P&O bookings in the Med fall foul of Iraq war jitters

P&O Princess Cruises signalled yesterday that the march towards war in Iraq was putting US tourists off booking its Mediterranean cruises as it reported a strong rise in underlying profits for its last year as an independent company.

The group, which ended a 15-month takeover tussle last month when it agreed to be bought by the industry leader Carnival Corporation, said the number of Americans willing to fly to Europe for a cruise in April and May was down by as much as a third.

Peter Ratcliffe, the chief executive, said he "would consider" moving one of the group's two Mediterranean ships to less politically sensitive waters. During the Gulf War, the group relocated both its European-bound ships after bookings dived. But Mr Ratcliffe added that first-quarter sailings are almost fully booked and forward bookings for the third quarter are holding up.

P&O Princess also said that yields in its UK and German businesses could come under pressure because a rapid increase in the number of berths and ships had outpaced the number of holidaymakers booking cruises.

But analysts dismissed any impact on earnings from a slowdown in bookings as largely immaterial, given that the group becomes part of Carnival from April.

Jamie Rollo, at Morgan Stanley, said: "This is completely academic because shareholders are giving up Princess earnings and taking Carnival earnings instead. As long as Carnival does well, Princess shares will do well. Because the US domestic business is holding up well and prices are strong I'm not worried."

P&O Princess, which abandoned a pre-agreed merger with Royal Caribbean to take up Carnival's offer, said earnings per share before exceptional items and tax were up 14 per cent to 47.1 cents against 41.3 cents last year. This was ahead of expectations, reflecting the group's swift action on cutting costs and the underlying appeal of cruising despite the downturn in the travel market after the US terror attacks.

After exceptional items related to the bid battle – including adviser's fees of $54.5m (£33m) and a $62.5m break fee paid to Royal Caribbean – earnings per share fell to 30.2 cents. The exceptional items also dragged down pre-tax profits from $301.5m last year to $225.9m, on turnover up slightly at $2.53bn from $2.45bn.