Eurotunnel unveils recovery plan

Shares in Eurotunnel fell 7% today after the struggling Channel Tunnel operator unveiled its long-awaited recovery programme.

The group’s stock dropped 1.5p to 18p after it revealed plans to boost revenues by £70m (€100m) in 2007 and reduce costs through a shake-up of its lorry and car shuttle services.

It also said the plan would involve cutting its 3,000-strong workforce, although it said it was too early to give figures.

Eurotunnel said the plan, dubbed Project Dare, was the “essential pre-requisite” to opening negotiations with its creditors about restructuring its £6.4bn (€9.2bn) debt pile.

It warned that the measures alone would be inadequate to safeguard its future beyond the next two years and that it would still be left with a vulnerable cash flow position at the end of 2005.

“In reality, the financial structure of the group remains fragile and the high financial charges continue to impact on operating results,” the group said.

Eurotunnel's new all-French management team was installed after rebel shareholders threw out its previous board at a stormy annual meeting in Paris earlier this year.

Group chief executive Jean-Louis Raymond said the business review the new board had carried out in the past few months had found its commercial strategy to be “highly unsuited” to the present state of the declining cross-Channel transport market.

A change of strategy was vital and the group had decided to adopt a “radical reorientation” of its commercial policies.

The company’s doubling of truck shuttles in the past few years had left capacity disproportionate to demand.

The service offered was well suited to the road haulage industry’s need for regularity, punctuality and reliability, but was too often treated as a “free insurance” by hauliers in the event of delays or bad weather affecting cross-Channel ferries.

It said it would give priority access to hauliers who provide annual day-by-day volume forecasts, allowing it to match capacity and prices to demand.

Eurotunnel said it would also adopt measures to adjust capacity to meet demand on its passenger shuttles, which would result in more flexible running costs.

It had also begun a complete review of sub-contractor and supplier contracts to ensure greater use of standard products and more structured relationships with suppliers.