AN Post has announced pre tax profits of £11.5 million for last year, as turnover increased by 2.9 per cent to £297.1 million.

The figures were boosted by an exceptional profit of £2.6 million, from the sale of the Central Sorting Office building. Operating profits fell from £10.9 million to £9 million.

The company's cumulative debt, which peaked at £13.8 million in 1991, was eliminated last year and An Post had a £4.1 million surplus at year end, the first since 1988. The after tax profits", of £7.2 million were a record in the 11 years since the creation of An Post.

Despite the fall in operating profits the chairman, Mr Stephen O'Connor, said that the underlying trend was positive, when income from elections and referendums was excluded. However, Mr O'Connor warned that An Post was still not making enough profit, and would have to double its margins if it was to successfully compete after markets were liberalised.

To enable the company to increase margins to about 4 per cent would require "further business growth and cost reductions Mr O'Connor said. Revenue from letter post, which accounts for 62 per cent of the company's business, increased by 4 per cent, fuelled in part by a large growth in mail usage by small and medium sized companies.

Mr O'Connor said that although the price difference between An Post and other European postal services had been eliminated "intensifying competition means that the scope for general prices increases in Ireland is limited".

Revenue from letters and parcels combined grew from £206 million to £216 million, but income from elections and referendums fell from £6.1 million in 1994 to £973,000 last year. Revenue from the SDS parcel and courier service was up 10 per cent, while income from post office services increased by 4.6 per cent.

An Post's operating costs increased by 3.7 per cent to £288 million, which included an £8 million increase in staff and postmasters' costs. The company had a £14.8 million capital programme last year, which it financed from its own resources.

The expenditure included the completion of the regional mails' centre in Athlone, and an extension at the Dublin mails centre, which had been working to its full capacity. Another £22 million will be spent this year.

The European Union has set the year 2000 as the target rate for opening up postal markets to competition, but An Post's chief executive, Mr John Hynes, said that if the Commission was "aggressive" competition could, come as early as next year or 1998. Mr Hynes said that the other European post offices which would be An Post's most likely competitors "are going for margins of 4-5 per cent".

An Post is arguing that in order to offer a standard service for the same price throughout the State - new entrants should not be allowed to "cherry pick" particular locations. Rural areas account for about 25 per cent of An Post's deliveries, but about 65 per cent of its mail costs. Asked if foreign competitors could make money by cherry picking, Mr Hynes replied: "Yes, there is a profitable business in Dublin".

An Post is currently implementing a series of recommendations arising from a Price Waterhouse report on the company. These changes are aimed at improving its quality of service, competitiveness and profitability.

Mr Hynes said that the restructuring would mean that both the staff and the management would have to be more flexible. "The roles of everybody in An Post will alter," he said.