The shipping and ports group P&O is axeing 1,000 jobs at its P&O Nedlloyd containers joint venture in an attempt to stem spiralling losses that prompted a 25 per cent drop in group operating profit.
Lord Sterling of Plaistow, the chairman, said the plan to cut about 10 per cent of P&O Nedlloyd's workforce was intended to prepare the group for "consolidation opportunities" after P&O abandoned plans to reverse the unit into its Dutch parent.
The headcount reduction, announced after pre-tax profits at the venture fell 80 per cent to £22.8m, is intended to save $50m (£35m) a year, to reach annual savings of $350m by the end of 2003.
Lord Sterling added that P&O would continue to seek ways to reduce its exposure to P&O Nedlloyd. "It's a great global company but its cyclical and that doesn't fit what we are doing now that we've demerged our cruise business."
P&O, which spun off P&O Princess Cruises in 2000 to focus on increasing its ports operation, expects its ports and logistics business to continue to prove resilient despite warnings by analysts that the shipping market will remain tough this year. It also expects its ferries to have a better year as tourist trade picks up, helped by the Government's efforts to promote the UK as a holiday destination.
The group's shares rose 27.5p to 244.5p as the market took comfort from Lord Sterling's declaration that the group's dividend policy would reflect its view of long-term prospects. "If profits suffer from short-term volatility because of cyclical businesses it should not affect shareholders dividend," he said. P&O maintained its 2001 dividend on a pro forma basis at 13.5p.
Pre-tax profits for the year to 31 December came in below analysts expectations at £173m compared with pro forma results of £162m last year. Turnover was £4.5bn, up from £4.4bn a year earlier. While P&O's ports and logistics businesses reported a rise in operating profit, its ferries division slumped into the red to the tune of £1m against a £20m profit in 2000. The group's property division also saw profits fall from £133.9m to £94.7m, reflecting P&O's strategic decision to sell the bulk of its UK investment property portfolio.Reuse content