After 20 years of debt and chaos, Eurotunnel pays divi

Published on Wednesday 4 March 2009 20:47

MORE than 20 years after its flotation, Eurotunnel, which manages the train lines under the English Channel, is set to pay its maiden dividend.

Bucking a trend that has seen many of Europe's best-known companies cut or cancel returns to shareholders this year, Groupe Eurotunnel reported only its second profit since its 1987 flotation, and said it would return 0.04 a share in dividends.

The move is likely to come as small comfort to any private investors who bought shares when Eurotunnel floated.

Thousands of retail investors took part in its initial public offering in 1987, with the promise of free use of the tunnel – a benefit that was later scrapped – if they subscribed for more than 500 worth of shares, provided they did not sell until 1993, when the tunnel was meant to open.

But the cost of building the tunnel spiralled, forcing the company to hold a 532 million rights issue in 1990, and when the Queen finally opened it in 1994 it was more than a year behind schedule.

The problems continued for more than a decade, with traffic numbers consistently below expectations. Riddled with debt, the company's finances were finally secured in 2007 when 3.33 billion (3bn) owed to bond holders was converted to an equity stake.

Chairman and chief executive Jacques Gounon said yesterday that despite a fire last year that closed one of the tunnels and reduced capacity until last month, the group's financial position was strong enough to return the cash.

He said: "The year 2008 clearly marks the end of financial uncertainty for Eurotunnel. Through its efficiency and the control of its costs, the group has recorded a solid profit which, for the first time in our history, allows us to pay a dividend to our loyal shareholders."

Eurotunnel said it made a profit of 40m compared to a 12m loss in 2007, despite a fall in traffic due to September's fire and a weak sterling, which meant revenues rose by just 4 per cent to 748m.