The UK arm of cross-Channel train operator Eurostar has beaten expectations by boosting passenger volumes and narrowing losses in 2009 despite its services being slashed due to a fire and heavy snow.
Its next hurdle is competition from German rail operator Deutsche Bahn which will begin running trains through the tunnel in 2013 after reviews opened the route to competition.
The reviews also led to a cut in the fees paid by Eurostar to use the high-speed track between London and the tunnel through Kent. The fees fell 23 per cent to £154.6m, which led to Eurostar narrowing its operating loss by 25 per cent to £96.3m in the year ending 31 December 2009.
Eurostar's passenger volumes rose by 11 per cent last year. More than 100 million passengers have travelled on the service since it started running in 1994.
It has never had competition, but that will all change in two years' time when Deutsche Bahn's services begin. Eurostar's accounts state that "the potential competition to the company presents significant risk to the financial performance of the business in the coming years".
Preparing for the new competition, Eurostar has ordered £700m-worth of new 200mph trains from Siemens which will be ready in 2014. French train builder Alstom, which previously supplied Eurostar's rolling stock, failed to block the order with Siemens.
Eurostar needs a boost as its revenues remained flat at £316.2m last year due to the recession and the disruption to its service. No bonus was paid to any company director, with the salary of its highest earner, its chief executive, Richard Brown, falling £150,000 to £340,000. Staff costs dropped £6.1m to £49.6m as Eurostar cut 95 jobs, leaving it with 1,299 employees.
Combined with the lower track access fees, these cuts led to total costs falling 7.1 per cent to £412.5m. A revaluation of Eurostar's rolling stock added £167.6m to its bottom line. This gave it a £63.5m pre-tax profit after a loss of £146.5m the previous year.
Eurostar has made accumulated losses of £2.5bn. At the end of 2009, it had net liabilities of £1.6bn. This was £300m better than in 2008.
Until September, Eurostar was split into three divisions: the UK government's London & Continental Railways, the French operator SNCF and the Belgian SNCB. After September the UK arm became Eurostar's parent company, with SNCF having a 55 per cent share, 5 per cent owned by the SNCB and 40 per cent in the hands of London & Continental Railways.
Two SNCF-appointed directors resigned from Eurostar's board hours before the Siemens order was signed. The accounts state that its new structure "is expected to result in the injection of sufficient working capital and equity to enable the company to trade for the foreseeable future".