Post Office doubles profit despite letter price freeze

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THE POST Office more than doubled pre-tax profits to pounds 135m in the six months to September despite a freeze on letter prices and the effects of recession.

The sharp improvement from profits of pounds 62m in the same period last year was attributed largely to cost savings of pounds 70m achieved through increased efficiency.

Profits are poised to rise further as the Post Office reaches its target of shedding 16,200 jobs over the next four years.

By 1996 the Post Office will have shaved a further pounds 225m from its labour costs under the plan to cut 15,000 jobs in Royal Mail and 1,200 jobs in the Counters division.

Although Royal Mail's profits rose from pounds 62m to pounds 131m, the contribution from Counters fell by a half to pounds 12m.

The Post Office's parcel arm, Parcelforce, where privatisation plans have run into trouble, cut its first-half loss from pounds 27m to pounds 21m and is expected to break even for the year. Provisional results show that it made a trading profit of more than pounds 3m in October.

In his last formal announcement before retiring as Post Office chairman at the end of the year, Sir Bryan Nicholson repeated his pledge to keep letter prices frozen until at least next April.

'Prices will continue to be held as long as possible in the new financial year,' he added.

Sir Bryan also announced that the reliability of letter deliveries reached record levels in the first half, with 91.5 per cent of all first- class mail arriving the next day. This beats the target agreed with the watchdog body, the Post Office National Users' Council.

The continuing improvement in profits and performance comes as the Government prepares to publish the results of its review into the future ownership of the Post Office.

Although ministers are keen to press ahead with privatisation, the sale of Parcelforce has run into difficulties because of its VAT-exempt status.

If this was abandoned following a sell-off it could mean an overnight price rise of 17.5 per cent in parcel charges.

One option being examined by the Government and its advisers is to pair the business up with a more profitable arm of the Post Office and privatise the two together.

Despite the recession, mail volumes rose by 1 per cent from their level in April, with 61 million items being handled daily.