LOSSES of £264m and for the first time in 24 years the corporation not making a profit - anyone would think the Post Office was failing to deliver to its users.

But to its managers the figures are a creditable performance in the face of what has been a very difficult, and very changing year.

It was in May last year, at the annual postmaster conference in Scarborough that members were told of the threat to thousands of post offices in villages and local neighbourhoods caused by the postal services bill.

The changes proposed would see the benefits of millions of claimants being paid into banks rather than over the counter at post offices, with a third of the income of almost every post office set to disappear.

The strength of feeling among rural communities prompted The Northern Echo launch its Last Post Campaign to save the rural post offices under threat.

Last year's 382 post offices closed, and sub-postmasters say the closures will continue unless the Government helped the organisation develop other services, such as banking.

The losses for the last financial year have been caused almost exclusively because of those Government plans to pay benefits directly into bank accounts from 2003.

The £571m cost of the Horizon project to computerise its network of more than 18,500 post offices had to be "written down" because the Post Office can still not show how new earnings can be generated to replace the lost income.

Post Office chairman Neville Bain said: "A sales increase of seven per cent is a creditable performance in difficult trading conditions.

"Profit before tax was down 13 per cent largely reflecting competitive activity and the decision to freeze or reduce postal charges. The Post Tax loss reflects the £571m write down of the Horizon project to automate the post office network. The reduction in profits is not unexpected because we are repositioning ourselves, and have embarked on a huge change programme to make ourselves more competitive."

And the losses came as no shock to sub-postmasters and mistresses in the region, many of whom are fighting for the very futures.

Arthur Sanders, sub-postmaster in the village of Sadberge, near Darlington has launched his own petition to save the post office. He said: "For a long time the Post Office has been seen as a cash cow by successive governments.

"They would say we need so many millions from us, and that is what they would get. But this year the changes implemented to the system have caused a blip. But I am sure we will be back in profit next year."

Anne Pratt, regional secretary of the National Federation of Sub-Postmasters, said: "The extent of the losses are still a bit of a shock even though we knew the cost of automation would be very high. But in real terms the figures mean very little. The problem is, and will remain, the threat to the future of many rural post offices."