GUERNSEY Post is continuing to lose money on delivering the mail. The company has returned an overall profit this year and paid a dividend of £203,715 to the States, but it still lost £390,000 on daily trading operations.

Chairman Dudley Jehan said that Guernsey Post was struggling under the tariff regime set by the Office of Utility Regulation.

Last year increases did not match bulk mail rises imposed by Royal Mail and the utility had to absorb the differences for four months.

The OUR has set its tariffs on the basis that the company can cut operating costs. ‘If the company cannot realise the required level of savings, then the consequence will be that its ability to continue in its current form will be at severe risk,’ said Mr Jehan.

He highlighted concerns about any threat to ‘low-value consignment relief’ – the so-called de minimis VAT ‘loophole’, which is the bedrock of much of the island’s consignment business – and a continuing, though improving, deficit on pensions at £669,000.

‘New revenue opportunities will need to be found if the company is to continue to prosper in the future,’ Mr Jehan added.

The strategy of investing in new products and services outside the company’s traditional markets was starting to pay off and had created an opportunity to reverse the trend of closures.

The company has highlighted its success in service performance, meeting or exceeding 20 of its 21 key quality of service targets set by the OUR, its best recorded performance.

But chief executive Gordon Steele said that financial performance was ‘a matter of some concern’.

Guernsey Post lost £520,000 on operations in the six months to the end of March 2006.

The figure improved to £390,000 over the following year, but interest on the company’s reserves was the main net contributor to revenue and the bottom line profit of £814,000 compared to an overall loss of £161,000 in the company’s previous set of accounts.

Mr Steele was concerned about a growth in packet mail and decline in letters, expected to continue, which could reduce overall mail volumes in future.

Introducing new services and products has been encouraging, but Mr Steele said they needed to be accelerated to improve the company’s finances.

* The company’s annual accounts are published in the appendix to the Billet d’Etat for the September States meeting.