An Post has begun a fundamental review of its business following the publication yesterday of a €70.5 million loss, the worst in the State company's history.

The firm's new chief executive, Mr Donal Curtin, said the review would focus on costs and signalled that at least 1,100 job cuts were required before 2005.

Further cost cutting is also likely, given a fall off in business activity this year, said Mr Curtin, who did not rule out selling off non-core units within An Post.

"Such a financial performance is not sustainable into the future," said Mr Curtin. "A key priority for me is to stabilise the finances of the company."

An Post would seek to concentrate on its core business following its review, said Mr Curtin, who only took up the job at An Post two weeks ago following the retirement of Mr John Hynes.

An Post owns several non-core subsidiaries that could be sold off, including its technology units Post.Trust and PMI. It also operates a joint-venture operation to run the prize-bond scheme.

Mr Curtin said the review would look at all parts of the firm, including its property portfolio, to assess ways of creating value. Capital expenditure would be reduced in 2003 and 2004.

He said a tough market and a delay in proposed price rises requested from the regulator had resulted in An Post missing its budget targets for 2003 already.

An Post's results show the firm made an operating loss of €17.4 million in 2002, up from a loss of €6.7 million in 2001. All three of An Post's core units - letter post, its transaction unit PostTS and its parcel unit SDS - all increased turnover in 2002 but lost money.

The firm's net loss was €70.5 million, up from €5.3 million in the previous 12 months. This was boosted by an exceptional charge of €52.5 million taken to cover the cost of the 1,100 job losses, although no large-scale redundancies occurred at the firm in 2002.

In fact, An Post's annual return shows that the group's total workforce increased during 2002 to 10,090, up from 9,839 in the previous 12-month period.

An Post's chairwoman, Ms Margaret McGinley, said it was disappointing that the pace of its restructuring programme had been slower than planned. It was vital the firm implemented cost savings without delay, she added.

A spokesman for An Post said 200 staff had left the firm during 2003 and further proposals from management had been made to An Post's trade unions. He said the original restructuring proposals from An Post were now 18 months behind schedule.

Group turnover increased by 9.4 per cent to €683.9 million in 2002, but costs rose 11 per cent to €699.1 million, pushing An Post into the red for the second year in a row. The firm's wage bill increased to €479.5 million, up from €440 million during 2001.