P&O ferry overhaul after £40m loss

P&O, the shipping and logistics company, yesterday outlined plans to carry out a wide-ranging restructuring of its ferries arm after the business plunged to a £40m loss in 2003.

P&O, the shipping and logistics company, yesterday outlined plans to carry out a wide-ranging restructuring of its ferries arm after the business plunged to a £40m loss in 2003.

The company said the war in Iraq, Sars and the sweltering summer all kept passengers away, prompting the ferries business to go into the red, from a £13m operating profit the previous year.

P&O added that even booze cruisers, who use its Dover-to-Calais run to stock up on cheap alcohol and cigarettes, were put off by the fact that the French hiked up taxes on tobacco by 40 per cent last year.

Lord Sterling, the chairman of P&O, said: "We have to restructure. The ferries market is challenging. We cannot rely on it improving. That is not what we are hanging our hats on."

The company aims to publish its report this summer on how to reinvigorate the ferries arm, which has also been hit by the rail link with the Continent and by low-cost air travel.

P&O dismissed notions that its root-and-branch review could lead to the ferries business to be closed down or sold. Peter Smith, its director of strategy, said: "We see ferries as core to P&O. It has a fine history and an excellent brand. Until two or three years ago, we were generating very attractive returns."

Last year P&O embarked on initiatives it hopes will save £15m a year, including taking a ship off the Dover-to-Calais route and reducing the number of restaurants open on night crossings.

Across the group as a whole, P&O made £80m pre-tax profit in 2003, on turnover down 14 per cent to £2.29bn. In 2002, it made a £135.7m loss due to difficulties at its Anglo-Dutch shipping joint-venture, P&O Nedlloyd, which has since been sold.

The company said its ports business fared well last year, with container through-put up 20 per cent on an organic basis and operating profit up 18 per cent.