P&O Stena hit by end of duty-free

P&O'S ferries businesses yesterday showed the dramatic impact of the loss of duty-free sales on board, with profits more than halving at its P&O Stena Line joint venture.

P&O'S ferries businesses yesterday showed the dramatic impact of the loss of duty-free sales on board, with profits more than halving at its P&O Stena Line joint venture.

The business, which with the Swedish group Stena operates 10 ferries from Dover to Calais and Zeebrugge, saw profits fall to £10m for the second quarter, from £26.5m for the same period last year.

Duty-free shopping was abolished within the European Union in July 1999 and so the comparison with the second quarter last year is with the last few months of duty-free.

P&O Stena, which is 60 per cent owned by P&O, said that in June 1999 there was a rush to buy duty-free goods ahead of the abolition, making the contrast with this year especially sharp.

Peter Smith, a director at P&O: "We are encourage by this result," he said. "This covers the worst period in the abolition of duty-free for us, it was our nadir. We were also hit by higher fuel costs. However, the volumes of freight and vehicles carried are encouraging. We expect an improvement next year."

Spending by passengers on the ferries - still around £15 a head - has remained steady, but margins are much lower on non duty-free goods. Freight units fell to 286,000 for the quarter, down from 295,000 last year, as P&O Stena saw its market share slip from 49 to 42 per cent.

Tourist vehicles dropped to 521,000, from 613,00 last year. However, the average journey prices charged to tourists rose, as the company stopped the promotional fares, some as low as £1 for a crossing, that were used to draw in customers for duty-free sales.

P&O's wholly owned UK ferry operations, which run 50 ferries in the North Sea, Irish Sea, Western Channel and Scottish Isles, also reported carriage numbers yesterday, although it gave no financial figures for the second quarter. Freight units, at 335,000, and tourist vehicles, at 277,000, were broadly unchanged. P&O said that fuel costs in the first half, for all routes, increased by 75 per cent and cost both ferry operations a total of £13m extra.

P&O shares yesterday closed down 12.5p at 621.5p.