EUROTUNNEL boasted its first improvement in revenues for three years yesterday, despite an underlying fall in traffic through the Channel Tunnel, which it operates.
There were 3 per cent fewer cars transported through the tunnel in 2005, while rail freight tonnage dropped by 16 per cent, the company said in a trading update.
Traffic has fallen after the introduction of a budget airline-style pricing model, which means that passengers pay more to drive on to Eurotunnel shuttle trains at peak times and school holidays.
Eurotunnel said: “This 3 per cent decline should be viewed in the context of a voluntary reduction of about 20 per cent in capacity during 2005.”
The company claimed that its 4 per cent increase in shuttle revenue, to £295 million, was encouraging as its new pricing structure “favours increased operating margins and improved profitability rather than the pursuit of volumes and market share”.
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However, observers said that the figures were disappointing given that bad weather at the start of 2005 and strikes at the port of Calais, which affected ferry crossings, should have given Eurotunnel a boost.
Railway revenues of £235 million were stable, despite a sharp decline in freight traffic. Eurostar, the passenger train service that operates through the Channel Tunnel, showed a 2 per cent increase in passengers.
However, the railway revenue includes a payment of £72 million made under the “minimum-usage charge”. Payments under the charge will end in November, adding a considerable burden to Eurotunnel’s cashflow. Also this year, the company will have to start to pay interest on its stabilisation notes, as it decided not to convert them into shares. Eurotunnel has said that the decision not to convert would add a further £27 million to its annual interest bill.
The latest figures come as Eurotunnel is locked in talks with its creditors over its £6.1 billion debt. Last Thursday, in a statement released after the market closed, the company offered a relatively down-beat assessment of the talks, saying only: “Negotiations continue to follow their normal course, but it is not possible, at this stage, to anticipate their outcome.”
This was in stark contrast to a bullish newsletter sent by Jacques Gounon, executive chairman, to shareholders at the start of last week. Shares in Eurotunnel, which had been rising steadily, fell by 13 per cent after the company also said that it could not explain some unusual trading activity in its shares.
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Eurotunnel denied there was any difference in tone between the two communications, saying they were written in different ways for different audiences.
CAN FIRM STAY ON RAILS?
Eurotunnel has until the end of this month to agree a deal with creditors before its waiver expires. Jacques Gounon, the chairman, has said that he has no intention of extending the waiver. If no deal is done by then, the company could survive another 18 months before facing bankruptcy.
M Gounon is playing chicken with creditors, who need shareholders to approve a debt-for-equity swap. M Gounon can count on their vote only if a decent offer is made.