Bovis float brought forward as P&O profits cruise 33% higher

PENINSULAR & ORIENTAL, the cruises, ferries and ports group, is bringing forward the pounds 350m flotation of its Bovis construction arm to next month after reporting buoyant first-half profits.

The group also disclosed that its cruise and ferries divisions, which made profits of pounds 128m in the six months to 30 June, will be virtually exempt from paying tax when the Government's new "tonnage tax" takes effect next year.

P&O will pay just pounds 20,000 a year tax on the Grand Princess, the biggest cruise ship in the world, and a similar amount on the Oriana, the flagship of its UK-based cruise business.

The Bovis flotation had been scheduled to take place in the first half of next year. Lord Sterling, the P&O chairman, said the decision to accelerate the process had nothing to do with worries about the state of the equity markets next year.

P&O will publish a pathfinder prospectus later this month and list Bovis in October. It is selling 100 per cent of the company with the offer aimed predominantly at UK institutional investors. Bovis made operating profits of pounds 24m last year and pounds 12.3m in the first half of this year - 28 per cent up on the same period in 1998.

The improvement at Bovis helped P&O to achieve a 33 per cent increase in group profits to pounds 183m. The cruise business made pounds 109m and Lord Sterling said there were plans for a major expansion of the business into continental Europe, where P&O believes there is huge potential because of the six- week holidays people get.

The proceeds from the Bovis flotation will be used to help fund P&O's huge investment programme in nine new cruise ships that will cost pounds 2.3bn and double the number of berths in the P&O fleet.

In total P&O expects to raise around pounds 2bn from the disposal of its construction, property and container shipping businesses.

The proceeds were swollen by A$289m yesterday after P&O confirmed the sale of its Australian cleaning and catering interests, and the group is shortly to announce the disposal of its Earls Court and Olympia exhibition halls in London.

Speculation as to the identity of the buyer centres on Daily Mail and General Trust, which has its own large exhibition business.

Lord Sterling also disclosed that there would be further job cuts at its loss-making joint venture cargo shipping business, P&O Nedlloyd, as part of a $100m cost reduction plan. The division employs 8,000 but P&O would not say how many redundancies were planned.

He also confirmed that P&O had talked to the giant US cruise operator, Carnival, but categorically denied that its chairman, Mickey Arnison, had tabled an offer, either for P&O as a whole or its US-based Princess cruise division.

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