Eurotunnel to pay maiden dividend

Groupe Eurotunnelis to pay a dividend for the first time in its two-decade history, in spite of falls in revenue from a weakening pound and last September’s serious fire.

However, Jacques Gounon, Eurotunnel executive chairman, warned it would take 12 to 18 months for Channel Tunnel traffic to return to levels before the fire which broke out on a truck shuttle on September 11.

Eurotunnel will propose a dividend of €0.04 per share after declaring net profits of €40m ($50m) for the year. The figure includes a €24m arbitration award over the costs to Eurotunnel of disorder at the Sangatte detention centre, near the tunnel’s French entrance, which disrupted services and forced the company to improve security.

The result marks only the company’s second net profit, after it made €1m, excluding the effects of a major restructuring, for 2007.

Mr Gounon said the company was at a turning point.

“A clear net profit plus dividend 18 months after the restructuring is something which is not too bad,” he said.

Eurotunnel suffered serious financial problems between its formation in 1985 and 2007, thanks to cost and time over-runs in the construction of the 50km tunnel and consistently disappointing traffic levels.

The problems were finally comprehensively tackled only in 2007, with a restructuring that reduced the company’s debt from €9.18bn to €5.85bn and handed much of the equity in the restructured group to bondholders.

For 2008, revenue fell to €704m from €775m in 2007, thanks to a significant weakening of the pound against the euro and reduced revenue during repair work on the fire-damaged section of the north running tunnel, which reopened only on February 9.

Operating profit rose to €289m from €264m in the year earlier, and net debt servicing and financing costs fell to €249m from €278m.

While the fire reduced revenues, insurance paid €44m to cover operating losses, leaving the company bearing only a €10m excess.

Mr Gounon said the fire’s aftermath would continue to be a bigger determinant of traffic levels than the economic situation or the pound’s weakness. The company estimated the fire had cost it €120m, meaning that, after the insurance payments already made and the excess, it was already claiming a further €66m from its insurers.

The debt burden had been reduced to €3.8bn, partly because much of it was denominated in depreciating sterling.

Eurotunnel’s 1m private shareholders, nearly all of whom are French, have long agitated for dividends.

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