'We have got to accept a contraction of ferry capacity,' said Lord Sterling, chairman of P&O, which has a 60 per cent share of passenger trade and 54 per cent of the freight business on the prime Dover-Calais crossing.
A merger would depend on consent from the Government, which has barred a deal until the impact of the tunnel on the ferry operators is known.
P&O's ferry business was one of the main driving forces behind much better than expected half- year results announced yesterday.
The shares climbed 21p to 674p on news that pre-tax profits before exceptional items rose more than 50 per cent to pounds 122m. The interim dividend is 13.5p.
Analysts reacted favourably to the results and the bullish tone of the trading statement. City forecasts for the full year have been raised by as much as pounds 20m to pounds 360m.
Trading profits from P&O Ferries, whch also serve Le Havre and Cherbourg from Portsmouth, leapt from pounds 11.5m to pounds 26.6m. The number of passenger vehicles carried on the Dover-Calais route has grown by 37 per cent and freight units by 34 per cent.
Returns from P&O Cruises also rose sharply, from pounds 34m to pounds 42.5m, P&O Containers made pounds 25.7m, up from pounds 9.5m.
Lord Sterling said: 'The cruises division continues to perform well, and prospects for the year are very encouraging.' Four more ships are on order.
He said the improvement in the containers business was widespread, although trade between Europe and the Far East weakened towards June.
However, he added: 'The benefits of the economic recovery on the Continent should soon be felt.'
Bovis Homes performed slightly better. A dip in units sold was made up for by better prices, turning a pounds 300,000 loss into a pounds 100,000 profit. Profit from the Bovis Construction arm was flat at pounds 5.4m, and margins remained thin.
The outlook for the Olympia and Earls Court exhibition halls, was brighter, however. Profits rose from pounds 13.2m to pounds 14.8m.
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