Post Office delivers pounds 300m and a warning

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MICHAEL HERON, chairman of the Post Office, will warn today that the organisation's business will suffer unless it operates with more commercial freedom.

The warning will come alongside publication of record annual results. It is expected that the Post Office will announce profits of at least pounds 300m for 1993, up from pounds 283m previously.

Yet Mr Heron is likely to voice his fear that unless the Post Office is granted more latitude in the way it operates, it will be damaged by competition.

The mail distribution service saw volumes of letters and packets rise last year. Growth has been driven by a strong increase in demand for direct mail services, where customers perform at least part of the sorting task before handing articles to the Post Office for delivery.

Mr Heron is concerned that competitors will be attracted to the direct mail business and that the Post Office will not be able to fight back unless it is given more freedom.

Ordinary postal volumes have declined, partly as electronic communication services have gained market share.

Senior managers are resentful that the Post Office has to give a large proportion of its profits to the Exchequer. 'We want to use that money for capital investment in things like new technology,' one insider said yesterday.

In 1992 the Post Office was obliged to remit pounds 181m of its pounds 283m profit back to the Treasury. For 1993 the figure may rise to pounds 230m.

The Post Office is keen to explore business opportunities outside its core delivery service. It would like to form joint ventures with warehousing companies, printers and data processors.

It would also like to offer more to the direct mail customer than delivery. Its Dutch counterpart - much admired within the Post Office - will prepare and print literature as well handling distribution.