Eurotunnel Posts First Operating Profit

Anglo-French channel tunnel operator Eurotunnel long abandoned by many investors as a debt-laden black hole, on Monday reported an operating profit for the first time and said it was becoming a normal company.

Eurotunnel shares initially rose after the company beat its own targets with an operating profit of 653 million francs (57million pounds) in 1997, from a restated loss of 234 million.

At the net level its loss of 5.8 billion francs against 6.10 billion in 1996 was at the top end of a wide range of expectations tabled by investment analysts.

But the shares gave up their early gains and finished down 0.76 percent at 6.55 francs on the Paris bourse. It goes in the right direction, GAN analyst Pascal Nigen said of the earnings report. But its not enough to change the nature of the share, which for me is on the order of risk capital.

 

Taking into account a major debt restructuring deal, which includes conversion of some debt into shares through a warrants issue, Eurotunnel said the 1997 net loss would have been 3.09 billion francs.

For 1998 our goal is to be in line with our projections. Its a demanding target, Chairman Patrick Ponsolle told a news conference. The objective Eurotunnel has outlined is an operating profit of at least 1.08 billion francs.

Promising to avert characteristics of wishful thinking or arrogance attributed in the past to Eurotunnel, he said, We are reasonably confident of our capacity to achieve this objective. He said on British radio Eurotunnel would break even in 2003.

Eurotunnels operating profit was well ahead of a 395 million franc target laid out in May 1997 excluding the benefits of a debt restructuring deal, or 514 million francs including that deal.

1998 will open a new chapter in our history, Ponsolle told a news conference.

The restructuring is in place. We have become a normal company in the sense that we have ordinary relations with our partners. Its a banal thing to say but its new enough for Eurotunnel for me to take pleasure in saying it.

Ponsolle said it was still a source of frustration to him that investment analysts and institutional investors lacked interest in Eurotunnel, and pledged to work to try to recapture their attention.

Eurotunnel also outlined the timetable for a planned issue of free warrants to expire in 2001 and 2003, with a strike price which equates to a valuation of 11.68 francs per share, roughly double current levels.

Eurotunnel will decide on March 27 whether the issue will be open to all holders of its units, or just the banks holding its 77 billion francs of debt to be restructured. The restructuring will give them around 45.5 percent of Eurotunnel.

Finance Director Richard Shirrefs said the current share price suggested the issue would be limited to the banks.

Eurotunnels turnover rose by 14 percent from its restated year-ago figure to 5.13 billion francs, the company said. A total of 15 million people crossed the tunnel in 1997, up from 13.6 million in 1996.

And Eurotunnel said it had regained market share in 1997 despite operating below capacity after fire in late 1996 mainly hurt its freight business.

It said its shuttle services achieved a 40 percent average share of the Dover-Calais, Folkestone-Coquelles cross-Channel car market over the year.