reconcile its necessity to trade effectively with an
obligation by the Government not to close any sub-post offices. He
said there was no option but for the Government to subsidise the
business.
It was a theme taken up yesterday by Mr Hynes. Stating that the
group cannot continue to shoulder operating losses, he said: “We want
a sustainable post office network – that will involve a subsidy.”
Mr Hynes rejected suggestions that the company should use its cash
reserves of (pounds) 160 million to fund the business. “That would be
the equivalent of putting the furniture in the fire.”
A Government decision on funding, if taken, will have a strong
impact on An Post’s strategic options. The group wants to report to
Government on this matter in the autumn. While Mr Hynes said it will
give equal consideration to the possibility of going it alone as to a
stra