ANNOUNCING RECORD PROFITS of £577m pre-tax for 1996-97, Post Office chairman Sir Michael Heron warned: 'A successful Post Office cannot continue to be run simply as a cash cow for the government.' He also reiterated his plea for greater commercial freedom, expressing confidence that 'it is possible for the government to continue to benefit from the Post Office's profitability'. Citing growing competition from Dutch, Danish and Swedish postal administrations, Heron argued that the PO needed a financial relationship with the government which helped the business, rather than one placing undue emphasis on the need to generate cash. European competitors, he said, 'are able to offer large mailers one-stop-shops through joint ventures with airlines, mailing houses, printing, distribution and warehousing companies.'

Direct mail accounted for £500m of Royal Mail revenues over the last year. A series of major sales promotions are planned in a bid to boost this figure by 60% to £800m by 2001.