Spotlight – P&O profits on crest of a wave

The Peninsular and Oriental Steam Navigation Company is set to unveil pre-tax profits of #416m next Tuesday when it reports, but the impending abolition of duty-free sales is a headache for the company.

P&O group finance director Nick Luff will be weathering the storm when the results are published next Tuesday. Although he joined the company in 1991, Luff has only been in his current role since 1 January. He was formerly group treasurer and head of corporate finance.

Luff – whose appointment to group finance director followed the retirement of David Morris at the end of 1998 – qualified as a chartered accountant with KPMG before joining P&O as a manager in corporate finance.

He became group treasurer in 1994 and, starting from 1996, combined this post with head of corporate finance.

Tax issues are at the heart of shipping companies’ concerns at the moment. More specifically, it is the impending abolition of duty-free that concerns P&O and its competitors most. Industry insiders believe the loss of revenue from duty-free will put additional pressure on companies running passenger ferries to France, P&O included.

Cross-channel services are said to be operating at a loss, with revenue from duty-free compensating for the low price of travelling to the continent.

Competition offered by Eurotunnel will also have a bearing on full-year results.

Among P&O’s initiatives for expansion, the company has continued to invest in its cruises division, with the aim of increasing capacity by 70% by the end of 2001.

But the company is concerned about the current over-supply of shipping.

According to one industry insider, there are ‘too many ships and not enough people using them’.

In its interim results, P&O announced a pre-tax profit of #138m, up 12% from the 1997 level of #123.1m. At the time, P&O chairman Lord Sterling said it had been an encouraging first half.

‘The economic uncertainties in some countries have inevitably had an effect on certain parts of the group, but the main source of our earnings remains robust. The overall outlook continues to be positive,’ Lord Sterling said. That view might have changed by next week.

Related reading