Eurotunnel sinks as price war takes its toll

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The Independent Online

Eurotunnel shares fell to an all-time low yesterday as the company's new management warned there was no end in sight to the vicious price war hitting the cross-Channel market.

Eurotunnel shares fell to an all-time low yesterday as the company's new management warned there was no end in sight to the vicious price war hitting the cross-Channel market.

Net losses for the first six months of the year ballooned to £82m from £17m last year after Eurotunnel attempted to raise prices on its passenger shuttles only to see traffic levels plunge by 14 per cent.

The company cut charges for its freight shuttles, by contrast, but this failed to stimulate a sufficient increase in traffic and revenues.

Eurotunnel's chairman Jac-ques Maillotand its chief executive Jean-Louis Raymond, who took over after a shareholder coup in April, described the company's financial position as "worrying" but blamed the previous management for its poor performance. In a joint statement, they declared: "These results are not ours."

However, they gave no new information on how they planned to tackle Eurotunnel's mounting losses or bring down the £6.4bn debt burden, and some shareholders were critical that the management had not usedan update to investors earlier this month to warn of the deterioration in trading.

Eurotunnel shares fell 11 per cent to a historic low of 20p. They have now lost half their value since the previous board was ousted three months ago by rebel French shareholders led by the share tipster and convicted fraudster Nicholas Miguet.

Total revenues for the six-month period fell 3 per cent to £261m while operating costs rose 8 per cent to £137m, reducing Eurotunnel's operating margin by 11 per cent to £132m. After depreciation and interest charges, the underlying loss was £76m. Part of the increase in operating charges was due to the costs of hosting April's annual meeting when the shareholder revolt took place.

Eurotunnel faces a financial crunch in 18 months when part of its debt mountain becomes repayable and it is no longer able to issue "stabilisation notes" convertible into shares in place of interest payments to debt holders. An agreement guaranteeing Eurotunnel a minimum usage charge from Eurostar, the operator of through rail services to Paris and Brussels, also comes to an end. In the first half of the year this was worth £115m.

The company promised that plans to alter the tariff structure and cut costs should begin to bear fruit next year. However, in what amounted almost to a plea for help, the statement added: "These measures alone will not be enough. It is essential that Eurotunnel engages in a global dialogue as soon as possible with all its partners, whether public or private, financial or industrial, if it is to achieve recovery."

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