P&O reports early signs of revival

Shipping group P&O today reported early signs of revival at its ferries business, despite higher fuel costs and disruptions to a key cross-channel route.

P&O said it was “on track” to improve profits from its ferries by £50m (€73m) a year from 2006, after restructuring to meet the challenge posed by budget airlines and the Channel Tunnel.

More than 1,000 job losses were announced last year and P&O has cut back on routes, with the last sailing from Portsmouth to Le Havre due to take place at the end of next month.

P&O said underlying losses at its ferries arm narrowed to £16.6m (€24.1m) during the six months to June 30 from £19.9m (€28.9m), but insisted this masked the true progress made.

About 14% of sailings to Calais were lost when the vehicle loading ramps were removed for safety checks after one collapsed, while higher fuel prices increased costs by £4m (€5.8m).

P&O, which has filed a claim for £10m (€14.5m) against the Calais Chamber of Commerce over the ramps dispute, said it would have been able to improve profits by £17m (€24.7m) in the period without either of these problems.

Details emerged as P&O said pre-tax profits fell to £69.4m (€100.8m) in the six months from £75.6m (€109.8m) at the same stage of 2004.

Although its ports operations delivered profits ahead of analysts’ expectations in the first half, this was tainted by news that P&O was cutting its forecast for volume growth by 1% to a range of 7% to 8% for this year.

Slower growth in the UK and Australia was to blame, although this was offset by a better performance at its Asian ports, and the impact on profits from lower volumes should be negated by improved rates, the company said.

Chief executive Robert Woods said the past six months had seen P&O make “considerable progress”.

Property sales this year were now expected to be close to £400m (€581.1m), after the group beat its annual target of £325m (€472.2m) in just six months.

P&O also banked a profit of £187.9m (€273m) from the sale of its 25% stake in container shipping group Royal P&O Nedlloyd, which was taken over by larger rival Maersk.

“The overall outlook for the second half is positive,” Mr Woods said. “For the group as a whole, excluding property and container shipping, operating profit is anticipated to grow strongly for the full year compared to 2004."