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Eurotunnel profits may yield early dividend

EUROTUNNEL yesterday raised hopes among its long-suffering shareholders that it could start paying a dividend earlier than planned after reporting its first bottom-line profit.

The Channel Tunnel operator made a net profit of pounds 64m last year after realising a one-off pounds 279m gain following the completion of its mammoth debt restructuring.

Even at the operating level Eurotunnel comfortably beat its own targets, recording a pounds 184m profit - a three-fold increase on 1997 and a 50 per cent improvement on the forecast contained in its debt restructuring prospectus. Underlying losses, after interest, fell from pounds 611m in 1997 to pounds 215m.

On the current schedule Eurotunnel is not due to start paying its 730,000 shareholders a dividend until 2006. But Georges-Christian Chazot, the group managing director, said yesterday: "Our objective is to bring that date forward. I would not like to make a forecast but we are working towards that goal."

Patrick Ponsolle, the chairman of the Anglo-French group, pledged that operating profits this year would at least meet the prospectus forecast of pounds 205m to pounds 210m.

But with traffic levels up 12 per cent already this year and a 20 per cent increase in car shuttle prices taking effect in the summer, analysts expect Eurotunnel to beat that target, even if duty-free sales are abolished in July.

Eurotunnel also announced plans to cut its interest payments further by offering to redeem early pounds 936m of equity notes that it exchanged for borrowings last year as part of the restructuring of its pounds 8bn debt mountain.

The equity notes pay interest at 4.45 per cent. If all 645 million notes are redeemed early, then Eurotunnel will save pounds 40m on its annual interest bill.

The notes are due to be redeemed for shares on a one-for-one basis by January 2004. But they have been trading at a significant discount to their underlying value since they were issued. Eurotunnel is now offering to exchange them on the basis of 1.3 notes for one new share.

Turnover rose by 26 per cent last year to more than pounds 670m as Eurotunnel increased its share of the Dover-Calais cross-channel market, capturing 52 per cent of all car passengers and 37 per cent of freight business.

Income from its shuttle services was 87 per cent higher at pounds 210m, while the Eurostar passenger service linking London Paris and Brussels and the through-freight business brought in pounds 213m. Retailing, including duty-free, brought in pounds 195m.