Eurotunnel, the much-maligned owner of the Channel Tunnel, said today that it will pay a €0.04-per-share dividend to shareholders, for the first time since it was created in 1986. The tunnel operator has been (in almost every sense) a money pit for investors ever since – but this year, despite a fire in September that closed it down completely, it managed to record a net profit of €40m. At a time when many big European companies are freezing, slashing or even scrapping their dividend altogether, blaming market conditions, it seems a bit surreal that Eurotunnel of all people is bucking the trend…
It’s not even as if Eurotunnel had a particularly smooth ride last year, thanks to two things in particular. The operator was forced to cancel all trains in the immediate aftermath of the September fire, and didn’t return to a full timetable until last month, which put a big dent in passenger numbers (although Eurostar still managed record traffic after a strong first half). And the pound’s plunging value against the euro also hammered its revenues on the UK side. Throw in the general economic malaise – potentially leading to a fall in personal and business travel – and Eurotunnel could be forgiven for feeling a bit sorry for itself.
However, the operator is clearly feeling the benefit of the restructuring it agreed in 2007, which finally seems to have sorted out its finances. Since 1986 it has limped along, saddled with mounting debts thanks to huge cost over-runs, failing to get its house in order. But this latest restructuring seems to have done the trick: most of its equity has been handed over to creditors and its huge debts trimmed, leaving the management free to concentrate on running the business more efficiently. And since it had a €900m insurance policy for fire-related losses, it only had to shell out the €10m excess.
So the end result was that despite a slight fall in revenues (from €718m to €704m), Eurotunnel managed to record a €40m profit, up from last year’s €12m loss – allowing it to cough up its first ever divi. Good news for the management, who took over on the promise of paying out dividends, and good news for shareholders – not that there’s many of them on this side of the Chunnel these days...
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