Revenue shock adds to fears for Eurotunnel

Fears about a financial crisis at Eurotunnel deepened yesterday when the Channel tunnel operator released revenue figures far below its projections.

News that turnover for the first half of the year reached just pounds 104.5m ended a gloomy week for Eurotunnel, coming after an analyst's report of a looming cash crisis and a strike at Eurostar.

The company admitted that the figures were on the low side, but pointed to better days to come. However, the results are unlikely to impress the 225 banks due to meet Eurotunnel in the autumn for talks about advancing more funds to keep the company afloat.

Last year the company was forecasting revenues of pounds 500m for 1995. Although bankers have already discounted the chances of Eurotunnel meeting these targets, one said: "These figures do nothing for one's confidence. We will just have to wait and see what the company says in a few weeks."

The operator will be asking bankers for the release of more than pounds 400m in loans, which would see it through financially until 1996. Sir Alastair Morton, co-chairman of Eurotunnel, had already admitted that the company was at risk from its debts and could fold unless the banks released more funds.

Eurotunnel's turnover in the second quarter came in at pounds 60.3m, after the pounds 41.6m in the first three months. Richard Hannah, a UBS analyst who has been extremely cautious about Eurotunnel, had estimated a second quarter turnover of pounds 65m. Eurotunnel shares dropped 3 per cent in London and Paris to 175p and Fr13.50. Shares were not helped by a decision by Capital Group to cut its Eurotunnel stake.

The summer months are crucial for Eurotunnel, which is engaged in a price war with the ferry companies. The operator has been plagued by repeated delays, breakdowns and poor passenger numbers.

Looking to the future, Eurotunnel said the third-quarter turnover should be much higher than the second, since shuttle traffic had increased since the start of summer, as had the prices.

At the end of July, Eurotunnel was operating at a rate of 4,500 cars carried per day with peaks of 5,200, plus coaches. For trucks, the rate was 1,200 to 1,300 a day, with peaks at 1,900.

Eurotunnel claims to be taking more trucks than the P&0 ferry company on the popular Dover-Calais route. It hopes to negotiate increases in the tolls paid by the rail companies.

On Thursday French staff at Eurostar, which pays tolls to Eurotunnel to send trains through the tunnel, announced a strike that will cripple weekend services.

And earlier this week, Klesch & Co, the debt specialists, warned that Eurotunnel would be forced to undergo a partial financial restructuring this autumn, and a full pounds 3bn debt-for-equity swap by the end of 1997. Raising new cash from shareholders is out of the question because of the low share price, and the chances of a bond issue succeeding are unlikely, according to Klesch.

The strike at Eurostar is expected to continue to disrupt services until Monday, France's busiest holiday period.

Comment, page 17

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