P&O Ferries steer its way to £13m profits, but trading conditions remain 'compet

[TC]

Cheaper fuel helps P&O Ferries steer its way to £13m profits, but trading conditions remain 'competitive'

By Sarah Bridge for The Mail on Sunday 

Published: 22:01 GMT, 21 November 2015  | Updated: 22:01 GMT, 21 November 2015 

Passenger and freight shipping operator P&O Ferries jumped back into the black last year as cost-savings and cheaper fuel led to higher profit margins.

Earlier this year in a boost to P&O's passenger services, rival ferry operator MyFerryLink, owned by Eurotunnel, was ordered by the Competition and Markets Authority to stop running cross-Channel ferries. However, the decision is currently under appeal.

P&O Ferries, which runs ships between the UK, Ireland and the Continent as well as transport across Europe in its Ferrymasters logistics division, recorded sales of £942.5million in the year to December 31, 2014, down slightly on £966.9million the previous year.

Challenges ahead: Company directors at the Dubai World Corporation, which owns P&O Ferries, said that trading conditions remained 'extremely competitive', with key issues being low freight rates and overcapacity

However, the company, which is ultimately owned by Dubai World Corporation, turned a previous £10.2million pre-tax loss into a £13 million profit, aided by an internal refinancing, and said that economic conditions in 2015 were improving further.

Company directors said: 'Trading conditions remain extremely competitive, with the ongoing challenges of overcapacity on key routes and low freight rates continuing to constrain growth and profitability'.

The company, which was founded in the 1960s and is now the largest operator of cross-Channel services, employs 3,700 workers. The highest-paid director – understood to be chief executive Helen Deeble – was paid £435,000 last year.


Read more: http://www.thisismoney.co.uk/money/markets/article-3328582/Cheaper-fuel-helps-P-O-Ferries-steer-way-13m-profits-trading-conditions-remain-competitive.html#ixzz3tOqloGTH
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[Steven]

No doubt helped by events across the channel this year, and in particular the disruption to Eurotunnel.  Still, nice to see someone making a small profit.  Does this take into account the £14m they owe HMRC due to the unsuccessful tax dodge I wonder?

[TC]

I would imagine the Spirit's have been a help reducing costs. They, I assume are pretty efficient when you take into account how much they move. It makes me wonder how much longer P&O's Darwins have in operation on the straits? 

Regarding the 14 million owed to the lovely people at HMRC, it would not surprise me if P&O try and wriggle out of it. I haven't heard much about that for a while.

However its good to see P&O back making a profit. 2016 might be a good year for P&O. Personally think DP World need to re-develop the fleet in the next four years. Having a newer fleet on Dover - Calais will be very important. They could use the existing Spirit of Britain design with a few modifications, to keep costs down. Also a South Korean yard would probably be a better option than a European equivalent. Aker certainly weren't cheap for the 'Spirits', and in all fairness Stena Adventurer has preformed superbly over the past 12 years of service.   

[Steven]

I do wonder how much of a premium P&O paid by choosing to go with Aker instead of DSME for example.  It is not unheard of for Far Eastern yards to quote half the amount of European yards after all!  When the time comes to replace the Darwins, I wouldn't be surprised to see a reduction in the number of ships as well.  That Rauma wasn't seen as viable to keep going despite the cost of projects like the spirits is perhaps indicative of a very bleak future for building ferries in Northern Europe.  The product coming out of the Far East has much improved over the past decade as well.

[TC]

I agree. Its quite scary to think Aker Yards / STX Europe Rauma were closed after so many vessels. It was the same with van der Giessen De Noord. Great ships, just the economics were not on their side, and their main market was ferries. I was talking to on one of the pursers on Norbank, and he worked on Pride of Rotterdam shortly after delivery from Fincantieri, and he mentioned P&O did get a quote from van der Giessen, and the yard was considered too expensive.   

[Steven]

I agree. Its quite scary to think Aker Yards / STX Europe Rauma were closed after so many vessels. It was the same with van der Giessen De Noord. Great ships, just the economics were not on their side, and their main market was ferries. I was talking to on one of the pursers on Norbank, and he worked on Pride of Rotterdam shortly after delivery from Fincantieri, and he mentioned P&O did get a quote from van der Giessen, and the yard was considered too expensive.

Van der Geissen's problem was they were selling below cost - a problem that was always going to catch up with them.  They were probably too small to benefit from significant economies of scale as well.  The Fincantieris and Meyers of the world are significant concerns with costs spread out over multiple sites.  It could also be argued that VdG were caught between producing series of similar ships like FSG, Visentini, etc (and the economies of scale that brings), and being able to offer a truly bespoke product like Meyer, Fincantieri, Aker, etc.  That P&O, Stena, DFDS and the big Southern European concerns chose to build elsewhere for the most part perhaps speaks volumes. 

[TC]

Good example of GN's cost saving model is Stena Jutlandica & Isle of Inishmore. Also Norbank / Norbay and Isle of Inishfree (Pride of Cherbourg). Still I often wonder how smart operators are worrying about purely the aesthetics. The lay-man probably wouldn't notice the similarities between Jutlandica and Inishmore, given their interior are very different and the variation in livery and funnel design.

[Steven]

Good example of GN's cost saving model is Stena Jutlandica & Isle of Inishmore. Also Norbank / Norbay and Isle of Inishfree (Pride of Cherbourg). Still I often wonder how smart operators are worrying about purely the aesthetics. The lay-man probably wouldn't notice the similarities between Jutlandica and Inishmore, given their interior are very different and the variation in livery and funnel design.

That's exactly my point.  Their modular system worked on some levels, but the ships were too different to generate any real cost savings.   Look at the series produced by Visentini, Apuani, and FSG which varied little yet were produced in much larger numbers.  by producing a large series the costs are spread out, and so a lower price can be offered.  Operational efficiency is probably the most important aspect considered these days - how much can the ship load and how quickly can we get it turned around?