THE 2002 Christmas crisis contributed to Guernsey Post losing more than £800,000 in a year. The commercialised utility turned a £1.6m. profit in its first year of freedom from States control into a recorded loss of £819,922 in the year to the end of September 2003.

It blamed:

* the move to Envoy House and mechanisation;

* the 2002 Christmas crisis, when thousands of letters and cards went undelivered for weeks;

* meeting licence conditions and quality-of-service targets; and

* increasing costs for delivery from Royal Mail in the UK.

Compared to the previous year, income for ordinary services rose by more than £500,000 to £18m. but costs rose by 25% to £21.4m.

‘They reflect the very difficult time that the company had in the early days of commercialisation,’ said managing director Mike Hall.

Guernsey Post chairman David Warr called the events of Christmas 2002 ‘regrettable’.

He refused to blame commercialisation for the mounting losses and said that problems with the Royal Mail were the most significant factor.

‘I am well aware that there are a number of critics of the commercialisation process and that they will blame commercialisation for the problems – operational and financial – which the company has experienced.

‘In my opinion, it is incorrect to presume that such problems would not have occurred under the old regime.’

From 1 April 2003, the Royal Mail subsidy for the Bailiwick’s postal service, which had existed since postal independence in 1969, was removed. This cost the company more than £1m.

‘Not surprisingly, operating costs rose significantly and recovery from this could not be achieved without a tariff submission, public consultation and determination by the regulator.’

Tariff changes, however, did not come into effect until June 2004.

‘This obviously has had implications for this financial year’s costs, too – especially since a further increase in Royal Mail charges was triggered from 1 April 2004 and the new tariffs were not implemented until 1 June. In effect, Guernsey Post had to absorb increases in Royal Mail charges for 14 months.’

During the year, 40 more staff were taken on, costing the company another £1.1m and increasing the workforce to 268.

Mr Hall also blamed the retail network that was inherited from the former public utility.

‘In addition to those substantial additional financial burdens placed on the company, Guernsey Post also inherited a retail network that was already badly ailing, with operating losses of nearly £600,000 a year,’ he said.

Mr Warr said, however, that the appointment of a new senior management team during 2003 had brought improvements. He hailed last Christmas as a success.

Mr Hall said that Envoy House and mechanisation had enhanced services. There was better universal service, next day delivery and delivery by 1pm, but at a cost of more than £300,000.

‘As we start our new financial year, the signs of financial recovery are beginning to show through, but we shall need to keep all the company’s services under review if we are to achieve sustained profitability,’ said Mr Hall.