P&O steams back into calmer waters

Stripping out the £278m gain from the disposal of Sutcliffe Services in 1993, pre-tax profits up 41 per cent to £341m in the year to December suggest that, while not yet firing on all cylinders, P&O is finally starting to feel the benefit of economic recovery.

Apart from a few continuing laggards like European transport services and bulk shipping, all divisions increased profits last year.

It has been a long, hard slog to reach this stage.

With plenty of late-cycle operations such as construction and bulk shipping, it was always going to take a while for Lord Sterling to get the P&O liner steaming again.

It is therefore ironic that the shares peaked nearly a year ago at 732p and are now languishing at 582p, down 9p yesterday.

What has been depressing P&O's share price is the Channel Tunnel effect, as investors anticipate the impact on P&O's dominance of the cross-Channel ferry market.

Yesterday's figures will give some comfort to those looking ahead to the long-delayed build-up to a full service through the tunnel late this summer.

Ferries were last year's star performer for P&O. Operating profits from the division powered from £76.5m to £114m, providing the main stimulus to group operating profits up from £396m to £477m.

That is clearly both a strength and a weakness, as Eurotunnel inevitably takes market share. P&O's control of the Dover-Calais route has already slipped a bit from last year's 60 per cent for cars and 53 per cent for freight in the early months of 1995. But the continuing problems at Eurotunnel are clearly putting back the day when the ferries have to meet the full blast of competition, allowing the booming market - currently growing at between 15 and 20 per cent - to take up the slack.

Meanwhile, cruise ships - where profits roared from £85.6m to £100m - and containers, £63.2m compared with £42m before, continue to forge ahead.

On forecasts of around £375m for the current year, the shares stand on a prospective price/earnings ratio of 14.

The possibility of a bid for Costain and dollar worries could restrain the shares in the short term, but they are well- supported on a yield of 6.6 per cent and Channel Tunnel concerns are now surely all in the price.

Start your day with The Independent, sign up for daily news emails
News
ebooksAn unforgettable anthology of contemporary reportage
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Digital Optimisation Executive - Marketing

£30000 - £35000 per annum: Recruitment Genius: The UK's fastest growing, multi...

Recruitment Genius: Financial Reporting Manager

£70000 - £90000 per annum: Recruitment Genius: A Financial Reporting Manager i...

Recruitment Genius: Payments Operations Assistant

£23000 - £25000 per annum: Recruitment Genius: They win lots of awards for the...

Recruitment Genius: Telephone Debt Negotiator

£13500 - £20000 per annum: Recruitment Genius: This nationwide enforcement com...

Day In a Page

Syria civil war: Meet the military commander who says his soldiers will not rest until every inch of their war torn country is free of Islamist 'terrorists'

‘We won’t stop until Syria is back to normal’

Near the front lines with Islamist-controlled towns where Assad’s troops were besieged just last month, Robert Fisk meets a commander confidently preparing his soldiers for battle
The inside story of how Bill Clinton built a $2bn global foundation may undermine Hillary's chances

The inside story of how Bill Clinton built a $2bn global foundation...

... and how it may undermine Hillary's chances in 2016
12 best olive oils

Extra-virgin, cold-press, early-harvest, ultra-premium: 12 best olive oils

Choosing an olive oil is a surprising minefield. Save yourself the hassle with our handy guide
Sepp Blatter resignation: The beginning of Fifa's long road to reform?

Does Blatter's departure mean Fifa will automatically clean up its act?

Don't bet on it, says Tom Peck
Charles Kennedy: The baby of the House who grew into a Lib Dem giant

The baby of the House who grew into a Lib Dem giant

Charles Kennedy was consistently a man of the centre-left, dedicated to social justice, but was also a champion of liberty and an opponent of the nanny-state, says Baroness Williams
Syria civil war: The harrowing testament of a five-year-old victim of this endless conflict

The harrowing testament of a five-year-old victim of Syria's endless civil war

Sahar Qanbar lost her mother and brother as civilians and government soldiers fought side by side after being surrounded by brutal Islamist fighters. Robert Fisk visited her
The future of songwriting: How streaming is changing everything we know about making music

The future of songwriting

How streaming is changing everything we know about making music
William Shemin and Henry Johnson: Jewish and black soldiers receive World War I Medal of Honor amid claims of discrimination

Recognition at long last

Jewish and black soldiers who fought in WWI finally receive medals after claims of discrimination
Beating obesity: The new pacemaker which helps over-eaters

Beating obesity

The new pacemaker which helps over-eaters
9 best women's festival waterproofs

Ready for rain: 9 best women's festival waterproofs

These are the macs to keep your denim dry and your hair frizz-free(ish)
Cycling World Hour Record: Nervous Sir Bradley Wiggins ready for pain as he prepares to go distance

Wiggins worried

Nervous Sir Bradley ready for pain as he prepares to attempt cycling's World Hour Record
Liverpool close in on Milner signing

Liverpool close in on Milner signing

Reds baulk at Christian Benteke £32.5m release clause
On your feet! Spending at least two hours a day standing reduces the risk of heart attacks, cancer and diabetes, according to new research

On your feet!

Spending half the day standing 'reduces risk of heart attacks and cancer'
With scores of surgeries closing, what hope is there for the David Cameron's promise of 5,000 more GPs and a 24/7 NHS?

The big NHS question

Why are there so few new GPs when so many want to study medicine?
Big knickers are back: Thongs ain't what they used to be

Thongs ain't what they used to be

Big knickers are back